What is NPS (Net Promoter Score)? A Complete Guide
Table of Contents
What is Net Promoter Score (NPS)?
Net Promoter Score (NPS) is a widely used market research metric that measures customer loyalty and satisfaction. Developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003, NPS has become one of the most popular customer experience metrics used by businesses across industries.
The NPS framework is based on a single question: "On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?" Based on their responses, customers are categorized into three groups:
Promoters (9-10)
Loyal enthusiasts who will keep buying and refer others, fueling growth
Passives (7-8)
Satisfied but unenthusiastic customers who are vulnerable to competitive offerings
Detractors (0-6)
Unhappy customers who can damage your brand and impede growth through negative word-of-mouth
How to Calculate NPS
The Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters:
NPS = % Promoters - % Detractors
The resulting score can range from -100 (if every customer is a Detractor) to +100 (if every customer is a Promoter). An NPS above 0 is generally considered good, above 50 is excellent, and above 70 is world-class.
Example Calculation:
Let's say you surveyed 200 customers with the NPS question and got these results:
- 120 customers gave scores of 9-10 (Promoters)
- 50 customers gave scores of 7-8 (Passives)
- 30 customers gave scores of 0-6 (Detractors)
Percentage of Promoters: (120 ÷ 200) × 100 = 60%
Percentage of Detractors: (30 ÷ 200) × 100 = 15%
NPS = 60% - 15% = 45
NPS Response Categories
Understanding the characteristics of each NPS category can help you develop targeted strategies to improve customer loyalty:
Promoters (9-10)
Enthusiastic, loyal customers who continue purchasing
Actively refer others, serving as brand ambassadors
Less price-sensitive and more forgiving of occasional issues
Provide valuable feedback for product improvements
Passives (7-8)
Satisfied but not enthusiastic about your product/service
Vulnerable to competitive offerings and price incentives
Unlikely to spread negative word-of-mouth, but also unlikely to recommend
Represent opportunities for improvement to convert to Promoters
Detractors (0-6)
Unhappy customers who may damage your brand reputation
Likely to spread negative word-of-mouth and discourage potential customers
Higher churn rate and lower lifetime value
Provide valuable insights into critical issues that need addressing
Benefits of Measuring NPS
Net Promoter Score has become a standard metric for many businesses due to its numerous advantages:
Simplicity
Easy to implement and understand, with a single question that customers can quickly answer
Benchmarking
Widely used across industries, allowing for meaningful comparisons with competitors
Predictive Power
Correlates with business growth and customer retention, serving as a leading indicator
Actionable Insights
When combined with follow-up questions, provides clear direction for improvements
Limitations of NPS
While NPS is valuable, it's important to understand its limitations:
- 1
Lacks Context: The score alone doesn't explain why customers feel the way they do, requiring follow-up questions
- 2
Cultural Differences: Response patterns vary across cultures, with some being more conservative in giving high scores
- 3
Timing Sensitivity: Scores can be heavily influenced by when the survey is administered (e.g., right after a negative experience)
- 4
Oversimplification: Reducing customer experience to a single metric can miss important nuances
NPS Best Practices
To get the most value from your NPS program, follow these best practices:
Ask Follow-Up Questions
Always include an open-ended question after the NPS rating to understand the "why" behind the score:
"What's the primary reason for your score?" or "What could we do to improve your experience?"
Measure Consistently
Track NPS over time to identify trends and measure the impact of improvements. Consider implementing:
- Transactional NPS (after specific interactions)
- Relationship NPS (periodic overall assessment)
Close the Feedback Loop
Follow up with respondents, especially Detractors, to address their concerns and show that you value their feedback.
Segment Your Data
Analyze NPS by customer segments, product lines, or touchpoints to identify specific areas for improvement.
Voice-First NPS Collection
Traditional NPS surveys are typically conducted via email or in-app prompts. However, voice-first NPS collection offers several unique advantages:
Benefits of Voice-First NPS Collection
Richer Feedback
Voice responses capture tone, emotion, and nuance that text-based surveys miss
Higher Response Rates
Speaking is easier than typing, leading to increased participation
More Detailed Responses
Customers typically provide longer, more detailed explanations verbally
Accessibility
Includes customers who may struggle with text-based surveys
With Fydback's voice-first approach, you can collect NPS feedback through automated phone interviews, allowing for natural conversation flow and deeper insights. Our AI agents can ask the standard NPS question, record the score, and then engage in a meaningful follow-up conversation to understand the reasoning behind the score.
Conclusion
Net Promoter Score is a powerful metric for measuring customer loyalty and predicting business growth. While it has limitations, when implemented correctly and supplemented with qualitative feedback, NPS can provide valuable insights to drive customer experience improvements.
By adopting a voice-first approach to NPS collection with Fydback, you can enhance the quality and depth of customer feedback, leading to more actionable insights and better business outcomes.
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