What is a Net Promoter Score?

Ruben Buijs

Founder & Digital Consultant

Written on Aug 1, 2023

3 minutes

Customer Experience

The Net Promoter Score (NPS) is a widely used metric in the field of customer experience that measures customer loyalty and satisfaction. It provides businesses with valuable insights into their customer base and helps them gauge the likelihood of customers recommending their products or services to others. NPS is determined through a simple survey question that asks customers to rate, on a scale of 0 to 10, how likely they are to recommend a company to a friend or colleague.

Examples

To better understand how NPS works, let's consider a couple of examples:

  1. Company A sends out an NPS survey to its customers, asking them to rate how likely they are to recommend the company's services to others. Based on the responses, they find that 60% of customers give a rating of 9 or 10 (promoters), 20% give a rating of 7 or 8 (passives), and 20% give a rating of 0 to 6 (detractors). Using the NPS formula [(%Promoters - %Detractors)], the NPS score for Company A would be 40 (60% - 20%).

  2. Company B, on the other hand, receives an NPS survey with only 30% of customers rating them as promoters, while 50% are passives and 20% are detractors. In this case, the NPS score for Company B would be -10 (30% - 20%).

Importance

The Net Promoter Score is crucial for businesses as it serves as a key performance indicator for customer loyalty and satisfaction. Here's why it is important:

  1. Predictive of business growth: Research has shown that companies with high NPS tend to experience faster growth compared to those with low scores. Promoters are more likely to become repeat customers and refer others, driving revenue and business expansion.

  2. Identifying areas of improvement: By analyzing the feedback from detractors and passives, businesses can identify specific pain points and areas where they need to focus their efforts to improve customer experience. This helps in enhancing overall customer satisfaction and loyalty.

  3. Benchmarking and comparison: NPS allows companies to benchmark themselves against industry competitors and measure their performance over time. It provides a standardized metric that enables businesses to assess how they fare in the market and identify opportunities for differentiation.

How to Use Net Promoter Score

To effectively use NPS, follow these steps:

  1. Design a concise survey: Create a simple and straightforward survey that includes the NPS question along with optional open-ended questions for additional feedback. Ensure the survey is easily accessible and user-friendly for customers to complete.

  2. Calculate your NPS: Analyze the survey responses and calculate the NPS score using the formula [(%Promoters - %Detractors)]. Categorize customers into promoters, passives, and detractors based on their ratings.

  3. Analyze feedback: Dive deep into the feedback provided by detractors and passives to identify common themes and areas requiring improvement. Pay attention to recurring issues and prioritize action items accordingly.

  4. Act on insights: Take proactive steps to address the feedback and concerns raised by detractors and passives. Implement changes, improve processes, and enhance customer experience based on the insights gained from the NPS survey.

  5. Monitor progress: Regularly track and monitor your NPS score over time to assess the impact of your efforts. Use the NPS as a benchmark to measure improvements and make necessary adjustments to your customer experience strategy.

Useful Tips

Here are some useful tips for effectively utilizing Net Promoter Score:

  • Follow up with customers: Reach out to customers who provide feedback, especially detractors, to understand their concerns in more detail and work towards resolving their issues. This shows a proactive approach and can help in retaining dissatisfied customers.

  • Keep it simple: When designing your NPS survey, keep the questions concise and easy to understand. Avoid complex jargon or technical terms that may confuse customers and lead to inaccurate responses.

  • Regularly communicate NPS results: Share the NPS results with your team and stakeholders to create awareness and foster a customer-centric culture within the organization. Regularly communicate the progress made in addressing customer feedback to ensure everyone is aligned towards improving the NPS score.

  • Consider using a benchmark: Compare your NPS score against industry benchmarks or similar companies to gain a better understanding of your standing. This can provide insights into areas where you may be lagging behind or excelling.

FAQ

Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction with a company or brand.
Net Promoter Score is calculated by subtracting the percentage of detractors (customers who are unlikely to recommend) from the percentage of promoters (customers who are highly likely to recommend).
A good Net Promoter Score varies by industry, but generally, a score above 50 is considered excellent, while a score below 0 is considered poor.
Net Promoter Score is important because it provides insights into customer loyalty, helps identify areas for improvement, and can be used as a benchmark to measure performance over time.
Net Promoter Score can be used to identify unhappy customers, understand their pain points, and take necessary actions to improve customer experience and increase customer loyalty.
The advantages of using Net Promoter Score include simplicity, easy benchmarking, focus on customer loyalty, and the ability to drive organizational change.
Yes, Net Promoter Score can be used across different industries as a standard metric to measure customer loyalty and satisfaction, although industry benchmarks may vary.
Yes, some limitations of Net Promoter Score include its simplicity, potential cultural bias, and the fact that it focuses on the willingness to recommend rather than overall satisfaction.
Yes, Net Promoter Score can also be used to measure employee satisfaction and loyalty, providing insights into the overall health of an organization.
The frequency of measuring Net Promoter Score depends on the business and its goals, but it is commonly measured on a quarterly or annual basis.

Article by

Ruben Buijs

Ruben, the founder of Boei, leverages over a decade of consultancy experience at Ernst & Young to optimize lead generation. Boei specializes in converting website visitors into qualified leads. Outside of work, Ruben is passionate about crossfit and enjoys gaming occasionally.

Table of contents

  1. Examples
  2. Importance
  3. How to Use Net Promoter Score
  4. Useful Tips
  5. Related Terms

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