Varos Glossary

Net Promoter Score (NPS)

What is Net Promoter Score (NPS)?

Management may gauge the strength of their customer interactions with the use of the Net Promoter Score (NPS). The NPS technique was established by Fred Reichheld, Bain & Company, and Satmetrix in 2003. The NPS is a method developed to gauge consumers' propensity to advocate for a brand to others.

Net Promoter Score Calculation

The NPS is determined based on replies to a single question: "How likely are you to suggest our product or service to your family or friends?" Participants respond on a scale of 0 to 10, with 0 being "not at all probable" and 10 being "very likely." Respondents are classified into three groups based on their answers:

  • Promoters- 9-10

Customers that score a 9 or 10 are considered promoters since they are dedicated patrons who would most likely keep purchasing from the business and sing its praises to others. To the business, they represent its most valued clientele.

  • Passives- 7-8

These are happy clients who aren't too enamored with the business, but who nonetheless give it their business. People are unlikely to aggressively suggest the firm to others.

  • Detractors- 0-6

Detractors are unsatisfied consumers who are unlikely to purchase from the firm again and may even disseminate unfavorable evaluations. You might think of them as the largest threat to the firm.

You can get your NPS if you subtract the percentage of Promoters from the percentage of Detractors. A score between -100 and +100 is calculated. Your company should have a higher score if you have more promoters than detractors.

  • NPS= % promoters - % detractors

NPS Management

When a business knows its NPS, it may utilize that number to make its customers happier and more loyal. The Net Promoter Score (NPS) approach is beneficial since it offers a standardized method of measuring customer satisfaction that can be used to compare the effectiveness of various organizational units across time.

The following actions are recommended for businesses to perform in order to manage NPS effectively:

  • Act on customer input- Businesses should utilize customer feedback to find areas for improvement and take action to resolve consumer issues.
  • Businesses should interact with their promoters- to increase the likelihood that they will spread the favorable word of mouth about the brand and submit positive evaluations.
  • Engage with detractors- Businesses may win back dissatisfied customers—known as "Detractors"—by listening to their feedback and making changes to their products or services that make their experience more positive overall.
  • Tracking improvement over time and pinpointing problem areas requires constant monitoring of the NPS.

NPS Scale

The numbers on the scale may go either way. If the proportion of Promoters and the percentage of Detractors are both 0, then the score is neutral. If the score is favorable, then there are more advocates for the firm than critics, and if it is negative, then there are more critics than advocates.

Companies, sectors, and even regions may all be compared on the NPS scale. With the NPS, a rating of 50 or more indicates exceptional quality while a rating of 0 indicates the worst possible experience.

Although many companies have begun using the NPS system, others have voiced concerns about the methodology's lack of nuance and complexity. Others have argued that the approach simplifies client loyalty too much and doesn't give enough data to properly analyze consumer actions.

Closing thoughts

A company's ability to retain loyal customers may be gauged and its weak spots pinpointed with the use of the Net Promoter Score. To evaluate performance over time and across departments, the NPS system gives a straightforward indicator that is easy to grasp. NPS is useful, but businesses should supplement it with other metrics and customer input for a more complete picture of their current position.