How to Calculate Net Promoter Score (NPS)
Net Promoter Score (NPS) is a popular and widely used metric to measure customer loyalty and satisfaction. It helps businesses understand their customers’ overall satisfaction with their products or services, and the likelihood of recommending them to others. In this article, we’ll dive into what goes into calculating NPS, how to interpret the results, and methods for improving NPS over time.
Step 1: Survey Your Customers
Begin by sending out a survey to your customers asking them a simple question: “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?” The survey should include responses ranging from 0 (Not at all likely) to 10 (Extremely likely).
Step 2: Categorize Respondents
Based on their answers, divide your customers into three categories:
1. Promoters: Customers who score 9 or 10 are classified as promoters. They are loyal enthusiasts who actively promote your company to others.
2. Passives: Customers who give scores of 7 or 8 are considered passives. They are satisfied but may not necessarily recommend your brand and could be easily swayed by competitors.
3. Detractors: Customers who assign scores from 0 through 6 are labeled as detractors. They are unhappy with your brand and could potentially harm its reputation through negative word-of-mouth.
Step 3: Calculate Percentages
To calculate the percentages of promoters and detractors, first count the number of respondents in each category, then divide them by the total number of responses received:
1. Percentage of promoters = Number of promoters / Total number of respondents *100
2. Percentage of detractors = Number of detractors / Total number of respondents *100
Step 4: Calculate NPS
Now that you have the percentages for promoters and detractors, measuring NPS is simple. Subtract the percentage of detractors from the percentage of promoters:
NPS = Percentage of promoters – Percentage of detractors
The result is a single number – your NPS. It ranges from -100 (all respondents are detractors) to +100 (all respondents are promoters).
Interpreting Your NPS
NPS can help companies understand how their customer experience and loyalty measures up against competitors or track improvements over time. A positive NPS indicates more promoters than detractors, which typically translates into strong customer loyalty and a growing customer base. A negative NPS suggests there are more detractors than promoters and likely requires action to boost customer satisfaction.
Improving Your NPS
To improve your NPS, consider the following tactics:
1. Solicit actionable feedback: Seek out specific feedback on areas for improvement from customers directly, in addition to their likelihood of recommending your brand.
2. Act on feedback: Use the insights gained from feedback to make targeted improvements in products, services, or support.
3. Engage with customers: Communicate with customers regularly and show appreciation for both their business and their input.
4. Monitor competitor performance: Investigate the practices and policies of competitors with higher NPS.
Calculating and monitoring your Net Promoter Score allows businesses to gain valuable insights into their customer base while identifying areas where they excel or can improve. By understanding your NPS, you can better serve your customers, cultivate loyalty, and grow your business over time.