The Net Promoter Score is developed in 2003 by Fred Reichheld of Bain and Company. It is now used by millions of businesses to measure and track how their customers feel about their product.
The net promoter scale is a powerful tool to measure the health of customer relationship and client satisfaction by asking a simple question:
“How likely is it that you would recommend our organization to a friend or colleague?”
NPS indicates potential growth of a company or product.
NPS calculate to what extent a client or user would recommend a certain company or product to his friend, relative or colleagues.
Net Promoter Scale
Customers are asked to rate their likelihood of recommending a company to a friend or colleague by using 11 point scale from 0 to 10.
On the basis of a response from customers, customers are classified into three categories
Detractors are those customers who rate your product or company between 0-6. Detractors are your unhappy customers. They are not impressed or satisfied with your product and are not likely to use your service or product again. This category has lots of potentials to harm your business because they feel bad about you and your services and can spread bad review online and discourage other customers too.
Passives are those customers who rate your services or product at 7 or 8. Passives are satisfied with your services or product but they are not going to tell others about it. They are also not loyal customers to you because they can switch to another product if they find other product more suitable than yours.
Promoters are those who rate your services or product at a 9 or 10. These are the customers who are satisfied with your services and product and likely to remain loyal to you and chances of recommending your product to others are high.
How to calculate Net Promoter Score
First of all, you have to do an online poll with the NPS question and 0-10 scale, and at least get up to 1000 responses from the customer. Now NPS formula will give you a percentage of customer’s intent to refer your services or product to his friend or colleagues.
NPS is calculated by subtracting the total percentage of Detractors from the total percentage of Promoters — this is your NPS score.
The NPS is not expressed as a percentage but as an absolute number lying between -100 and +100.
NPS can be in negative value if the percentage of detractors are higher than the percentage of promoters.
What does NPS Score tell us?
After calculating NPS, the main problem is how to understand this score and why we need to take this score seriously.
According to Reichheld, highest performing American companies are having NPS score between +50 and +80 while the average American company scores less than +10 on the NPS.
If you get less than +10 score than it shows that you have a large percentage of detractors, and you have to take this seriously as this can bring harm to your business by bad word of mouth and writing bad reviews online.
Online customers give more preference to a bad review over a good review. That’s why if you have less score on NPS, then its time to think more seriously on your product experience with your customers.
On the other hand, if you have better NPS, then you can ask the promoters to promote your product or services with their friends and colleagues or they can write good online reviews to promote your product.
Why do we use NPS?
Easy to calculate
It is very easy to calculate NPS. No complicated formulas, no time consuming, just a basic subtraction and division to get the performance of your product among your customers.
Easy to understand
There are no complications in understanding the NPS. If you have NPS more than 60+ then its ok, otherwise you have to think again about your product.
NPS is a universally accepted score. Most of the prominent companies like Apple, Microsoft, Costco etc preferred NPS for determining customer loyalty.
Now you know everything about NPS, it’s time to start an NPS survey on your product. In the next blog, we will see how can you set up an NPS survey on your product or website in minutes with NotifyVisitors.