Net Promoter Score or NPS is a popular metric because it is simple to calculate and provides valuable insights into a company’s customer satisfaction, engagement and likeness of customers buying again or generating referral for the product/services of the comapny.
What is NPS
NPS metric was created by Bain and Company and it is now being used by a number of organisations to measure and track how their customers view them. The NPS score determines the distinction between negative and positive feedback.
The foundation of NPS is the idea that customers can be categorised into three groups: Promoters, Passives, and Detractors. Detractors are dissatisfied consumers who are more inclined to talk poorly of a company than Promoters, who are extremely satisfied customers who are more likely to suggest a firm’s product or service to others. Companies may quickly assess their customer satisfaction levels and pinpoint areas for improvement by assessing the percentage of Promoters and Detractors. NPS is also simple to track over time, enabling businesses to keep an eye on their progress and make changes as necessary.
How to measure NPS
To measure a company’s Net Promoter Score (NPS), you can use the following steps:
- Ask customers to rate their likelihood to recommend your company’s offerings on a grade from 0 to 10.
- Now the responses can be separated into three different types based on their score: Promoters for responses with scores of 9-10, Passives for scores of 7-8, and Detractors for scores less than or equal to 6.
- Now to get to the NPS – you need to get the percentage of Promoters and Detractors out of the total number of responses, and then percentage of Promoters – percentage of Detractors will give you the NPS score.
For example, if you have 100 responses and 40 of them are Promoters, 30 are Passives, and 30 are Detractors, your NPS would be calculated as follows:
- Percentage of Promoters: 40 / 100 = 40%
- Percentage of Detractors: 30 / 100 = 30%
- NPS: 40% – 30% = 10
A score above 0 is considered to be good, and a score above 50 is considered to be excellent. It’s important to note that NPS is only one measure of a company’s success, and it should be considered along with other metrics.
Example of questions that you can ask for measuring NPS
Here is an example of a customer survey that may be used to calculate your company’s Net Promoter Score (NPS):
- On a scale from 0 to 10, where 0 means “not at all probable” and 10 means “very likely,” how likely are you to recommend the product or service of our company to a friend or colleague?
- What is the primary contributor to your grade? (optional)
- Permit us to follow up with you to discuss your feedback, if possible. (optional)
Reasons to implement NPS
There are several reasons why a company might want to implement Net Promoter Score (NPS) as a metric for measuring customer satisfaction and loyalty. Some of the main reasons include:
- NPS provides valuable insights into customer satisfaction and loyalty. By measuring the percentage of Promoters and Detractors, companies can get a quick snapshot of their customer satisfaction levels and identify areas for improvement.
- NPS is easy to track over time. This allows companies to monitor their progress and make adjustments as needed to improve customer satisfaction and loyalty.
- NPS is a widely-used and well-established metric. Many companies are currently using NPS and NPS is now being considered to be a standard measure of customer satisfaction and loyalty. This also allows companies to compare their NPS scores with those of their competitors and industry benchmarks.
- NPS can help companies to prioritize their efforts. By focusing on improving the experiences of Promoters and converting Detractors into Passives or Promoters, companies can maximize the impact of their efforts on customer satisfaction and loyalty.
Net Promoter Score (NPS) is a popular metric in a variety of industries, including retail, healthcare, financial services, and technology. Companies from these industries heavily use NPS to measure their customer satisfaction and loyalty, and to identify areas for improvement. It is especially popular in industries where customer satisfaction and loyalty are critical to a company’s success. For example industries such as retail and financial services. Here customers have many options to choose from and can easily switch to a competitor. Such industries find great value in implementing NPS .
Overall, implementing NPS can help companies to better understand their customers, improve their customer satisfaction levels, and drive business success.