What Is Net Promoter Score (NPS) & How To Calculate It
What is Net Promoter Score And How Do I Calculate It?
Net promoter score (NPS) refers to customers’ willingness to recommend a company to another person. Its range can be anywhere from -100 to 100. NPS is important to understand, as experts have identified it as being most closely correlated with a company’s future growth and profits. Companies can and should track NPS over time as a barometer for customer sentiment. But how do you derive this number?
To calculate net promoter score, a 10-point scaled survey is sent to customers asking them “how likely they are to recommend the company to another person” – with one being “extremely unlikely,” five being “neutral,” and ten being “extremely likely.”
Once all surveyed customers’ answers responses, the researcher can derive the NPS score by taking the combined percentage of customers who scored a 9 or 10 … minus the combined rate of customers who scored a 1 through 6.
Once all surveyed customers answer has been recorded the NPS score is derived by taking the combined percentage of customers who scored a 9 or 10 … minus the combined percentage of customers who scored a 1 through 6.
Take this scenario:
You send out the survey above and get ten responses:
- One voted “10.”
- Four voted “9.”
- One voted “8.”
- Three voted “6.”
- One voted “1.”
We can see that 50% of respondents scored a 9 or 10, and 40% scored 1 through 6. Using the formula below, we can calculate that the NPS is 10.
- Formula: [% of Scores 9 & 10] – [% Of Scores 1 – 6] = NPS
- Application: 50 – 40 = NPS = 10
Why Are Scores Of 7 & 8 Left Out From The Net Promoter Score Equation?
Why only 9-10 and 1-6 for this calculation? Fred Reicheld, a leading strategy consultant, explained in an HBR article from 2003 that people who score either 9 or 10 are the only genuinely, loyal customers of a company, i.e., “promoters.” On the other hand, he explained that people scoring 1 through 6 were at high risk of detracting/leaving and thus labeled as” detractors.” (People that scored a 7 or 8 are considered “passively satisfied” and not included in the formula.)
When brands don’t pay attention to keeping a high NPS, they are at higher risk of people detracting from another company if/when a viable competitor is available.
What Are Some Of The Best Ways, Practically Speaking, To Collect Net Promoter Score Data? And, How Exactly Can I Use It In My Business?
As a web searcher, you’ve likely already encountered these types of surveys in the wild. They’re often served on the website itself or via email. You can send the survey to all website visitors or customers who purchased. These customers only made a specific type of purchase (i.e., a particular product name or price point) or a specific demographic trait like income, age, or employment status. It’s all helpful.
Many companies layer their NPS score to their internal customer churn rate data – to look for correlations and make more robust models. Looking for variations in NPS by customer segment is also often used to help uncover differences in customer experiences.
HubSpot actually has some great resources for this if you want more context. You can check out their recommendations here.
- Sources:
- Book: Management Accounting: Information for Decision Making (7th Ed.), page 177
- HBR: https://hbr.org/2003/12/the-one-number-you-need-to-grow
