Net Promoter Score: Ultimate Guide to Know All About NPS

Who are promoters, detractors, and passives? What is the role of NPS in improving customer experience? How to calculate NPS? We are answering all the important NPS-related questions in this ultimate Net Promoter Score guide.

“On a scale of zero to 10, how likely are you to recommend [Company Name] to a friend or colleague?”

All of us have seen this question at least once in our inboxes. It could be from the car rental agency you just used or your internet security software company. Your answer to this question is the foundation of the Net Promoter Score, an authoritative, widely accepted gauge of customer satisfaction and customer experience.

What is Net Promoter Score?

According to Bain & Company, the Net Promoter Score is a “reliable metric to link improvements in customer loyalty to business outcomes”.

In simple terms, the Net Promoter Score is the difference between the percentage of people who would recommend your product and the percentage of people who wouldn’t.

But why is Net Promoter Score based on the question, “Would you recommend?”, rather than another one like “Did you have a good experience”? Or “How satisfied are you with [company name]?”

How to Calculate Net Promoter Score?

Since Net Promoter Score is based on a single, uncomplicated metric, it doesn’t involve complex calculations or functions. But before we dive into the NPS formula, we need to understand who are promoters, passives, and detractors.

NPS Formula
NPS Formula
Infographic explaining net promoter score and how to calculate it
Infographic explaining net promoter score and how to calculate it
Formula to Calculate NPS

What is a Good Net Promoter Score?

Scores vary widely depending on several factors like industry, country, and demographics of your customers. Since this is bound to vary from company to company, one of the best ways to look at this is to better your scores from the previous quarter.

NPS chart according to industry
NPS chart according to industry
Source: NICE Satmetrix
average nps score per industry | graph | relently
average nps score per industry | graph | relently
Source: Retently

When Should You Go for an NPS Survey?

There are usually two situations when you can trigger an NPS survey. One is transactional, and the other is relational. Let’s look at the difference between the two.

Transactional Net Promoter Score

These transactional surveys (t-NPS) are triggered immediately after every customer touchpoint. For instance, as soon as a customer makes a purchase. Or after a major product update or after customer care resolves an issue.

Relational Net Promoter Score

Relational surveys (r-NPS) are sent out periodically, like every quarter or half-yearly. These surveys help you understand what the business generally means to the customer and indicates the customer and the brand’s long-term relationship.

How to Set Up an NPS Survey?

It’s generally best to immediately trigger the NPS question and in-app if the customer is using your app. For example, it could be, “Based on your ordering experience, how likely is it that you would recommend our food delivery service?”

NPS Follow-up questions

Usually, the NPS consists of only one question about recommending your product or service to someone else. However, you can schedule a couple of follow-up questions to understand what you’re doing right and what you’re not.

Pros and Cons of NPS

Surveys have shown that NPS is strongly correlated with revenue growth. A London School of Economics study showed that every 7% increase in NPS resulted in a 1% growth in revenue. However, there are a few limitations with NPS as well. Let’s take a look at the pros and cons:

Advantages of NPS

  • Simple metric, easy to implement
  • Customer response rates are high due to the limited number of questions
  • Can measure customer loyalty/satisfaction over time
  • Easy to follow-up on detractors and find out what went wrong
  • Can compare NPS score to the industry standard/norm

Drawbacks of NPS

  • Doesn’t measure the why. Why would the customers not recommend your services? What should the company do to improve? NPS doesn’t answer these questions
  • Not comprehensive, and often needs to be combined with another survey like a Voice of customer or CSAT to get thorough feedback
  • Does not account for the influence factor of promoters or detractors. For instance, if you have a celebrity on your detractors’ list, it will be far more damaging.

Takeaways

The NPS system is the most widely used indicator of customer loyalty since its inception in 2003. It’s easy to set up, has high response rates, and delivers quick results that you can act on. It is also highly correlated with revenue growth.

gramener offer net promoter score analysis services and build custom data visualization to analyze and visualize customer experience factors such as NPS, CSAT Score and CX Drivers.
gramener offer net promoter score analysis services and build custom data visualization to analyze and visualize customer experience factors such as NPS, CSAT Score and CX Drivers.

Gramener is a design-led data science company that solves complex business problems with compelling data stories using insights and a low-code platform, Gramex.

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