The Net Promoter Score is an index measuring the customer experience and the willingness of customers to recommend a company’s products or services to others. The Net Promoter Score is one of the core KPIs used in the business landscape in order to assess the customer satisfaction and predict business growth.
How is the Net Promoter Score calculated?
Customers are asked to answer one single question. They are asked to rate the likelihood of recommending the brand to another person on a scale of 0 to 10.
Based on the rating they choose, respondents are then grouped in 3 categories: Detractors, Passives and Promoters.
Promoters are loyal customers who scored 9 or 10 in the question. Those are the people who are enthusiastic about the brand and they are likely to spread the word. Promoters are vital for your business since they are actively promoting growth.
Passives are those individuals who scored 7-8 and although they seem to be satisfied with the product or service offered, they are nevertheless not enthusiastic about it. These customers are vulnerable since they are likely to switch to competitive products.
Detractors are unhappy customers who scored below 6 and they are capable of damaging the brand’s reputation by spreading negative word-of-mouth.
The Net Promoter Score (NPS) is calculated by subtracting the percentage of customers who are detractors from the percentage who are promoters. The NPS might range between -100 and 100 (with -100 being the worst and 100 being the best).
How to use the Net Promoter Score (NPS)?
The NPS is a very straightforward metric which had been gaining increasing popularity due to its simplicity. The NPS can be used to assess what the majority of customers feel about your brand. If you are scoring high, then you have more promoters than detractors, which in turn implies that you are running a healthy business. On the other hand, if you are scoring low, it means that detractors are ruling your customer base and you are in a real danger. The main goal here is to turn detractors into promoters by enhancing customer satisfaction. At this point it is important to go back and assess what you might be doing wrong. Make sure you put a smile back on your customers’ face!
What are the benefits of Net Promoter Score (NPS)?
- Simple to use and understandable by all workforce
- Applicable to a broad range of industries
- Easy to calculate
- Higher response rate than long quantitative studies
What are the cons of Net Promoter Score (NPS)?
- Need for further qualitative analysis to uncover the areas of customer dissatisfaction. A supplementary analysis may be needed here.
- Sample size needs to be large in order for results to be accurate. This means it might not be suitable in a B2B context in which there are only a few customers.