A market-research metric that measures customer loyalty and satisfaction, the Net Promoter Score (NPS) is based on a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or service to a friend or colleague. The NPS was developed by Bain & Company consultant Fred Reichheld and has been widely adopted by large companies, initially being popularized in Reichheld's 2003 Harvard Business Review article.
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.
How to Calculate NPS
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).
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Uses of NPS
Businesses use NPS 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.
Benefits of NPS
Using NPS to measure and improve customer satisfaction and loyalty, businesses can increase customer retention, reduce churn, and drive business growth.
