What is Net Promoter Score (NPS)?
The Short Answer
Net Promoter Score (NPS) explained simply
The Net Promoter Score (NPS) is a simple yet powerful way to gauge customer loyalty. It asks customers one question: "How likely are you to recommend [Company/Product/Service] to a friend or colleague?" Customers respond on a scale of 0 to 10.
Based on their answers, customers are grouped into three categories:
- Promoters (9-10): These are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (7-8): These are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (0-6): These are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. The score can range from -100 to +100. A higher score means more customer loyalty.
Real-World Example
Calculating NPS for a Software Company
Imagine a software company surveys 100 customers:
- 60 customers rate them 9 or 10 (Promoters).
- 20 customers rate them 7 or 8 (Passives).
- 20 customers rate them 0 to 6 (Detractors).
To calculate the NPS:
- Percentage of Promoters: 60/100 = 60%
- Percentage of Detractors: 20/100 = 20%
- NPS: 60% - 20% = 40
This company has an NPS of 40. This is generally considered a good score, indicating strong customer loyalty.
Why this matters
NPS matters because it directly links to business growth. Loyal customers buy more, stay longer, and refer new customers. A high NPS suggests a healthy customer base and a strong brand. It helps you understand customer sentiment and identify areas for improvement.
Regularly track your NPS. It helps you see if your customer service and product changes are actually making customers happier. A good NPS can be a strong selling point for your business.
Regularly track your NPS. It helps you see if your customer service and product changes are actually making customers happier. A good NPS can be a strong selling point for your business.
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