What Is Net Promoter Score? Definition and Calculation

What Is the Net Promoter Score?

As a business metric, NPS helps organizations of all sizes to focus on a mission-critical goal—improving their score by gaining more enthusiastic customers—that can be easily tracked and quantified over time.

Customer segments, geographic units, and functional groups are all noted. It assists everyone in focusing on the twin objectives of increasing promoters and decreasing detractors. Simply put, it’s your customer balance sheet.

The Net Promoter Score (NPS) is a metric to gauge how engaged your employees are in your customer service program.

Isn’t it, after all, a fascinating topic in product management?

Why Is the Net Promoter Score Important?

Making your clients happy is one of the most effective strategies to develop your business.

The Net Promoter Score (NPS) is a metric for determining client loyalty and the likelihood to recommend your products and services to others.

The Net Promoter Score (NPS) can forecast business growth. 

When your company’s net promoter score (NPS) is high (or at least over the industry average), you know you have a healthy relationship with consumers who are likely to serve as brand advocates, fuel word of mouth, and generate a positive growth cycle.

The net promoter score (NPS) is a metric that allows organizations to assess the standard of their customer service, especially in contrast to their competitors.

NPS gives you a broad picture of how a client feels about your company rather than focusing on a single interaction. As a result, NPS applies to all employees and digests as a single number.

Companies can use their net promoter score to fix issues, improve their customers’ experiences, track loyalty patterns, and increase revenue through referrals and upsells.

NPS can assist you in determining which consumers are promoters, passives, or detractors. Customers loyal to a company are an advantage and a fantastic way to maintain healthy functioning. Obtaining new business is frequently more complex than renewing existing contracts.

The net promoter score (NPS) measures the health of your business and its potential for growth in the future.

When you conduct an NPS survey, it tells your customers that you care about their opinions of you. It gives the appearance that you care about customer happiness and highlights that you put your “customers first” and that the customer’s voice is important to you.

How Does the Net Promoter Score Work?

Polling of the customers is on just one question. They ask to rate the likelihood of referring the firm or brand to a friend or colleague on an 11-point scale.

“How likely are you to suggest this company’s product or service to a friend or colleague on a scale of 0 to 10?” The customers are placed in three categories based on their ratings: detractors, passives, and promoters.

Promoters are ardent, devoted admirers. They sing the praises of the firm to their friends and coworkers. They are considerably more likely to stay consumers and grow their purchases over time than others. 

Furthermore, most businesses account for more than 80% of referrals. Employees find them to be nice to work with in general.

The detractors are “passively satisfied” since they are content—at least for the time being. Repurchase and referral rates are nearly 50% lower than promoters’, and their referrals are more likely to be qualified and eager. Most telling: They may defect if a competitor’s ad catches their eye.

Detractors are disgruntled clients and are responsible for more than 80% of nasty words from mouths. They have a high turnover and desertion rate. 

Some may appear profitable on paper, but their comments and negative attitudes damage a company’s brand, deter new consumers, and demotivate personnel.

We grade the answers to the ultimate question on a simple zero-to-ten scale. Customers will be familiar with and comprehend this scale. It prevents individuals from mixing up the scale’s ends by incorrectly picking “one” on a one-to-ten scale (a zero is never a good score). Second, it gives respondents enough options, so they don’t just give a “five out of five” for positive experiences.

We can notice behavioral variations between people who score nines and tens and those who score zeroes and sixes on the 11-point scale. The underlying strength of understanding your NPS is that these link behavioral variations to economic value.

How to calculate the net promoter score

The net promoter score is an extensively used metric for customer happiness and loyalty worldwide.

Now that you know it, let’s go over how to compute the net promoter score (NPS).

Let’s look at the net promoter score formula and the various techniques for calculating your NPS.

Deduct the percentage of Detractors from the Promoters to get your net promoter score. NPS equals the % of promoters – the % of detractors. It’s as easy as that!

Look at the following example for a better understanding:

So, if 60% of respondents were promoters and 10% were detractors, your net promoter score would be 50.

The excel or google sheets method is optimal when your raw NPS data is only rows of numbers between 0 and 10 that classify as promoters, detractors, or passives.

• Fill up an Excel file with all of the survey replies.
• Divide the responses into three categories: Detractors, Passives, and Promoters.
• Total the responses from each group.
• Multiplying the group total by the total number of survey replies to get the percentage.
• Subtract the total proportion of detractors from the total percentage of promoters to get your NPS score.

You can also use an online NPS calculator if you’ve already tallied up the number of replies received by each 0-10 score.

If you collect your NPS data using a survey tool, it may already include an auto-calculate capability that allows you to compute your NPS with a single click.

What Are the Net Promoter Score Best Practices?

Corporations compete more with customer service than with their products in today’s fast-paced industry.

The difficulty is that many people don’t comprehend what “excellent customer experience” entails.

NPS is a terrific approach to ensure that your entire firm focuses on your consumers. Don’t limit yourself to running a business or selling items; attempt to create an unforgettable experience for your customers.

In the area of product management, the aforementioned is critical to comprehend.

Now that we understand the significance of NPS and its influence on businesses, let’s look at some NPS best practices to follow in the modern era.

What clients want is a simple, stress-free experience.

Apply the Correct NPS Software

First and foremost, utilizing an NPS program tailored to your company’s needs is usually advisable. 

What makes this one of the best NPS practices? A decent piece of software, on the other hand, can make data collection a breeze.

Frequency and Timing

The time and frequency of your NPS survey are determined by your strategic goals and your customers’ needs. 

For example, suppose you want to measure and improve user experience during a product trial and exploit that information. 

In that case, you should time the survey to coincide with the trial schedule of the user.

Are you completing the circle?

Even if you obtain great feedback from your consumers during the NPS survey, with most of them taking the time to fill in their remarks, the entire exercise is pointless if you don’t close the feedback loop. And you would have squandered everyone’s time.

When it comes to surveys, closing the feedback loop is crucial.

You should share feedback from the NPS with the entire team.

The first stage is to collect scores. 

The following step is to take action based on the results, including following up with respondents and, more importantly, disseminating the feedback internally. 

Ensure that customer feedback and suggestions reach all appropriate workers to improve your service.