What is NPS score?
NPS, or Net Promoter Score, is a popular business metric for customer satisfaction and loyalty. NPS is a metric used to determine whether your customers will likely tell their friends and family about your products or services.
NPS is calculated by asking: “How likely are you to recommend our product/service to others on a scale of 0 to 10?” Customers rate their likelihood, with 0 being “not at all likely” and 10 being “extremely likely.”
Customers are divided into three groups based on their responses: promoters (those who scored 9 or 10), passives (those who scored 7 or 8), and detractors. (those who score 0 to 6). The net promoter score (NPS) is then calculated by subtracting the percentage of detractors from the percentage of promoters. A higher score indicates greater customer satisfaction and loyalty.
Businesses use NPS as a KPI to track customer sentiment over time and make data-driven decisions to improve their products, services, and customer experience. NPS provides useful insights into customer perceptions and can be used to identify areas for improvement, set goals, and compare them to industry standards. It is also used as a customer relationship management tool, assisting businesses in prioritizing customer retention and growth strategies.
How to calculate NPS?
NPS, or Net Promoter Score, is calculated using a simple methodology that involves asking a single question to customers and categorizing their responses into three groups: promoters, passives, and detractors.
Steps to calculate NPS:
- Do a survey to all your recent purchasers and ask them to rate how likely they are to recommend your product or service on a scale of 0 to 10, with 0 representing “not at all likely” and 10 representing “extremely likely.”
- Sort the responses: Customers are divided into three groups based on their ratings.
- Customers who give a 9 or 10 are considered promoters because they will likely recommend the product or service to others.
- Customers who respond with a 7 or 8 are classified as passive because they are somewhat satisfied but are less likely to recommend actively.
- Customers who rate a product or service from 0 to 6 are classified as detractors because they are unlikely to recommend it and may have negative perceptions.
- NPS is then computed by subtracting the percentage of detractors from the percentage of promoters. So, the NPS score ranges between -100 to 100. If 70% of customers are promoters and 15% are detractors, the NPS is 55 (70% – 15%).
How to interpret NPS?
The NPS score indicates customer satisfaction and loyalty. A higher NPS score indicates greater customer satisfaction and loyalty, whereas a lower NPS score indicates areas for improvement.
The NPS score of 55 indicates that most customers (70%) are promoters, which means they would highly recommend the product or service to others and indicates that this group has high customer satisfaction and loyalty. Conversely, detractors (15%) are unlikely to recommend the product or service and may have negative perceptions, which suggests room for improvement in addressing these detractors’ concerns.
An NPS score of 55 is considered good because it reflects a higher percentage of promoters than detractors. However, to improve customer satisfaction and loyalty, the company must take action and address the needs and concerns of detractors.
Also, NPS should not be interpreted in isolation. It should be used alongside consumer feedback and performance metrics to understand customer sentiment and make informed business decisions. Regularly tracking and analyzing NPS trends can provide useful insights and help guide strategic efforts to improve the overall customer experience.
