The Net Promoter Score (NPS) or Net Promoter is calculated based on responses to a single question: How likely is it that you would recommend our company/product/service to a friend or colleague? The scoring for this answer is most often based on a 0 to 10 rating scale. This is an easy way to measure the customer loyalty of a company.
The Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company's products or services to others. It is used as a proxy for gauging the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand
This guide will teach you:
1. NPS Analysis
The idea behind an NPS is that customers don't need long questionnaires. The scale used ranges from 0 (not at all likely) to 10 (extremely likely). Net Scoring is then applied with the percentage of scores from 0 to 6 (Detractors) subtracted from the percentage of scores from 9 to 10 (Promoters). Scores of 7 - 8 are called passive.
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2. Net Promoter Score Example
If you have 25% Detractors and 55% promoters, your net scoring is 30% (55% - 25%). This value can vary from -100%, when there are only Detractors and no Promoters, to +100% when there are only Promoters.
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3. NPS Advantages
Two of the greatest advantages are that it is easy to understand and evaluate the net promoter score calculation. Both are clearly important attributes when considering the communication of customer loyalty both within the organization and externally. In turn, this easy communication will aid its ability to drive the message of how important customers are right across the business – an extremely valuable message, and one that NPS can help with.
Perhaps the greatest advantage of NPS though was the claim that there was a strong link between an NPS score and business growth. This was purported to be the single best predictor of future customer loyalty behavior. In fact, Reichheld at the time claimed that it was most significant in determining company growth. There was a constant referral to data sources that were analyzed to come to these conclusions, so it appeared to be supported by thorough data analysis.
Other potential advantages NPS was offering were:
- As there was only a single question the cost of fieldwork would be greatly reduced
- It had a positive impact on respondent’s time being surveyed, therefore organizations should receive higher participation rates
- In this single measure, you were able to cover the complete customer experience – both physical (arrive on time, etc) and emotional (customer experience)
4. NPS disadvantages
The biggest single disadvantage of the NPS approach is the crucial lack of ability to identify and act upon driving factors behind customers’ responses to the question. There is little point in asking customers for their views unless you are willing to act upon the answers you obtain. In order to do that you need to understand what drives customers’ views on a recommendation.
Most of the times there is a need to ask supplementary questions that would help understand the drivers and what actions were required. Whilst there clearly needs to be a balance between asking customers too many questions and looking to minimize the interviewing time, the extreme of a single question appears to us to be too biased towards the customer and not the organizational needs.
Another disadvantage of net performance score that is frequently raised is: how does it allow for cultural differences in using scales. In some countries, the culture more freely allows for giving a 9 or a 10, wherein some others this would be perceived as truly exceptional circumstances, and providing a rating of 8 may be considered “the best you’re going to get”.
NPS question may not also be relevant for your market and your customer set. Certainly, within a B2B environment, we often find that a small number of very large customers dominate the business’ income, and therefore the use of a single recommendation score may not be the most effective tool.
- Ranking question: compare different items to each other by placing them in order of how they score (or rank) at a specific aspect, such as design, cost, functionality, importance. Often with the most important or preferred item ranked first or on top of the list.
- Rating scale questions: a rating scale is a method that requires the respondent to assign a value, sometimes numeric, to the rated object. Rating scales are popular in research because they offer the flexibility of response together with many possible types of quantitative analysis.
- Smiley rating: A smiley rating question is a rating question, most often used to get a clear view of how someone likes your product, service, or business. The smiley question is a 5-point rating scale intended to represent a range of sentiments from negative to neutral to positive, making smiley ratings most useful when measuring emotions or feelings.