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What is Net Promoter Score®?
Net Promoter Score®, or NPS®, is a type of customer satisfaction metric that uses surveys to quantify and determine consumer satisfaction and loyalty.
NPS® surveys usually have one question, “On a scale of 0-10, how likely are you to recommend us?”; sometimes framed in different words. Customers then choose a number to reflect how likely they are to do so.
Types of Respondents
To calculate NPS®, respondents need to first be categorized into three groups depending on the number they chose in the survey.
Promoters: Respondents who choose a score of 9 or 10.
Promoters are the respondents who are most likely to spread a good word about the company and encourage them to purchase their products. They do so by saying positive things about the company.
Passives: Respondents who choose a score of 7 or 8.
Respondents who belong to the passive group are unlikely to say anything in regard to the company, and will usually not spread a good or bad word about it.
Detractors: Respondents who choose a score between 0-6.
Detractors are the customers who likely didn’t have a good experience with the company and won’t say anything positive about. It’s also likely that detractors dissuade future customers from interacting with the company by spreading a bad word about it and discouraging people from purchasing from the brand.
After the survey respondents are categorized into their respective groups, the following formula can be used to calculate Net Promoter Score®:
NPS® = % of promoters – % of detractors
The value of NPS® will range between -100 and 100.
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In order to get a better understanding of how Net Promoter Score® is calculated, here is an example:
Let’s assume that company XYZ sent out an NPS® survey to 500 customers.
100 customers respond to the survey with scores ranging from 0-6, 200 respond to it with a 6 or 7, and 200 respond to it with a score of 9 or 10.
This means that company XYZ has:
In order to calculate the NPS® score, we first need to find the percentage of promoters and the percentage of demoters.
Percentage of Promoters = (Number of Promoters/Total number of Respondents)x 100
Percentage of Promoters = (200 x 100)/500
Percentage of promoters = 40%
Percentage of Detractors = (Number of Detractors/Total number of Respondents) x 100
Percentage of Detractors = (100 x 100)/500
Percentage of Detractors = 20%
Now that we have all the values we need, we can use the NPS® formula to calculate the NPS® score:
NPS® = % of promoters – % of detractors
NPS® = 40% – 20%
Therefore, company XYZ has a Net Promoter Score® of 20, and this value is positive because there are more promoters than detractors. If company XYZ had more detractors than promoters, they would have a negative value as their NPS® score.
What is a good NPS Score
An NPS score above zero (a positive score) is ideally good for a company as means that the number of people who speak well of the company is higher than the number who speak badly of it.
However, bigger companies will usually have a score of around 50 or above, signifying that to do well, companies need to make sure that their number of promoters are significantly higher than their number of detractors.
Significance of Promoters and Detractors to a Company
“Word of mouth” is a tool that can be used by companies to significantly increase their customer base. However, if the company doesn’t satisfy its customers, this tool may also reduce a company’s customer base. Thus, it is important to companies to make sure that most of their customers are satisfied with them and turn into promoters.
With the introduction of social media and its influence over the masses, one good review can bring a company hundreds or thousands of new customers. Promoters may use social media as a tool to do so, reeling in a larger customer base for the company.
Types of Net Promoter Score® Surveys
There are two main types of NPS® surveys, and they are as follows:
NPS® relationship surveys are surveys that are sent to a company’s customer base on an interval basis, for example, half yearly or monthly. These surveys focus on getting an insight on customer loyalty.
NPS® transactional surveys are sent to customers after they have certain interactions with the company. For example, after a call with customer service or after the purchase of a product. These surveys focus on getting an insight on customer satisfaction, rather than loyalty.
Net Promoter®, NPS®, NPS Prism®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Net Promoter Score℠ and Net Promoter System℠ are service marks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.