NPS

NPS is the acronym for Net Promoter Score.

What is Net Promoter Score?

A metric used by businesses to measure customer loyalty and satisfaction. The NPS score is based on a single question that asks customers to rate how likely they are to recommend a company, product or service to a friend or colleague on a scale of 0 to 10.

Based on their responses, customers are then categorized into three groups:

• Promoters (Score 9-10): These enthusiastic customers will keep buying and refer others to your company. They are your most loyal customers and brand advocates. They typically have a higher customer lifetime value and bring in new customers through word-of-mouth recommendations.
• Passives (Score 7-8): These customers are satisfied but unenthusiastic. They are vulnerable to competitive offerings and unlikely to spread positive or negative word-of-mouth. While not included in the final NPS calculation, understanding this group is crucial as they represent opportunities for improvement.
• Detractors (Score 0-6): These customers are unhappy and can damage your brand through negative word-of-mouth. They have a higher churn risk and may discourage others from using your products or services. The wide range (0-6) helps capture various degrees of dissatisfaction.

NPS Formula

The NPS score is calculated by subtracting the percentage of detractors from the percentage of promoters. The score ranges from -100 (if all customers are detractors) to +100 (if all customers are promoters).

\(\text{NPS} = \left(\frac{\text{Number of Promoters}}{\text{Total Responses}} \times 100\right) – \left(\frac{\text{Number of Detractors}}{\text{Total Responses}} \times 100\right)\)

NPS is a widely used metric in customer experience and loyalty programs. Businesses use it to measure the effectiveness of their customer service, products and services, and overall customer satisfaction. A high NPS score is considered an indicator of customer loyalty and satisfaction, while a low score suggests areas for improvement.

NPS can also be used to track customer sentiment changes over time and identify trends and patterns in customer behavior. Using NPS to measure and improve customer satisfaction and loyalty, businesses can increase customer retention, reduce churn, and drive business growth.

• Abbreviation: NPS
• Source: What is the Net Promotor Score System?