Net Promoter Score
Also known as: NPS
The Net Promoter Score (NPS) is an important KPI for customer satisfaction and customer loyalty. The higher this score, the more satisfied and loyal customers and users are. Central to this is how likely customers are to recommend the company or brand to others.
To determine this Net Promoter Score, a simple question is asked of customers, "How likely are you to recommend our company/product/service to a friend or colleague?" The answer is a number from 0 to 10.
The answers given are classified into three groups:
- Detractors (participants who gave a number from 0 to 6)
- Passives (participants who gave a 7 or 8)
- Promoters (participants who gave a 9 or 10)
The goal of any business should be to have as many promoters as possible. They will create a lot of positive word of mouth. Detractors, on the other hand, you want as few as possible. These detractors can actually damage your brand's reputation.
Formula to calculate NPS
NPS = percentage of promoters - percentage of detractors
The result is a number between -100 and 100. For example, if there are 30% promoters and 20% detractors, the NPS amounts to 10 (30% - 20% = 10). Passives have no direct influence on the NPS score.
When is the NPS positive?
The NPS is positive when the percentage of promoters exceeds the percentage of critics. This means that more customers actively recommend the company than recommend against it. An NPS above 0 is considered positive, while a score above 50 is considered excellent. Companies with a high NPS tend to have strong customer loyalty and a good reputation in the marketplace. A positive NPS indicates that customers are satisfied with the products or services offered and are willing to share it with others, which can lead to organic growth and more customers.
Criticism of NPS
Although the Net Promoter Score has quickly gained a lot of traction in the business world, there is also commentary. For example, the KPI would add little to existing methods of measuring loyalty and customer satisfaction. Also, one question with an answer within a divergent scale of 0 to 10 would yield few reliable results. Another common argument is that the outcome is highly dependent on the type of product or service, which makes it difficult to compare companies' NPS, especially when different industries are involved.
