Net Promoter Score – What Is It and How Do You Calculate It?

Want to determine customer satisfaction and loyalty using the Net Promoter Score? This blog is for you!

What is a Net Promoter Score (NPS), and what are its benefits?

The term combines “to promote” (recommend or advocate for someone or something) and “score” (a metric or measurement, such as from a test or survey). The Net Promoter Score system was developed by Fred Reichheld, an author and business strategist.

The Net Promoter Score (NPS) is a popular and widely used metric for measuring customer loyalty, especially in online marketing.

Your customers’ opinions matter! As a company or organization, you value customer satisfaction and want to know whether and why customers would recommend your product or service to others. Insights into loyalty and the number of so-called “promoters” (those who recommend your business) are crucial for most companies. To gain these insights, you can measure the Net Promoter Score (NPS).

What exactly does the NPS measure?

The NPS measures whether a customer feels connected to a brand or company and intends to recommend it to others. Specifically, the NPS assesses the likelihood of a customer recommending your business, providing insights into customer loyalty. Due to its simplicity and ease of implementation, the NPS is highly popular among companies across various industries that care about their customers’ opinions.

It’s important to note that not all satisfied customers are loyal. While the NPS provides data on satisfaction, it measures the intent to recommend, which reflects customer loyalty. During an NPS survey, you may notice that not all satisfied customers are promoters.

How does the Net Promoter survey work?

To determine the NPS, a simple survey is sent to your customers or users. The survey includes one central question:

How likely are you to recommend our service/product/company to friends or colleagues?

Respondents can choose a value from 0 to 10 on a numerical scale. The higher the number, the greater the likelihood that the customer will recommend you. After rating, respondents can provide additional feedback in an open text field, sharing what they liked or disliked about your product, service, or company.

How is the Net Promoter Score calculated?

To calculate your company’s NPS, the numerical scale is divided into three levels:

The three levels of the NPS scale:

• 9 or 10 points: These respondents are promoters—they highly recommend your company.

• 7 or 8 points: These respondents are passives—they are neutral and unlikely to recommend or criticize your company.

• 0 to 6 points: These respondents are detractors—they are critical of your company and may share negative feedback or reviews.

To calculate the NPS, subtract the percentage of detractors from the percentage of promoters. The result is your Net Promoter Score, which ranges from -100 to 100.

Calculation example:

If 20% of survey participants are passives (7 or 8 points), they are excluded from the calculation.

Insights, Goals, and Benefits of the Net Promoter Score

Generally speaking, companies with a higher NPS than their competitors are more profitable. In comparison, companies with a slightly lower value than their competitors find it more difficult to retain customers and grow profitably. Above all, it is important that an improvement in your NPS becomes visible over time. This means that you implement improvements and your customers recognise this through increased loyalty.

Goals:

• Centering business strategies around customer feedback.

• Encouraging companies to consider alternative perspectives.

• Identifying hidden issues in products and services.

• Better assessing strengths and weaknesses.

• Increasing customer retention and gaining more NPS promoters.

Benefits:

• High survey participation rates due to its simplicity.

• Quick identification of positive and negative customer opinions.

• Improved customer experience (CX) based on actionable insights.

• Standardized method enabling competitive benchmarking.

Challenges and Limitations of the Net Promoter Score

While the Net Promoter System has many advantages, some limitations should be considered:

• Industry variations: Different sectors have different NPS benchmarks.

• Cultural differences: Rating tendencies differ across cultures.

• Simplified classification: The distinction between NPS promoters and NPS detractors may oversimplify customer sentiment.

• Limited insights without additional questions: A single score without qualitative feedback lacks depth.

How to Improve the Recommendation Rate with Targeted Actions

Collecting NPS survey data is only useful if businesses take action based on the insights. With real-time feedback systems, companies can respond immediately to detractors and take necessary actions to improve their experience. This approach can convert an NPS detractor into a promoter and transform an unhappy customer into a satisfied one.

Conduct a Successful Customer Survey with Survalyzer and Easily Calculate Your NPS

With Survalyzer, you can create professional customer satisfaction surveys and measure the Net Promoter Score effortlessly. Start now for free and check out an example NPS dashboard showcasing real-time Net Promoter Score tracking.

Optimize Your Business with the Net Promoter Score

Understanding and utilizing the Net Promoter Score (NPS) is essential for companies looking to enhance customer satisfaction and drive business growth. Whether you refer to it as the National Promoter Score, Net Promotor Score, or Net Advocacy Score, this powerful metric provides valuable insights into customer loyalty and helps you make data-driven decisions.

Start using the NPS system today and boost your company’s customer experience strategy!