What is Net Promoter Score (NPS)?

The Net Promoter Score, or NPS®, is a measurement tool used by organizations to get a clear vision of the health of their customers’ loyalty. Using a scale (e.g. 0 - 10), customers measure their willingness to recommend a company's product or services to others. Used widely across the globe, Net Promoter Score has become a key metric in customer engagement since its launch in 2003, attributed mostly to the model it provides for linking customer loyalty to financial KPIs and profitable growth.

Why is NPS Important?

By knowing your Net Promoter Score you have a clear way of segmenting your customers into Promoters, Passives and Detractors. This gives you the ability to build a strategy to approach these 3 groups, for example closing the loop with your Detractors, or leveraging positive word of mouth with your promoters. Additionally, having a series of Net Promoter Scores allows you to track key areas of your business. For instance, tracking your relationship NPS over time gives you an indication of whether your CX initiatives are having an impact on loyalty.

How Does Net Promoter Score Work?

Using a min/max index scale and specific formula unique to NPS, this score allows you to segment your customers into classes (i.e. - Promoters, Passives and Detractors). While the type of questions used may vary by business, the key question to calculate is “How likely is it that you would recommend Company X to a friend or colleague?”. This question should be followed by at least another question: “Why”, as the respondent’s answer will guide the organization when it comes to driving customer-centric change.

How to Calculate Net Promoter Score

NPS is based on the answer to one question: How likely are you to recommend Company/Product/Service X to a friend or colleague? Customers answer this question using an 11-point scale, ranging from 0-10. Based on you customers' responses they are classified into one of the three aforementioned categories, Promoters (9 or 10), Passives (7 or 8) or Detractors (0-6). After customers are bucketed, the following formula is used to calculate the NPS:

NPS = % of Promoters - % of Detractors

Net Promoter Score calculation example:

Using the NPS equation, if you have 50% Promoters (i.e. half of your respondents gave you a score of 9 or 10), 20% Passives and 30% Detractors, your NPS score will be 50 – 30 = 20. The NPS scale goes from -100 (if you have no promoters) to +100 (if you have no detractors).

Is Net Promoter Score Just One Question?

Although the scale itself is based on a single question (aka The Ultimate Question), the Net Promoter System is much more sophisticated. It implies that although the aim should always be to keep your survey questions short and to the point, you do need to include:

• The Why question following the NPS question. Typically, this is formulated as “Could you please tell us why you gave us this score?”

• Additional questions you might need in order to dig deeper into the areas you focus on (for example, satisfaction scores for different stages of the customer journey)

If you do need more information, instead of adding more questions to the survey, you should consider other techniques, like root-cause analysis – basically asking key customers in-depth questions about their survey responses.

But a survey based on Net Promoter, like any other customer feedback, means nothing if you don’t take actions based on the insights you’re getting. The right mix of tactical, closed-loop actions (to rescue accounts about to churn for example), and strategic, long-term initiatives (for example improving your product offering), is key to the success of your program. And the NPS® score serves as a very intuitive, simple metric you can trend over time to evaluate the progress you’ve made.

What’s a Good Net Promoter Score?

A good (or even average NPS) is relative and can vary by industry. For that reason, instead of focusing on a definitive "good" number its more effective to compare your NPS with industry benchmarks to get a sense of the average score specific to your market.

Typically, a good NPS Score is one that:

• Compares favorably with your competitors in your region and market

• Increases over time based on the initiatives you take to increase customer experience

• Helps to give direction when it comes to taking customer-centric actions to deliver on your specific business outcomes

What Are the Net Promoter Economics?

The economics of Net Promoter are similar to the principles that govern customer loyalty. Satisfied, or even better, delighted customers, will spend more and recommend your company to their friends. They also cost less to serve. On the other hand, dissatisfied customers cost a lot more to serve, as they tend to generate more complaints. And of course, they spend less and might deter new customers from joining by spreading negative word of mouth.

A key element of what the Net Promoter system adds here is the ability to correlate these principles to the Promoter, Passive and Detractor segmentation. For example, you can calculate the customer lifetime value of a promoter as opposed to a detractor, and therefore build a business case around whether the cost of turning a detractor into a promoter is worth the benefits.

Major organizations around the globe use NPS as their customer loyalty KPI. Its intuitive nature and correlation to financial metrics make it a very powerful metric, but it’s in the way it helps them make better business decisions that the true power of NPS come into play.

Can NPS Apply for Every Business?

Although NPS can provide many benefits and valuable insight, it's important to note that it doesn't work for everyone. Below are some key aspects to keep in mind when considering NPS for your business:

• NPS might not be the right metric for you (just like any other metrics)

• NPS might not help to drive change within your organization

• NPS might not correlate to growth in your business (for example in companies where recommendations aren’t important)

What Are the Steps You Need to Calculate Your Net Promoter Score?

Below is a list of 6 steps to get started with calculating your Net Promoter Score.

1. Implement a customer satisfaction survey using the NPS scale and the “Why” question

2. Calculate the percentage of customers who answered 9 or 10 on the questionnaire (your Promoters)

3. Calculate the percentage of customers who answered 0-6 on the questionnaire (your Detractors)

4. Subtract the percentage of Detractors from the percentage of Promoters

5. The number you now have is your Net Promoter Score

6. Don’t forget to act on what your customers have shared with you, so you can work on increasing your score over time, and drive business results

This will help you get started but remember that fostering a customer-centric culture and finding ways to improve NPS in your organization are no easy tasks.

Learn more about best practices in implementing a Voice of the Customer program that will deliver results in the short and long run.

How to Increase Your Net Promoter Score?

• Make sure you use your current NPS to establish a baseline so you can evaluate future trends

• Take tactical actions to close the loop with individual customers (or a selected group of them). Turning detractors or passives into promoters is a great way to increase your score (and more importantly your customers’ loyalty)

• Once you’ve gathered insights from a representative sample of your customer base, start taking more strategic actions, for example investing in product innovation or re-designing your billing system

• Keep correlating your actions to the impact they’ve had on your NPS, so you can justify further investments in customer experience

• Now correlate your Net Promoter Score to your business KPI’s (customer churn, revenue, cost of acquisition, etc.) so you can demonstrate the impact of customer experience on the bottom line

• Empower everyone in your organization to take action at their level, and understand how they can influence customer loyalty – customer experience should never be just another initiative, but a driver of positive culture change

Quick Facts About Net Promoter Score

Is Net Promoter Score a Percentage?

The Net Promoter Score is not a percentage. It’s a score that ranges from -100 to +100. It is calculated based your percentage of Promoters and Detractors (see above for calculation), but the result, the NPS Score itself, is not a percentage.

When Was Net Promoter Score Introduced?

The creation of the Net Promoter Score was the result of research in the early 2000, which culminated with the publication of an article in the Harvard Business Review in 2003 (The One Number You Need to Grow), and a book by Fred Reichheld, called The Ultimate Question, published in 2006 and revised in 2011 (The Ultimate Question 2.0, Harvard Business Review Press).

What Can You Measure Using Net Promoter Score?

While one of the main purposes of using NPS is to measure customer loyalty, it can also be used to measure:

• The financial benefits of improving the customer experience, based on Net Promoter Economics

• An actionable segmentation of your customer base (Promoters, Passives and Detractors)

• Your position against your competition

What Can You Do with Your Net Promoter Score?

Some of the actions you can take after getting your Net Promoter Score include:

• Identifying the right strategy to address key customer segments, for example: saving detractors from switching to another vendor

• Tracking the success of CX initiatives by paying close attention to the evolution of the NPS

• Embedding NPS at all levels of the organization, for example recognizing call center agents who generate promoters, or identify best practices in high-scoring stores which can be replicated to locations that might be struggling

How to Read a Net Promoter Score?

Your NPS Score is a number between -100 and +100 and indicates the overall loyalty of your customer base. Most organizations calculate their NPS Score at key stages of the customer journey:

• An overall Relationship NPS

• Transactional NPS Scores at key touchpoints, for example post-purchase or after a support call

The score, like all customer loyalty metrics, has limited power. If you calculate your relationship NPS to be 35, the next question will be: “So what?”.

Rather than reading the NPS Score itself, focus on:

• The verbatims and qualifying questions that will give you an indication on what you should improve to drive a better customer experience

• The trends in the NPS Score(s) you collect – to evaluate the impact that the actions you take (or external factors in some cases, like a recession) has on customer loyalty

Other best practices can be put in place for your Net Promoter program to ensure you drive the right actions, and culture, that will deliver tangible financial benefits for your organization.

How Can Net Promoter Score Work for Your Business?

An essential ingredient to the success of a Voice of the Customer program based on NPS, or other loyalty metric, is executive support. No matter how engaged your employees are to improve the customer experience, or how motivated you are as a CX professional, your program can only truly drive positive business results with the full backing and support of your top executives, starting with your CEO.

If that’s the case, you’re in a great spot! But you still need the right technology and services:

• to ensure you’re asking the right questions to the right customers at the right time, through the right channel

• to get the insights to the people who can take the right actions

• to measure the impact of these actions in terms of business outcomes

What Are the Net Promoter Score Questions?

Utilized properly, there should be at least 2 questions in a Net Promoter customer loyalty survey:

• "How likely is it that you would recommend Company X to a friend or colleague?” The scale offered to the respondent should range from 0-10 and state all 11 scores possible.

• A question asking the respondent to justify the score they gave, for example “Could you please tell us why you gave us this score?” The response to this question should preferably be in open-text format to let the respondent share his feedback in his own words.

Additional questions may be added to the survey if they can help the organization gather key insights they need, but it is critical for organizations asking for customer feedback to keep their questionnaires short and to the point. Respecting customers’ time and collecting only critical data will go a long way towards improving engagement, and response rates. But in the end, it’s all about the actions you take to drive a better customer experience – if your customers see you care about their feedback, and act on it, they’re much more likely to keep sharing insights in future.

*All trademarks are the property of their respective owners. Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix, Inc., Bain & Company, Inc., and Fred Reichheld.