What Is Net Promoter Score and Why Measure It?

"How likely are you to recommend us to a friend or colleague?"

This is a common question we encounter in many surveys. While it may seem like a simple question, it's an important question that's used to calculate the Net Promoter Score. NPS is often regarded as the gold standard for measuring customer experience. It’s now used by more than 2/3 of  Fortune 1000 companies and aims to measure customer loyalty. In addition to the raw score, NPS also seeks to understand “Why?”. This allows customers to articulate what is most important to them and those comments give context and depth to the score received.

What is NPS?

NPS stands for both Net Promoter Score and Net Promoter System. Sophia Bernazzani in her article for HubSpot defined NPS as a customer satisfaction benchmark that measures how likely your customers are to recommend your business to a friend.

How to Calculate the NPS?

Measuring NPS is simple. You just need to ask your customers the question: "On a scale of 0 to 10, how likely are you to recommend us to a friend?".  Categorize the respondents according to their score. Customers that give you a 0-6 are called Detractors, those rating you as a 7-8 are Passives, and those rating you as 9-10 are Promoters. Subtract the percentage of Detractor responses from the percentage of Promoter responses. The result is your Net Promoter Score. This score can range from -100 to 100.

The Net Promoter System is much more than just the score. By asking customers the reasons for their ratings using an unstructured, open-ended question, you can source specific customer pain points and ways to improve their experience.

Why is the Net Promoter Score Important?

• It measures customer loyalty. Without happy customers who want to continue buying from you, a business may struggle to survive. Acquiring new customers tends to cost more than retaining existing ones. Generally, they don’t spend as much money as loyal, repeat customers. Consistently monitoring your NPS helps companies measure customer loyalty and track service levels.
• It identifies ways for process improvement. A low rating on the NPS question provides an opportunity to improve. The comments about why they gave a specific score might help pinpoint specific things you can change to make their experience with your product or service better. Expect that not all feedback will be helpful. But specific notes about bugs, poor user experience (UX), or a bad call with a customer could be quickly routed to the responsible team to address.
• It helps you prioritize reaching out to detractors. NPS specify who your detractors are. They are the survey respondents who score between 0-6. This indicates that they are not likely to recommend you to others. It’s important to follow up with customers if they flag a problem or an issue. It could be a simple misunderstanding or error but could also be something bigger that needs attention. By following up with detractors, you can make them feel heard and valued. It might make them less likely to churn. What you don't want is for them to tell others that they shouldn't purchase from you.
• It boosts referral marketing. A good NPS provides companies a better opportunity to earn recommendations from happy customers. Companies can harness this information to design incentive programs for referral marketing, online reviews, and testimonials. They can also be used to tempt potential brand ambassadors and advocates. Happy customers provide more up-sell opportunities to deepen existing relationships.

The key to achieving a high NPS is having a greater number of promoters than detractors. Treat negative responses as an opportunity to improve. Likewise, don’t stop even if you find many happy promoters. Listen to their comments and find out ways to further improve your products and services. Turn happy customers into brand advocates to develop that positive word of mouth that is the most trusted way of advertising.