How To Calculate Net Promoter Score?

What Is Net Promoter Score?

Commonly known as NPS, Net Promoter Score, is a metric used to measure customer loyalty. This concept was originally developed by Bain and Company in 2003 and it has become an essential method for businesses to assess how well they are perceived by their customers.

Net Promoter Score offers an easy method to measure customer sentiment and it helps companies distinguish between positive and negative feedback.

To measure customer sentiment, you can present your customers with a single-question survey. The survey results are reported with a number that ranges between -100 to +100. As you can guess, higher scores are more valuable.

Net Promoter Score revolves around this straightforward question below:

Customer Net Promoter Score

A higher NPS score means that you have better customer loyalty and satisfaction. By using this method, you can measure your overall customer sentiment and pinpoint the areas for improvement.

On top of that, tracking your Net Promoter Score over time and comparing it to industry benchmarks will help you make informed decisions to improve customer experience and it will create business growth.

Employee Net Promoter Score (eNPS)

The Employee Net Promoter Score (eNPS) helps you measure how satisfied your employees are. It’s about finding out if your employees would recommend your company to potential employees as a great place to work.

With this metric, you can capture a snapshot of loyalty, employee engagement, and your overall workplace happiness.

To measure the Employee Net Promoter Score, you slightly modify the question that measures customer sentiment:

“On a scale from 0 to 10, how likely are you to recommend our company as a place to work?”

By categorizing employees into different groups according to their level of satisfaction and enthusiasm you will be able to make improvements to create a happier and engaged workforce.

A positive Employee Net Promoter Score is a good sign and it shows that your workforce is eager to endorse your organization. On the flip side, if you have a negative eNPS, you need to address issues that affect employee morale to build a more positive work environment.

How to Measure Net Promoter Score

Finding the Number of Promoters, Passives, and Detractors

Once you ask the question: “On a scale from 0 to 10, how likely are you to recommend us to friends, colleagues, or business associates?” and collect the answers, you will find your customers fall into one of the three categories:

1. Promoters: These people are your brand’s biggest fans and they are more likely to buy from you in the future. On top of that, they are enthusiastic to be your brand ambassador. These customers give a solid 9 or 10 to your NPS survey questions.
2. Passives: Passives give scores of 7 or 8. They might stick around, but they are open to switching to a competitor and they won’t go out of their way to promote your brand to others.
3. Detractors: Detractors provide scores ranging from 0 to 6. These customers aren’t happy about your product/company/service and can potentially spread the word about their dissatisfaction.

To calculate your Net Promoter Score, subtract the percentage of detractors from the percentage of promoters. If everyone dislikes your service, this is the worst-case scenario, your score would be -100, and if everyone loves your service, it would be 100.

But in the real world, NPS scores are not that extreme. Passives are included in the calculation as well and they nudge the score closer to the middle ground.

How to Calculate Net Promoter Score

If a company surveys 100 of its customers, and the responses show 70 promoters, 20 passives, and 10 detractors, you can calculate their Net Promoter Score with:

Calculate the percentage of each group:

• Promoters = (70 / 100) x 100 = 70%
• Passives = (20 / 100) x 100 = 20%
• Detractors = (10 / 100) x 100 = 10%

Apply the NPS formula:

• Company NPS = %Promoters – %Detractors
• Company NPS = 70% – 10% = 60

In the scenario above, the company’s NPS is 60 and it shows that the majority of their customers are promoters, and the company has a positive customer sentiment.

What Are The Benefits Of Using Net Promoter Score?

Net Promoter Score is a convenient way to predict customer churn, the likelihood of them canceling a subscription, and doing business with other companies.

So, why should your company use NPS?

1. Easy Way to Collect Feedback

Nps surveys will help you dive deeper into the customer experience. In other words, these surveys provide you with an opportunity to acquire more information from your customers. By collecting feedback,

NPS surveys can help you build a positive impression even if you previously had a negative one. And the best part of using Net Promoter Score is the ease of collecting feedback within just a minute of your customers’ time.

2. Common Customer Language

You can neatly categorize customers into promoters, passives, and detractors, which allows you to have a common language to talk about your customers. In other words, when you use Net Promoter Score, you’ll have a shared vocabulary for the customer conversation and you’ll be able to distinguish them easily.

3. Effortless Benchmarking

Since Net Promoter Score is a universal metric used by companies worldwide, it can help you compare your score with others in your industry. This will provide you with valuable insights into where you stand in the competition. Plus, it’s a great way of presenting a holistic picture of customer loyalty to the senior management in your organization.

4. Boosting Growth

The companies that embrace Net Promoter Score as a key metric can channel their efforts into customer service improvements. Using NPS can potentially increase revenue through referrals and upselling. In a nutshell, when you prioritize your customers’ feedback by using Net Promoter Score, it will help you grow your business.

How to Decide If Your Net Promoter Score is Good or Bad

There is no one-size-fits-all answer when it comes to deciding whether a Net Promoter Score is good or bad. The ideal number will vary significantly from one industry to another.

Any Net Promoter Score above zero is a win because having a positive rating means that you have more promoters than detractors. According to global NPS standards, a score above 50 is considered good, and scores above 70 are simply outstanding. But realistically speaking, these high Net Promoter Scores are pretty rare.

Taking a peek at the Net Promoter Score of your close competitors would be a smart move. In this way, you can see how your score stacks up against theirs and it will give you a solid benchmark to work with.

In some industries, having a net promoter score between 30 and 40 is a goal worth chasing. For example, for department and specialty stores the average score is around 58, which is better than airlines at 35. However, airlines beat internet service providers since their average Net Promoter Score is a humble 2.

So, if your Net Promoter Score shows that you’re outperforming your industry rivals, it’s a good indicator that your customers will be more likely to stay.