The term NPS is abbreviation for “Net Promoter Score” A tool based of metric which is used in measurement of customer experience programs / customer loyalty metric the tool NPS calculates the loyalty of customers towards company/business. Majorly NPS scores are calculated with a single-query survey and reported with a number ranging between -100 to +100, where the higher score is required.
The scoring scale is used by different businesses may differ from 0 to 10, 0 to 100 or between -100 to +100 or -10 to +10 depending the scale development by the companies that they opt for out source or in house development.
What is actually the NPS?
The NPS was developed in 2003 by management consultant Fred Reichheld of Bain & Company in collaboration with the company Satmetrix. The purpose behind the development of this tool was to determine a easy and clearly interpret-able customer satisfaction score which later can be compared and studied over time between different sectors and industries.
The NPS assesses and suggests to business that to what extent a audience would recommend a certain business, company, product or service to his friends, relatives or colleagues. The is very simple idea: “if you like using a certain product or doing business with a particular company, you like to share this experience with others. Specifically, the respondent is asked the following “ultimate” question: How likely are you to recommend company/brand/product XYZ to a friend/colleague/relative?”
This can be answered on an 11-point Likert rating scale, ranging from 0 (not at all likely) to 10 (extremely likely).
Calculation
For calculations of NPS , We can make three categories based on the score that is given to the Net Promoter question, the three main categories can be split as per given below.
- Promoters = respondents giving a 9 or 10 score
- Passives = respondents giving a 7 or 8 score
- Detractors = respondents giving a 0 to 6 score
The Net Promoter Score is calculated as the difference between the percentage of Promoters and Detractors. The NPS is not expressed as a percentage but as an absolute number lying between -100 and +100.
For instance, if you have 25% Promoters, 55% Passives and 20% Detractors, the NPS will be +5. A positive NPS (>0) is generally considered as good.
Don’t make the common mistake of placing a percent sign (%) behind your NPS score, it is not a percentage.
What’s the average Net Promoter Score?
Net Promotor Score is being used large companies as tool for collecting and analyzing the customer feedback. It provides the organization an definitely clear figure that is easy to understand for all stakeholders and beneficial as first hand input for managers to direct the department, company or target group. According to many people the NPS also gives a good indication of growth potential and customer loyalty for a company or product. NPS can be tracked over time and provide the clear images against the set target even we can have a benchmark for diverse areas, products, categories or check where your company is seeing itself against the industry or competitor average if this is available.
“To understand the motives of Promoters and Detractors it is recommended to accompany the NPS question by one or more open questions that probe the underlying reasons behind the given score. This allows you to make the appropriate adjustments to increase the future NPS, either by boosting the percentage of Promoters, either by reducing the proportion of Passives and Detractors (or better yet, a combination of both).”
It is certainly obvious that the NPS on its own may not be sufficient enough as a management tool, but by fitting in the proper framework and adding some “motivational questioning” no doubt can be proven as a useful tool. the main strength of tool is its simplicity, leading this more functional and interpretable for stakeholders. Considering the large number of big companies using this tool on a continuous basis, it certainly has proven its worth.
NPS is only a starting point for further analysis, and the real work is “improving your organization and taking actions to boost your NPS”. This will be a long term project, but the NPS allows you to perfectly assess at which stage your organization is in this growth process.
Net Promoter and NPS are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld
