is short for Net Promoter Score®
, which is an indicator of customer loyalty by looking at how likely customers are to recommend a brand/product to others. Ratings are obtained by surveying customers with the NPS question, “How likely are you to recommend our product/company to others on a scale of 0 to 10?”
. The NPS question, in slight variations, will tell companies how customers perceive their product through a more accurate lens than other surveys.
While other survey measures
exist, such as customer satisfaction index and customer effort score, NPS®
plays an important role in identifying customer loyalty and the probability of long-term commitment. First introduced by Bain and Company, NPS®
is based upon the theory that honest responses could be triggered by asking a question that is closely bound to a user’s reputation among friends and colleagues.
How to Calculate the Net Promoter Score®?
NPS® is calculated using a simple formula that takes the overall ratings given by customers that are both positive and negative to get a number between -100 and 100. Individual ratings out of 10 from users are categorized as belonging to one of three groups, namely, detractors, passives, and promoters.
Detractors are persons who rated your product 6 and lower. They have either felt very disappointed with one or several aspects of your product and may even demote your brand among friends and colleagues. They would not, in most probability, consider using your product for a second time.
Those who rated 7 and 8 are passives because they were satisfied enough, but were not at a level where they felt enthusiastic about promoting to others. Now, promoters are your target raters who will promote your business and whose experiences will shape the ideal business model.
Among these, only the detractors and promoters contribute toward finding the NPS® score. The NPS® score is calculated by taking the difference of the percentage of promoters from the percentage of detractors.
NPS® = %Promoters - %Detractors
Evaluating Your NPS® Score
NPS® scores below zero indicate an overall negative rating from users, or, in other words, more detractors than promoters. Any score above zero is considered positive when there are more promoters than detractors. Each company/brand should aspire to increase their positive ratings, convert passive customers to brand enthusiasts and negate all detractions by acting upon customer feedback.
However, your NPS® can also vary depending upon numerous factors such as company size, the type of industry, and the number of ratings you are able to collect. Let’s explore some of the segments by which you can further analyze your NPS® survey results:
By Quantity or Sample Size – The number of responses received might remain the same in terms of positive and negative responses, but the sample size or customer size will cause NPS® results to be skewed. The NPS® will be high for smaller companies and very small for large-sized companies if the results are compared.
For example, 20 promoter responses with no detractors for a company with a customer size over 500 that collects, say, 500 survey responses from users, will give us an NPS® of 4. But the same number of responses for a company with 100 respondents yields a score of 20, and that of 50 will produce a score of 40.
Company sizes and their respective NPS®s can be seen in the below table:
Detractors = 0, Promoters = 20, Total respondents = N
Respondent Size (N)
Such variation in results may lead companies to believe that they are doing better or worse than they actually are and create bias in the overall evaluation of individual scores.
Smaller sample sizes can also create bias with outliers. Outliers are those ratings that are well above the average or way below it. Large sample sizes can also make the NPS®’s interpretation complex.
In such cases, it is beneficial to compare the NPS® with bar graphs to see how many customers are falling under the passives section. However, if there are very few responses to NPS® surveys for a mid-size or large company, it may mean that the method of surveying needs to change.
By Industry -
Several surveys clearly suggest that it is unfair to pit yourself against a different industry as scores across industries vary greatly. E-commerce and education industries received a much higher NPS®
than healthcare industries in a 2020 survey by Statista
. While a 2018 survey
found that department stores and electronics industries were among the top few when compared to health insurance companies or internet services among U.S customers.
The reasons for such differences might have to do with the nature of the industry, the choices available to the customers, or the stages of the digital evolution of each industry. Risky businesses like financial investment institutions generally get poor ratings. If customers are spoilt for choice in any business, they may become picky in terms of how they rate a company among competitors. Certain industries also score higher due to the level of digital transformation they have achieved much earlier than others (e.g., the E-commerce industry).
Tips to Improve Your Net Promoter Score®
is a measure of customer loyalty or their overall sentiments toward a product. Therefore, it is essential to take into consideration the customer journey
while aiming for a better score. Responses to NPS®
surveys are also a reflection of how well-strategized you are during the entire process of conducting them.
Here are a few important tips that will help in gaining more positive responses from customers:
1. Avoid overwhelming your customers: Product analytics tools provide the option to conduct multiple surveys during a customer life-cycle. But if customers are overwhelmed by the number of survey screens they encounter, they may soon feel put off.
This will impact their willingness to take surveys in the future, and can also invite negative sentiments toward the brand.
2. Nudge post transaction: Nudge your customers to take surveys after a positive experience with your product, like a successful transaction or purchase. Such points of action can evoke better reactions from customers.
3. Measure by metric: Ask the customer what they did and did not like in a product so that there is an objective method for NPS® measurement that avoids pitfalls. These queries will also act as benchmarks for future R&D in product development.
4. Capture incidents: Similar to how purchases influence survey ratings, any incidents such as a service resolution, call-center interaction, or any milestone achievements by the user can trigger a need to respond. They need to be carefully evaluated so that the service ratings are not considered as a strict reflection of the brand popularity.
5. Keep it short: Follow-up questions to a simple NPS® survey will provide deep insights into customer struggles and factors that affect product success. Still, keeping the surveys short leaves customers with a positive feeling that will strongly influence future responses.