Net Promoter Score (NPS)

If you run a company or small business, I’m sure you already know that customer experience is one of the key factors that determine the success of any business. The growth rate or potentials of any business can be seen from the average number of customers patronizing it, their loyalty to the brand and how easily they can recommend its products or services to anyone. 

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Therefore, if you want to grow and nurture the business growth, you must pay attention to these metrics, find out what they say about your business and use this information to improve your business for better results. 

One of the most important metrics you must know how to calculate as a business owner is your Net Promoter Score.

As you read down, we’ll be discussing this in detail to find out what it means, how to calculate it and how you can improve your business using the figures gotten from it.

What is Net Promoter Score?

Net Promoter Score (NPS) is a business metric used to measure the loyalty of customers to a brand or company. Since it was first developed by Bain and Co in 2003, many businesses have used this to track or measure how they’re seen by their customers. It has become the core metric for measuring customer experience management programs globally. 

NPS aims to measure how willing a customer is to recommend a brand’s product or services to other people. This is used to gauge customer’s satisfaction with the belief that when customers are very satisfied with a brand, they wouldn’t hesitate to recommend their products or services to people.

Net Promoter Score is measured in an index of -100 to +100 with a single question to the customer on an 11-point scale of 0 to 10;

How likely is it that you would recommend this brand’s product to a colleague or friend?

NET PROMOTER SCORE

Picture 1. Net Promoter Score Calculation

How to Calculate your Net Promoter Score? 

With this single question, Bain’s Net Promoter system divides the customers into three categories;

  • The Promoters
  • The Passives and
  • The Detractors

The Promoters are your loyal and enthusiastic customers who always buy from you and encourages other people to do the same. Their response to this question is either 9 or 10. 

The Passives are also satisfied customers however; they can be easily wooed by your competitors, therefore, can’t be relied on to make recommendations about your company or brand. Their response is either 7 or 8. 

While the Detractors who respond with a lower score ranging from 0 to 6 are the customers who are unexcited about your products and services. They are unhappy about your service, unlikely to buy from you again and can even damage your reputation with their negative comments thereby discouraging others from buying your products.

After taking a survey with the above question, take note of the percentage of the promoters, the passives, and the detractors. Subtract the percentage of the detractors from the promoters to get your Net Promoter Score.

With the score ranging from -100 to +100 as we already mentioned, you will know where your business stands in the eyes of your customers. For example, if you have 5% of your respondents as detractors, 25% as passives and 70% as promoters, your NPS would be 70 – 5 = 65%

Why You Should Use Net Promoter Score? 

Net Promoter Score is a very simple and easy to understand metric, hence the reason it is popular and widely used. It provides you with a simple metric that can be shared among your employees to show where the results of their efforts stand. It can be used to motivate them into providing better customer experience where possible. 

The ultimate goal of NPS is to help you convert more customers that will be happy about your brand hence spread the good news, acquiring more customers for you without any extra pay thereby increasing your revenue and profits.

The higher your Net Promoter Score, the healthier your business seems to be. However, a low or negative Net Promoter Score will serve as a warning for you to go back to the drawing table and seek ways to improve your customer satisfaction.

According to the research from Bain and Co seeking the correlation between a company’s growth and it’s NPS, the average leader in an industry leads with a promoter score double of its competitors. So if you’re aiming to become a leader among your competitors, you must work on your overall customer experience to make this happen.

Therefore, if you want to know how well your business is doing, the growth rate and its perception from your customers, you must learn to calculate your Net Promoter Score often and use the obtained score to make the above predictions and also determine what needs to be done for improvement.

 

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Net Promoter Score (NPS) was last modified: September 6th, 2019 by Mirjana
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