Introduction
You’ll constantly be curious about your consumers’ loyalty. How likely they are to recommend you and buy goods or services from you in the future. The Net Promoter Score (NPS) measures customer loyalty based on one simple survey question: i.e. “On a scale of 0 to 10 how likely you would recommend [Organisation /Service /Product] to a friend or colleague?”
What is NPS?
NPS stands for Net Promoter Score. It is a matrix ranging from -100 to 100 that measures the loyalty, satisfaction, and enthusiasm of customers with the company. It represents how likely customers would refer the company’s products or services to others.
How to calculate NPS?
NPS is calculated by subtracting the percentage of customers who rate the NPS score scale between zero to six (known as ‘detractors’) from the percentage of customers who rate the NPS score scale with nine or ten (known as ‘promoters’).
For example,
Let’s imagine a scenario where a company surveys 1000 of its customers with the standard NPS question. After the responses are totaled, 600 of the respondents are promoters, 250 are passives and 150 are detractors. The first step is to calculate these amounts as percentage values.
Calculated percentages of the following are:
Detractors = 15% (150 / 1000)
Passive = 25% (250 / 1000)
Promoters = 60% (600 / 1000)
Now, using the formula for NSP = Promoters (i.e. 60%) – Detractors(i.e. 15%) we will get:
NSP = 45%
What is a good NPS score?
Generally, if your score is below 0 then it indicates that there are lots of issues to be addressed and need more improvement. Whereas if the score is between 0 to 30 is considered to be good, but still, improvements can be recommended. Moreover, NSP between 30 to 70 is great and above 70 will be excellent which means your customers are highly satisfied.
What is the NPS score scale?
Customers are asked to input the values between 0 to 10 which is represented on a scale and based on these inputs the customers are categorized into three groups as follows:
- Promoters
- Detractors
- Passives
Promoters
Promoters (scores of 9 and 10) are a company’s most enthusiastic and loyal customers, who are more likely to act as brand ambassadors, improve a brand’s reputation, and boost referral flows, all of which accelerate the company’s growth.
Detractors
Detractors (score of 0 to 6, included) are unhappy customers who are unlikely to recommend your company or product to others, and may even discourage others to do so.
Passives
Passives (score of 7 or 8) are satisfied with your service but not happy enough to recommend your company or product. Although passives are not directly factored into the NPS calculation, they should not be overlooked. As they are more close to promoting as promoters thus little more effort can improve your NPS score. For example, resolving the problems of the customer can improve their rating from 8 to 9 in the next survey.
Advantages of NPS
- NPS quantifies customer loyalty.
- You can easily benchmark your Net Promoter Score and see where you stand against your biggest competitors.
- Fast and easy way to get customers’ feedback.
- Higher response rates than multi-question surveys
Disadvantage of NPS
- The NPS system isn’t specific enough to identify the reasons why your customers may be Detractors.
- NPS Score doesn’t provide Deep Insights.
Conclusion
The Net Promoter Score is a metric that allows companies to measure the quality of their customer service, especially in comparison to their competitors. Moreover, Businesses can use their net promoter score to address any issues, improve their customers’ experiences, track loyalty patterns, and increase revenue through referrals and upsells.
