Net Promoter Score (NPS) is a customer satisfaction metric that’s calculated using (usually) a single question and a 1-10 score. It’s one of the simplest and resource-effective ways to source strategic business information directly from your customers.
Due to the simplicity and ease-of-implementation, NPS is used by ⅔ of Fortune 1000 companies in the world. You have likely come across a business doing a Net Promoter Score calculation yourself if you’ve ever been asked: “From a scale of 1 to 10, how likely are you to recommend our brand to a friend or colleague?”
Why is Net Promoter Score (NPS) So important?
Outside of being extremely cost-effective, Net Promoter Score is highly modifiable to get segmented data. Some companies might collect brand-wide data from net promoter scores, which would be an overall reflection of customer loyalty.
You can, however, collect net promoter scores for specific products, especially if any changes were made and compare them to previous scores. Such data reveals how customers are reacting to changes in your products.
Additionally, having a net promoter score across a product range could showcase weaker offerings within your company, allowing you to resolve issues or remove challenging products from your catalog.
Finally, an NPS survey can also be enhanced by adding several other questions to get a better understanding of the customer. Any additional questions, however, carry some risk as consumers are less likely to fill out longer NPS surveys.
Regardless of how an NPS survey is used, the acquired data can be used to inform further business decisions and focus areas for the upcoming quarters. It’s often best if other supporting sources of data are used, however, as an NPS survey is rather limited in the depth of insight it provides.
Net Promoter Score (NPS) Calculation Formula
A standard NPS survey uses a single question and a 1-10 evaluation. Usually, all NPS surveys use a form of the question “On a scale from 1 to 10, how likely is it that you would recommend this brand to a friend?”
NPS score calculations work slightly differently than any usual 1-10 scales as only the top end (9 and 10) is considered good:
- Score of 6 and below. These respondents are considered your detractors as it’s likely they’re not satisfied with the product, brand, or service.
- Scores of 7 or 8. In NPS surveys, these participants are considered neutral. It’s likely that they enjoyed your product, brand, or service, but not enough to actively promote it.
- Score of 9 or 10. These are your promoters, ones with the highest customer loyalty. Not only are they likely to stick with your brand, but they’ll also share it with their friends and family.
Due to such an uneven distribution, the net promoter score formula relies on percentage values. To calculate the Net Promoter Score, you have to subtract the percentage of promoters from the percentage of detractors:
You can get your percentage of total promoters by dividing the number of promoters from the total number of respondents:
To get the percentage of detractors, perform the same calculation as above. Then use the NPS calculation formula to get your score. You can also always use a Net Promoter Score calculator to get your score instead of calculating NPS manually.
Note that passives are not included in NPS calculation at all. Additionally, the NPS calculation formula also removes the percentage points for the final result. So, for example, if your brand has 10% detractors, 80% promoters, and 10% neutrals, your NPS score is 70.
Due to how the NPS calculation formula works, the score may vary anywhere between -100 to 100. Almost all companies which measure NPS would consider anything below 0 a bad NPS score.
Even the lowest scoring industries, such as Telecommunications, will usually have a positive NPS score. According to research, Telecommunications may have 9 as the average NPS score. As such, while your industry-standard NPS score may vary, positive values are ubiquitous.
How to Improve Net Promoter Score (NPS)?
Using the NPS formula to just get a number isn’t enough. Once you compare your NPS score to the industry average (or known values of competitors), then you’ll get a good understanding of where your brand stands.
Unless you’re beating the industry and competitor average, it’s likely you’ll want to find ways to improve your NPS score. Unfortunately, the NPS survey by itself won’t provide enough data to find good ways to improve it.
Follow up surveys will help you find the customer pain points and help devise strategies to improve your Net Promoter Score. There’s several ways to go about it, depending on where your NPS survey started out.
If your NPS calculation was done for the entire brand, you can separate the surveys to specific products or services. Once those surveys are completed, calculate NPS for each product and service separately. You might discover that only a specific part of your business is bringing down the Net Promoter Score.
Once that has been cleared up, conducting follow up surveys is likely the best way to go about it. Your new survey should attempt to discover the pain points (i.e., what exactly customers are unhappy with) throughout the customer journey.
You’ll then have highly specific feedback that can be acted upon. For example, your product may have user experience issues, so focusing on resolving these could improve your Net Promoter Score.
Once you’ve resolved at least one issue, calculate NPS again by sending out a fresh survey. If your new NPS survey shows no improvement, it’s likely there are more issues or that the existing one hasn’t been fully resolved.
Additionally, it’s best to regularly calculate NPS. Depending on your sample size, there may be secondary factors that are affecting the score. But if you calculate NPS regularly and still receive largely similar scores, it’s likely there’s a real underlying issue.
Net Promoter Score (NPS) Survey Types
There are two general types of Net Promoter Score surveys being implemented in businesses. One, outlined above, collects data about the brand or product to calculate the Net Promoter Score. It’s also sometimes called Relational Net Promoter Score.
A second way is to collect data on specific transactions or interactions. For example, you may provide a NPS survey to a customer after they finished talking to a customer service representative. It’s also sometimes called Transactional Net Promoter Score.
In both cases, the Net Promoter Score formula remains the same. There’s only one real difference between these two types—immediacy.
While relational NPS surveys are more general purpose, transactional NPS surveys give you quick and actionable insights into highly specific touchpoints. The latter are highly useful when you hire a lot of customer service specialists, launch new products or revamp a website.
As a rule of thumb, you’ll want to regularly conduct relational NPS surveys and launch transactional ones after you’ve made major changes in any part of the business. With such a strategy, you’ll always have precise and actionable data directly from your customers, which will help you make good strategic decisions.
