What is NPS? Net Promoter Score Explained

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NPS stands for Net Promoter Score.

It measures the likelihood, on a 1-10 scale, that someone will recommend your company to someone else.

It’s a quick, easy, and inexpensive way to track how well your initiatives delight your customers.

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The theory behind NPS is this:

  1. Customer satisfaction and loyalty correlate strongly with sales.
  2. A stated propensity to refer your brand a friend or colleague correlates strongly with customer satisfaction and loyalty.

Why are recommendations important?

NPS tells businesses how they’re doing in two very important arenas: customer promotion and customer loyalty.
Recommendations lead to sales. Word of mouth is the most effective form of marketing in the estimation of 64% of marketing executives.

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Recommendations from friends and family are more trustworthy than all other forms of advertising to  92% of consumers, according to Nielsen.

Image source: https://www.referralcandy.com/blog/word-of-mouth-marketing-strategy/

It’s also a customer loyalty metric. Customer loyalty is essential to profitability because it’s much cheaper to get a repeat sale than a new customer.

Once you get a baseline NPS, you can measure it against variables to determine their impact on NPS. In this way, you can learn how to grow your NPS, and your sales too.

Why is NPS important now?

The Net Promoter Score was invented in 2003 by Fred Reichheld and introduced to the world via “One Number You Need to Grow” published in Harvard Business Review. Reichheld wanted to solve the problem of unhelpful customer satisfaction surveys.

They tend to be long and complicated, yielding low response rates and ambiguous implications that are difficult for operating managers to act on. Furthermore, they are rarely challenged or audited because most senior executives, board members, and investors don’t take them very seriously. That’s because their results don’t correlate tightly with profits or growth.

NPS promoters claim it correlates tightly with profits and growth.

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Though others say customer responses aren’t closely aligned with actual customer behavior. The argument is that intention is not behavior, and so it’s a useless metric.

Even if that’s true, however, measuring NPS can still provide value. That’s because it gives you a baseline metric to gauge at a glance whether people are feeling better or worse about your brand over time. And it also helps you identify the people who at least claim they will champion your organization.

It’s also true that NPS is one of, if not the, fastest, easiest way to assess consumer sentiment about your brand.

Though others say customer responses aren’t closely aligned with actual customer behavior. “Intention to do anything,” the argument goes, “let alone to recommend a company one does business with, is useless.”

Either way, measuring NPS is valuable because it gives you a baseline metric to gauge at a glance if people are feeling better or worse about you over time. And it also helps you identify the people who at least claim they will champion your brand.

NPS is the fastest, easiest way to assess consumer sentiment about your brand. And if it actually does correlate with likelihood of recommending, it may be more important than ever.

In 2003, a realistic win was a customer telling two friends about your brand. In 2017 a realistic win is a customer using their blog, Twitter, Facebook, Periscope, Meerkat, Snapchat, Instagram, Vine, YikYak, WhatsApp, etc. to tell two million friends about your brand.

Three quarters of people talk about brands on social media.

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As customers have become more empowered than ever to spread their opinions, good and bad, it’s never been more important to ensure you’re giving them something positive to say.

How do you measure NPS?

It starts with a question: “How likely are you to recommend us to a friend?”

The first people you want to ask are your current customers. One good time to ask them is after they purchase or after they contact customer service.

To do this, you need a Net Promoter Score questionnaire.

If you’ve never asked your customers this question, SurveyMonkey has some templates to help get you started.

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There’s also a lot of survey software to help automate the process.

The most common scale is 0-10.

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While a 0-10 scale is popular, the 7-point scale (1-7) is becoming more common. People are less likely to pick randomly on this scale compared to an 11-point scale in some studies. Researchers theorize that fewer options are less overwhelming, reducing random answers. In addition, the unfamiliarity of a seven-point scale may throw people off guard, causing them to think before answering, which may make their answers more accurate.

Your Net Promoter Score is your percentage of promoters minus your percentage of detractors.

NPS ranges from −100 (meaning everyone is a detractor) to +100 (meaning everyone is a promoter).

Most companies consider a decent Net Promoter Score to be >0%. Any positive NPS good. An NPS of +50 is excellent.

Once you have your responses, add up your “promoters,” “passives,” and “detractors.”

If you’re using a 0-10 scale, people who select

  • 9 or 10 are promoters
  • 7-8 are passives
  • 0-6 are detractors

If you’re using a 7 point scale, people who select

  • 7 are promoters
  • 5-6 are passives
  • 1-4 are detractors

Next you need to know what percentage of your customers each group comprises.

Some survey software will automate some or all of this process for you. calculate your NPS manually: 

  1. Export responses from your questionnaire/survey into a spreadsheet.
  2. Divide respondents into detractors, passives, and promoters.
  3. Add up the total responses from each.
  4. Divide the group total by the total survey responses to get the percentage total of each group. Or use a percentage calculator to make it easier.
  5. Subtract the percentage total of detractors from the percentage total of promoters.

This is your NPS!

You can also use this equation:

(promoters – detractors) / (respondents) x 100

NPS example:

100 responses to your survey

10 people answered 0, 1, 2, 3, 4, 5, or 6

100/10 = 10% are detractors

20  answered 7 or 8

100/20 = 20% are passives

70 answered 9 or 10

100/70 = 70% are promoters

Subtract detractors from promoters. 70% – 10% = 60%

A Net Promoter Score is always shown as an integer and not a percentage.

So your NPS is 60. Baller!

Conclusion

NPS, or Net Promoter Score, isn’t a perfect measurement. But it’s a quick-and-dirty method that correlates closer to sales and growth than traditional customer satisfaction surveys.

Do you measure NPS? Why or why not? Let us know in the comments!

Check out this post to learn more about the difference between CES, NPS, and CSAT. Then read Customer Feedback Template: A 5-Step Guide for Getting Actionable Customer Feedback and 5 Must-Read Customer Success Books. Once you’ve got the hang of it, compare the Customer Service Software That Helps You Run CES, NPS, or CSAT Surveys.

Looking for Survey software? Check out Capterra's list of the best Survey software solutions.

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About the Author

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Cathy Reisenwitz

Cathy Reisenwitz is a former Capterra analyst.

Comments

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After reading from 9 different references about NPS, I’d give this one a 10 on the scale. Thanks.

Important question however; many companies add an indicator icon above the scale, meaning on the questionnaire the scale would have a red sad face on number 1-6, then a yellow indifferent face on 7 and 8, then a green happy face on 9 and 10, which is basically guiding the customer to score. I personally believe that this is not ideal for a few reasons:

1. By guiding the customer you might get better scores, which becomes unrealistic and does not impact your business as you’d expect
2. If NPS is published, this might tip the scales towards you, especially that this approach is not widely used globally except for a few companies.
3. Finally, if NPS wasn’t dependent on hidden scale, then it’s easier to simply put three options in the survey; 0, 1, and 2 instead of using 10 digits.

Please share your thoughts.
Thanks

Avatar

Dear Team

Please what happens to NPS score when you have 100% passive rating i.e no Promoters and no detractors

[…] Net Promoter Scores are calculated using a simple survey which asks consumers how likely they are to recommend your products or services to a friend or colleague. The given response of an individual places that consumer into one of three categories: […]

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To all,

NPS is an 11-point scale, 0-10 with “0” intentionally included and part of the NPS concept. The point and value of NPS is far less about the score than to effectively categorize customers into three main categories with attributes specific to “Promoters”, “Passives”, and “Detractors”. In the absence of commentary about the respondent’s reason for their rating for some critical mass of common respondents, you do not have an NPS, you have a number. There are justifications for changing the rating, i.e. to account for differences in cultures around the world, etc. It may be helpful to revisit the intention and research behind the selection of the 0-10 rating scale before determining how it should be changed. If someone does not intend to use NPS for the purpose intended by the authors, it may not be the rating of choice and it probably should not be called NPS.

Avatar

Your scales and graphics are inconsistent. 0-10 on survey, 1-10 on chart, 1-10 in text then 0-10 in text – select one range and stick with it.

[…] it: Use an algorithm that combines churn, Net Promoter Score (NPS), activity, invoice history, support engagement and marketing engagement (e.g. Algorithm = […]

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