What is Net Promoter Score [+Why does it matter]

What is a net promoter score?

Net promoter score (NPS) is a metric that quantifies customer loyalty by asking customers how likely they are to recommend a company or product, rated on a 0-10 scale. 

It gauges overall customer sentiment towards a brand using a single question, resulting in scores ranging from -100 to +100. You can deploy your NPS survey after specific events (at checkout or website exit) to gauge how consumers feel about your brand at the moment.  

However, unlike metrics like customer effort score, which solely focus on specific interactions, NPS can also indicate a customer's holistic perception of a brand. A higher score indicates stronger loyalty and satisfaction.  

Insights from NPS evaluation bring a certain cultural shift in a business, helping teams work in unison to attain common goals. It provides every contributor with a targeted push that results in maximum customer satisfaction. 

Net promoter score was developed by Fred Reichheld of Bain & Company in 2003 with the intention of providing businesses with a concise tool to understand and enhance customer loyalty. However, NPS evaluation becomes all the more meaningful when it is a part of the larger Net Promoter System that includes follow-up questions and results interpretation.  

How do you calculate net promoter score? 

To calculate your net promoter score, you need to design an NPS survey, which is basically a single-question customer survey asking, "On a scale of 0 to 10, how likely are you to recommend us to a friend or a relative?" 

Your score will give you a clear idea of how happy customers are with your service. A customer’s score becomes the basis for classifying them as either promoters, passives or detractors.    

1. Promoters are satisfied, happy customers who give a score of 9 or above: These loyal customers have a high probability of becoming advocates of your brand and are highly satisfied with your offerings.  

2. Passives are satisfied, but not fully engaged customers who give a score of either 7 or 8: These customers are neutral and are neither satisfied nor dissatisfied with your offerings. 

3. Detractors are customers who are unhappy with their experience and give a score between 0 and 6: These customers did not like your offerings and are more likely to leave bad reviews or poor feedback about your company.  

The net promoter score utilizes a scale of 0–10, purposefully designed to avoid ambiguous feedback. While a 0 might be considered overly harsh, rendering little constructive criticism, a 5 out of 5 may be viewed as merely satisfactory, lacking nuance.  

A 0-10 scale, on the other hand, offers a broader spectrum, elucidating precise customer sentiments. The wide spectrum lets you understand not just if customers are satisfied, but how much they really like or dislike the product.  

The formula for net promoter score calculation 

There are two ways to calculate NPS. Choose the method that works best for you. 

Method 1: The first method involves subtracting the percentage of detractors from the percentage of promoters. 

NPS = % of Promoters - % of Detractors 

Example: Let’s say you have 10 voters, out of which two are detractors, three are passives and five are promoters. You would then have a score of 3 for NPS. That would look like this: 

NPS = 5% – 2% = 3   

Method 2: The vote of each detractor is counted as -1, of passives as 0 (or neutral) and promoters as +1. Simply add the number of detractors to the number of promoters for your NPS.   

Here is the formula:  

NPS = (Number of promoters * 1) + [Number of detractors * (-1)]   

Using the above example, it would look like   

NPS = (5*1) + (3*0) + [2*(-1)] = 5-0-2 = 3 

How do you interpret NPS? 

To interpret NPS, understand that it is a value determined on a scale of -100 to +100 — not in percentages. 

When NPS is below zero, it indicates that there are more detractors than promoters. Here’s what it means for your business:   

1. Higher churn rate: A negative score may point to a higher likelihood of customers discontinuing your service or product. 

2. Reduced referral potential: Detractors are less likely to recommend your service, limiting organic growth. 

3. Potential brand damage: Dissatisfied customers might spread negative word-of-mouth, impacting the brand's online reputation. 

Conversely, a positive NPS indicates more promoters than detractors. It has the following business implications.   

1. Growth potential: A higher volume of promoters can lead to increased referrals, boosting organic growth.  

2. Positive brand perception: Promoters often champion the brand, have higher customer lifetime value and reinforce market reputation. 

What is a good and a bad NPS? 

Any score higher than 0 is a good net promoter score as it means the majority of your customers are happy. If the score is below 0, this signals unhappy customers and it may be time for you to focus more on your customer experience.  

According to most industry NPS benchmarks, a score of 50 or more is considered fantastic and a score over 70 means you are a bona fide customer-centric brand.  

A high score for NPS indicates your customers will continue doing business with you because they love your products or services and are strong advocates of your brand. 

Understand that NPS must be viewed in context with industry benchmarks. Industry benchmarks for NPS vary widely. For example, a low score is concerning for hotels because guests expect consistent quality and experience. In contrast, airlines, facing challenges like flight delays and luggage issues, often have naturally lower scores, making a low NPS more typical. 

Please note: A score of +100 in NPS, representing unanimous promoter feedback, is more mythical than achievable. Such a score can suggest a potential lack of diverse feedback or a skewed sample. 

Why is NPS important in customer service? 

From a business perspective, calculating the net promoter score (NPS) is pivotal for measuring customer happiness with products, services and support. In fact, two-thirds of Fortune 1000 companies trust NPS as their benchmark for gauging customer experience quality.   

 It’s simply a straightforward metric that directly assesses customer sentiment, acting as a tangible "customer balance sheet.” For businesses, NPS evaluation and analysis has several implications:  

1. Customer transformation: The overarching aim of NPS is twofold: transform passives and promoters into loyal advocates and simultaneously minimize the number of detractors who might damage the brand reputation.  

2. Revenue implication: Higher NPS suggests strong brand loyalty and effective customer experiences, which directly correlate with increased revenue. 

3. Efficiency in QA: Amidst the deluge of data on call center quality assurance, NPS offers focused, actionable insights and helps you set internal quality benchmarks. 

4. Granular tracking: Businesses can monitor NPS across customer segments and products, enabling targeted service improvements. 

5 benefits of net promoter score 

NPS can singlehandedly act as your north-star metric to help you gauge the health of your business. Here is why it’s important.  

1. Better customer focus 

NPS helps realign your teams with customers at the core of every initiative they take. It helps them work towards the common goal of building a happier, satisfied customer base. Since the very nature of NPS is user feedback, consistent evaluation keeps businesses attuned to the voice of the customer. This continuous loop of feedback ensures that your business shifts from mere reactive measures to a proactive customer service strategy — anticipating needs and optimizing offerings to align with customer expectations.   

2. Risk predictor 

NPS is about understanding the present and predicting the future. A steady increase in passives, even if detractors are not rising, could signal a potential slide into indifference. On the other hand, detractors are disproportionately responsible for spreading negative word-of-mouth — which is a significant risk. Bain and Company, in fact, claim them to be the cause of more than 80% of the negative publicity a brand receives. This foresight allows businesses to act pre-emptively, perhaps by introducing fresh engagement strategies or by re-evaluating what the evolving customer base seeks. 

3. Strategic decision support 

With the multitude of metrics available to businesses today, it can become daunting to prioritize areas of focus. NPS simplifies this. Should resources be allocated towards improving a product, or should there be more emphasis on after-sales service? A careful analysis of NPS can guide businesses on where to invest next.  

4. Cross-functional alignment 

Since NPS is a holistic measure, its implications span across departments. If customers voice concerns about product usability, it's not just a product team's responsibility. Marketing needs to be aware to align communications and customer service should be prepped for potential queries.  

5. Internal efficiency 

NPS serves as a barometer for the health of the entire customer journey.  

When customers assign a score, they're not just reflecting a singular experience, but the culmination of all interactions with a brand.   

Accompanying comments or feedback provides invaluable insights into why customers rated the way they did. This singular metric can pinpoint areas that are underperforming. 

For instance, if a business releases a new product version and the NPS dips, it's a clear signal that the recent update may not have resonated well, allowing for effective course correction. 

How to implement a net promoter score survey 

NPS survey is your key tool used to gauge customer loyalty. Crafting a well-thought-out NPS survey ensures that you're not just gathering numbers but actionable insights that can shape your brand's future strategy and enhance customer relationships. Here’s how to create and implement a net promoter score survey: 

1. Choosing the right platform 

The platform is your foundation. Your choice of platform dictates the depth of insights and actionable data you can obtain. So, instead of basic survey tools, consider using a platform for complete customer experience management. A CXM platform doesn't just record scores; it offers a panoramic view of every customer touchpoint, from web visits to customer support interactions.  

For instance, if a detractor had a recent negative customer support interaction, the platform might reveal this, allowing for a more contextual understanding of their score.   

2. Including the right demographic questions 

Demographics can be a powerful tool to segment and interpret data.  

Knowing that a majority of your detractors are from a particular age group or location can be enlightening. For example, if younger audiences consistently rate you low, perhaps there's a disconnect between your offerings and their expectations.  

However, brevity is key. If you have this data from other sources, like a CRM system, skip this to ensure your survey remains concise. 

3. Devising the core NPS question 

The heart of your survey is asking customers about their likelihood to recommend your service or product. Here are a couple of tips to help you build the most effective core NPS question. 

• Focus on key interactions: Identify the most impactful customer touchpoints and center your question on that experience. If you're a service provider, it might be post-service feedback; for product-based businesses, it might be post-purchase 

• Test and iterate: Before finalizing, test your question in a small group. Get and act on feedback before rolling it out on a larger scale. A/B testing different phrasings can also help identify which resonates most with your audience.  

4. Understanding the “Why” behind their score 

While the score gives a quantitative measure, the reasons behind it offer qualitative insights. Asking respondents why they chose a particular score paints a clearer picture of their experience. For example, while a score of “2” indicates dissatisfaction, knowing it's because of "long wait times on support calls" offers a tangible action point. Here’s what the two questions would look like:  

5. Gathering constructive feedback 

Direct feedback is gold. Encourage respondents to share suggestions. Prompt your customers with thought-provoking questions to surface their sentiments that they wouldn’t otherwise bring up.  

For example, responses to “How can we make the payment process simpler for you?” will definitively provide clear direction for improvement.  

By acting on these insights, not only can you enhance the customer experience, but you also show customers that their feedback is valued and impactful.  

6. Seeking permission for further engagement 

Personal follow-ups can make a world of difference, especially with detractors. Ensure that you explicitly ask all respondents for their consent to contact them again, should the need arise.  

Imagine a user who's upset due to a defective product delivery. Reaching out directly can help resolve their grievance, potentially altering their overall perception of your brand.   

Always seek permission to engage further, ensuring you respect their privacy. If they agree, ensure you have their preferred contact method. 

How to improve your net promoter score 

Here are the three best ways to improve your net promoter score.  

1. Engage with your customers in real-time 

Reducing customer response time and average handling time (AHT) leads to an increase in NPS. Customers expect instant responses. If you can quickly respond, you can transform a detractor into a promoter and leverage their advocacy for your brand to acquire new customers.    

If a query or complaint stays unresolved for a long time, it indicates poor customer experience. Left with a bad impression, customers can share their experiences online and also spread negative word-of-mouth. When you engage with customers in real-time, you reduce the average response and handling time to a great extent.    

2. Track and assess calls 

Track and assess agent-customer calls to understand what is working, what your agents are doing right, where they are going wrong, and how to increase customer satisfaction.  

Find out ways to improve the quality of calls and coach your customer service agents in keeping the interest of customers as their top-most priority. Keep in mind that a satisfied customer is more likely to recommend your brand to friends and family.  

💡Pro tip: AI can help your business filter recurrent issues customers report. You can uncover common hindrances that lead to poor NPS using conversational analytics tools. With service gaps highlighted, you can work to build solutions to address them. 

3. Create a quality assurance program 

Design a customized quality assurance program. Ensure every customer receives high-quality service and create a benchmark to measure agent performance.   

Once you know who your top-performing agents are, you can create a training program for your newly hired agents. Create an incentive program and keep your agents motivated. After all, happy employees lead to happy customers.  

Read more: 9 best practices to improve your NPS 

What can you measure using NPS to drive business growth? 

The value of the NPS shines brightly in the quintessential stories of Magoosh and Slack, two companies from distinct sectors. 

Magoosh is a renowned online test preparation platform for exams like GRE, GMAT and TOEFL. When students' anticipated GMAT scores, predicted by Magoosh, differed from their actual results, it sent a wave of concern.   

Their NPS reflected this discrepancy. Instead of turning a blind eye, Magoosh delved deep.  

Adjusting the predictive algorithm might yield scores that could seem disheartening to students, potentially affecting their motivation.  

Was it then more prudent to maintain the status quo, or risk altering the algorithm?   

Instead of making an abrupt change, Magoosh cleverly altered their feedback approach.  

They refined their prediction algorithm and to gauge its impact, integrated instant feedback mechanisms. By closely monitoring and reacting to their NPS, Magoosh reaffirmed its commitment to its students, ensuring they got the most accurate insights for their upcoming exams.  

Source 

Parallelly, in the realm of enterprise communication software, Slack's journey with NPS paints another compelling narrative.  

When Bill Macaitis, Slack’s CMO, underscored the significance of NPS, it wasn't just about gauging satisfaction. For Macaitis, the real success was when users turned evangelists, actively promoting Slack. Beyond mere sign-ups or conversions, he was vested in the transformative stage where users became brand champions.  

His idea: CEOs should ask why customers would, or wouldn't, recommend their brand. It was this perspective that refined Slack's approach to customer experience and propelled its market dominance. 

Both Magoosh and Slack illustrate a fundamental truth: NPS isn't just a metric. When interpreted and acted upon with care, it's a catalyst for profound business evolution. 

Bring the number and the narrative behind your NPS with Sprinklr Service.  

Consolidate feedback from every channel and paint a holistic view of your customers' sentiments. Use Sprinklr to not just tally scores, but reveal the stories, patterns and actionable insights behind them. Understand the "why" as much as the "what" — ensuring that you're always tuned into your customers’ voices. 

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