How to Calculate Net Promoter Score or NPS
Net Promoter Score or NPS is a metric used by businesses to measure customers’ loyalty and their likelihood of recommending the product or service. To measure NPS, surveys are distributed that ask customers two questions. “How likely are you to recommend us to your family, friends, or colleagues?” The customer can give a numerical answer from 0 to 10. In addition to the numerical question, many NPS surveys ask a follow-up question. “What is the reason behind this score?” This non-numerical question can help provide clarity for the business.
How to Calculate NPS
To calculate Net Promoter Score or NPS, you’ll first need to separate your customers into promoters, passives, and detractors. For this, use the numeric answers from question one of your survey. “How likely are you to recommend us to your family, friends, or colleagues?”
If the customer gave your business a score of 0 through 6, classify them as Detractors. If they gave your business a score of 7 or 8, they’re Passives. Customers that gave your business a score of 9 or 10 are Promoters.
Once you have segmented your customers based on their loyalty, you can calculate your business’s NPS score. To do so, subtract the percentage of detractors from the percentage of promoters (leaving you with a NPS score anywhere from -100 to +100).
-100 to -1: Your net promoter score needs some work. If your NPS is in this range, the majority of your customers are likely not very happy or loyal to your business. If your NPS is in this range, here are 4 ways to grow your NPS through exceptional customer service.
0 to +49: Your net promoter score is in a good place. If your NPS is in this range, your customers and business are likely on the correct track.
+50 to +100: Your net promoter score is in a great place! If your NPS is in this range, you have many loyal customers that are likely to advocate for your business.
Why Does NPS Matter?
NPS can tell you a lot about your business. A high NPS usually directly translates to high retention rates. Given that it’s 6 times more expensive to win new customers than to keep existing ones, retention rates matter, a lot. Conversely, if your NPS is low, that’s a clear indicator that your products, services, or customer service need some attention.
NPS can tell others a lot about your business. If you’re proud of your NPS (it’s above +50), you can display it on your website or in your marketing materials. On the other hand, if a customer sees a low NPS, they may be less likely to do business with that company.
According to Hubspot, NPS can help inform key business decisions. “NPS allows you to find your most loyal customers and use them as the model of who to build your product for.” (Hubspot)
The Reason Behind The Score
The second question of the NPS survey allows you to listen to your customers. Listening can lead to actionable change for a business. The reason behind the score can give a business a clear indication of which areas are performing well and which ones aren’t.
It can be difficult to know what aspects of your business need work when your only feedback consists of a numerical Net Promoter Score. It’s much easier to make a change when someone submits a survey that says, “Your sales representative, Rebecca, was very rude on the phone.”
The reason behind the score can give you granular insights, for better or worse.
Whether you’re a small business or large corporation, customer feedback is vital, and NPS should be a key metric that you’re regularly examining.