The Net Promoter Score, “NPS,” is a scheme of measuring customer satisfaction. Present your customers with a simple survey, then enter their responses into a formula that creates a single figure for comparison.
What is the Net Promoter Score?
The NPS score is a customer satisfaction comparison tool. This method, built on a two-minute survey, provides customer loyalty by measuring their willingness to mention a business to a friend or acquaintance.
The NPS method differs from other related comparison methods, such as the customer satisfaction result. It indicates the customer’s overall opinion of a brand rather than specific interactions or purchases. Because of this, it comes up frequently in discussions about customer experience. Additionally, the Net Promoter Score is a standard reference used by companies around the world. It makes it a suitable method for companies to evaluate their performance against their competitors.
Calculation of the Net Promoter Score
Step One: Determine the Number of Promoters, Liabilities, and Detractors
The Net Promoter Score calculation is founded on a two-minute questionnaire that asks customers to rate how possible it would be to promote a brand to their friends and acquaintances.
“On a scale of 1 to 10, how likely are you to refer us to friends, colleagues, or business associates?”
All Net Promoter Score calculations are based on this fundamental question (which allows for slight variations in wording). The respondent is usually asked for a rating on a scale of 1 to 10. Depending on the number you choose, it falls into one of the following three categories:
Promoters are people who assign a score of 9 to 10. They are considered more likely to show behaviors that generate value, such as buying more, trusting the brand for an extended period, and recommending it to more people. They have what is known as a great “lifetime value.”
Liabilities are people who give a score of 7 or 8. They are considered moderately satisfied. They can remain loyal to the brand, but it is also possible that they will transfer their loyalty to a competitor if the conditions are right. It will not make any special effort to refer to potential clients.
Naysayers give a score between 0 and 6. Typically, they are actively dissatisfied customers who have the potential to damage your brand’s reputation through negative reviews, social media interactions, or word of mouth.
To analyze the Net Promoter Score, subtract the percentage of naysayers from the percentage of promoters. The worst possible score (the score that would be achieved if each customer were a detractor) is -100. The best is 100. However, both scores are improbable in real life. Liabilities count toward the total number of respondents, which lowers the percentage of detractors and promoters alike. It leads to a total score of 0.
Step Two: Bit Down into the Net Promoter Score
For companies to delve into the general information provided by the NPS method, they are encouraged to expand on the central question and request an explanation of the customer’s reasons. For example, additional questions might ask a customer’s opinion about the service they have received.
The responses can be translated into follow-up and guidance measures. Since open comments can be difficult to analyze objectively, companies often provide rating scales for these additional questions. Additional questions help companies understand the NPS method’s relative contribution to individual products, services, and business areas.
Promoter Net Score Calculation Example
Imagine a scenario in which a company surveys 200 of its customers with the standard question of the NPS method. Remember that the purpose of the NPS method is to find out the general opinion of the customer, so this question should not be related to a specific product.
Once the responses have total, 125 of the respondents are promoters, 42 are passive, and 33 are naysayers. Interpretation of the NPS score is very complex and context-dependent.
Why measure the Net Promoter Score?
To defect. As mentioned above, the NPS methodology is design primarily to measure customer loyalty to a company or brand, the likelihood that they will buy again, act as brand ambassadors, and struggle pressure. This last point can express as the “churn rate,” the probability that they will cancel a subscription or not buy again. It is essential because it is cheaper to retain a customer than to win a new one.
Measuring the NPS score can benefit your business in several ways.
Closing the feedback stream: The Net Promoter System allows companies to “close the loop,” that is, to scroll vertically and gather more information from respondents. It also allows them to change a negative impression. Since customers only have to spend one minute on the NPS survey, it is relatively easy to get them to participate.
Ease of Use: You don’t need to be a statistician to administer an NPS survey online. Similarly, conducting the study is intuitive and easy for customers. You can send it to them by email or include it on your website as a pop-up message after a transaction. The formula can calculate with a simple spreadsheet.
A common language for customer conversations: By dividing customers into promoters, liabilities, and detractors, the NPS system makes it easy to separate between them. All members of the company have a standard set of definitions to work with
More straightforward comparison: NPS is a standard metric use by companies around the world. As such, it allows you to place your score in the context of other scores within your industry and understand your situation. The NPS score is also great for presenting senior management with an overall snapshot of customer loyalty at any given time.
Growth Drive: When companies take the NPS questionnaire and begin to study it as a critical metric, it supports them channel their customer service efforts and increase revenue through referrals and upsells. It covers in more detail in a later section of the article.
Cost Per Mille (CPM) – Explanation, Costs of CPM, Advantages, and More
Cost Per Lead – Costs Mean, Marketing Tactics, Charge, and More