What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a widely used metric for measuring customer loyalty and satisfaction. It was developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003 and has since become a popular tool for businesses to gauge how likely their customers are to recommend their products or services to others.

NPS is based on a single question survey that typically asks customers the following:

“On a scale of 0 to 10, how likely are you to recommend [Company/Product/Service] to a friend or colleague?”

Based on their responses, customers are categorized into three groups:

1. Promoters (score 9-10): These are highly satisfied customers who are enthusiastic about the company’s product or service. They are likely to recommend it to others and can become advocates for the brand.

2. Passives (score 7-8): These customers are generally satisfied, but they may not be as enthusiastic as promoters. They are considered neutral and may not actively promote or criticize the brand.

3. Detractors (score 0-6): Detractors are dissatisfied customers who are unlikely to recommend the product or service. They may have had negative experiences and could potentially harm the company’s reputation through negative word-of-mouth.

To calculate the Net Promoter Score, you subtract the percentage of detractors from the percentage of promoters. The score can range from -100 (if all respondents are detractors) to +100 (if all respondents are promoters). A higher NPS indicates a more positive customer sentiment and loyalty.

NPS is valuable for several reasons:

1. Simplicity: It’s a straightforward metric that is easy to understand and calculate.

2. Customer-Centric: NPS focuses on the customer’s perspective and their likelihood to recommend the company, making it a customer-centric measurement.

3. Benchmarking: Companies can compare their NPS with industry benchmarks or their own historical data to assess improvements or declines in customer loyalty.

4. Actionable: NPS provides actionable insights. Detractors can be followed up with to understand and address their concerns, while promoters can be leveraged for referrals and testimonials.

5. Predictive: NPS has been shown to correlate with business growth. Companies with higher NPS scores tend to see greater revenue growth over time.

While NPS is a valuable tool, it’s important to use it in conjunction with other customer feedback mechanisms and metrics to gain a comprehensive understanding of customer satisfaction and loyalty. Additionally, it’s crucial to act on the feedback received and make improvements based on customer insights to drive positive change within the organization.