NPS stands for Net Promoter Score which is a metric used in customer experience programs. NPS measures the loyalty of customers to a company. NPS scores are measured with a single question survey and reported with a number from -100 to +100, a higher score is desirable.
Net Promoter Score®, or NPS®, measures customer experience and predicts business growth.
The NPS Calculation
Calculate your NPS using the answer to a key question, using a 0-10 scale: How likely is it that you would recommend [brand] to a friend or colleague?
Respondents are grouped as follows:
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).
How to calculate your company’s Net Promoter Score
Let’s say you’ve sent out an online poll with the NPS question and the 0-10 scale, and you’ve received 100 responses from customers. What do you do with the results? Is it as simple as averaging the responses? Well, not quite. But it’s almost that easy.
The NPS system gives you a percentage, based on the classification that respondents fall into—from Detractors to Promoters. So to calculate the percentage, follow these steps:
- Enter all of the survey responses into an Excel spreadsheet
- Now, break down the responses by Detractors, Passives, and Promoters
- Add up the total responses from each group
- To get the percentage, take the group total and divide it by the total number of survey responses
- Now, subtract the percentage total of Detractors from the percentage total of Promoters—this is your NPS score
Let’s break it down:
(Number of Promoters — Number of Detractors) / (Number of Respondents) x 100
Example: If you received 100 responses to your survey:
- 10 responses were in the 0–6 range (Detractors)
- 20 responses were in the 7–8 range (Passives)
- 70 responses were in the 9–10 range (Promoters)
When you calculate the percentages for each group, you get 10%, 20%, and 70% respectively.
To finish up, subtract 10% (Detractors) from 70% (Promoters), which equals 60%. Since an example Net Promoter Score is always shown as just an integer and not a percentage, your NPS is simply 60. (And yes, you can have a negative NPS, as your score can range from -100 to +100.)
Performing these calculations might seem overwhelming, but it’s well worth the effort. Numerous research studies prove that the NPS system correlates with business growth.
Some critical remarks
From a scientific perspective and in certain market research circles there is some skepticism about the NPS. Opponents of the NPS concept argue that there is insufficient scientific base for the outcome and that the model is too simple. They claim customer loyalty and satisfaction is not only about numbers and percentages, but also about causes, consequences and correlations.
It is also suggested that the NPS method cannot accurately measure customer behavior. Customers can claim they will recommend a company or product in a greater or lesser extent, but it is not proven they will actually do that in practice. Besides that, the recommendation of one customer is not always as valuable as that of another one. It is also a fact that the NPS is more useful in markets with a lot of competition where potential buyers have a greater tendency to ask friends or acquaintances for advice before deciding about a purchase. Another limitation of NPS is that it only takes into account customers, while also a lot of non-customers can act as detractors and generate bad word-of-mouth publicity.
Furthermore the NPS disregards important differences in the answer score distribution: no distinction is made between a 0 score and a 6 score, while there is obviously a substantial discrepancy between those two. It also makes no difference whether there are 70% Promoters and 30% Detractors or 40% Promoters and 0% Detractors. Both result in an NPS of +40 which doesn’t seem very logical.
Some caution is therefore required. It is obvious that the NPS on its own may not be sufficient as a management tool, but in the right framework and with some additional motivational questioning it can undoubtedly be a useful metric. Its greatest strength is the simplicity, making it functional and interpretable for every stakeholder. Considering the large number of big companies using this tool on a continuous basis, it certainly has proven its worth.
To be clear, NPS is only a starting point. After the analysis, the real work can begin: improving your organization and taking actions to boost your NPS. This will be a long term project, but the NPS allows you to perfectly assess at which stage your organization is in this growth process.