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What is Net Promoter Score (NPS) and should my business use it?

What is Net Promoter Score (NPS) and should my business use it?
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Net Promoter Score (NPS) is a customer loyalty metric that was created by Fred Reichheld, Bain & Company, and Satmetrix in 2003. The metric is based on the idea that customers can be divided into three categories: promoters, passives, and detractors. NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

NPS can be used to measure the loyalty of a customer base, track customer satisfaction over time, and track customer effort. It can also be used to gauge customer sentiment about a company or product.

Net Promoter Score (NPS) is a simple customer feedback system that helps businesses gauge their customers loyalty. It’s a tool that you can use to see how likely your customers are to recommend your company to others.  There are now specialist Net Promoter Score survey companies that will help to implement NPS for your company or organisation.

NPS is calculated by asking customers how likely they are to recommend your company on a scale of 0 to 10. Customers who respond with a 9 or 10 are considered promoters, customers who respond with a 7 or 8 are considered passives, and customers who respond with a 6 or below are considered detractors.

The NPS score is determined by subtracting the percentage of detractors from the percentage of promoters.  To improve the Net Promoter Score for your company or organisation it is simply a case of continually following the steps:

  • Identify what is causing customers to be detractors
  • Fix what is causing customers to be detractors
  • Measure the change in Net Promoter Score
  • Repeat steps 2 and 3 as necessary

NPS can help you track customer loyalty over time and identify areas where you need to make improvements. It can also help you compare your company’s NPS score to the scores of your competitors.

How many surveys do you need for NPS? There is no one definitive answer to this question. The number of surveys you need will depend on a number of factors, including the size and composition of your customer base, the frequency of customer surveys, and the desired margin of error.

Generally speaking, you should aim to survey a large enough percentage of your customer base that the results will be statistically significant. However, you also don’t want to survey so many customers that the survey becomes burdensome or expensive to administer.

Ultimately, the number of surveys you need will depend on the specific circumstances of your business. By carefully considering the factors mentioned above, you can develop a survey plan that will produce accurate and reliable results.

Some disadvantages to Net Promoter Score are that it can sometimes be misleading and it can be difficult to determine the root cause of a low score. One theory is that an improved version of the Net Promoter Score would be to subtract the percentage of customers who are detractors from the percentage of customers who are passives. The percentage of customers who are promoters would remain the same.

It also can be time-consuming to implement and track and may not be applicable to all businesses.  But generally, taking these disadvantages into account if you want to improve your customer loyalty, using NPS is still an excellent way to start.

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