NPS stands for Net Promoter Score. It is a simple, yet effective metric that we like to measure across most of our customer experience programs. NPS shows how likely someone is to recommend your business to friends or family. In this post, we’ll explain how NPS is measured and why it’s important for the health of your business.
The Importance of NPS
When it comes to the products and services that consumers choose to purchase, the importance of recommendations from family and friends can not be overstated. Neilsen research found that 92% of people trust recommendations from friends and family over ANY other type of advertising.
This is why NPS is so important. NPS is a key driver of business growth, because happy customers create a network effect as they recommend your product or services to friends and family, who in turn will recommend you to their social circles if they had a good experience, resulting in exponential growth.
In our conversational surveys, a typical NPS question might ask:
“How likely are you to recommend this store
to a friend or family member?”
Customers can answer the question on a scale from 0 (not at all likely) to 10 (extremely likely). Every answer is grouped into one of three categories:
😍 Promoters – responded with a score of 9 or 10
😐 Passives – responded with a score of 7 or 8
😞 Detractors – responded with a score from 0-6
Promoters are people who exhibit a high level of value-creating behaviors. They support your brand, will stay with you longer, and are most likely to recommend you to their social circles.
Passives fall in the middle of the spectrum. They are people who may have enjoyed their experience, but are not overly loyal to your brand. For example, think of a time when you were willing to compare brands to buy a particular product. If at the time you purchased, you were not loyal to that brand, you are probably a passive.
Detractors are people who do not exhibit value-creating behaviors, which means they are not loyal to your brand, and are not likely to recommend you or purchase your product/service again.
A company’s NPS is calculated using the following formula:
NPS = Percentage of Promoters – Percentage of Detractors
For example, lets imagine that we asked ten customers how likely they would be to recommend a store to their friends or family on a scale of 0-10. Here’s how those customers answered:
Total Number of Promoters (customers who answered with a 9 or 10): 8
Total Number of Passives (customers who answered with a 7 or 8): 1
Total Number of Detractors (customers who answered with a 0-6): 1
NPS is calculated by subtracting the percentage of detractors from the percentage of promoters, so in this example, the store’s NPS would be 70.
NPS = 80% – 10%
NPS = 70
Going Beyond NPS
While NPS is a useful metric for monitoring the health of a business, it only tells one part of the picture. It’s a quick way to determine whether a customer had a good or bad experience, but it does not tell us why that was the case.
That’s why we like to ask open-ended questions in all of our conversational surveys, to let customers guide the conversation. By enabling customers to answer questions in their own voice, we can understand exactly what it was about their experience that made it a happy or unhappy one.
By combining that information with NPS, our proprietary Satisfaction Impact Analysis (SIA) measurement enables us to understand what factors had the greatest overall impact on a customer’s NPS rating.