NPS – A Basic Explanation of the Net Promoter Score
Often referred to as ‘The Ultimate Question’ Net Promoter Score (NPS) has supplanted conventional customer satisfaction measurements in many organisations. There’s good reason for this; it’s simple, effective and robust.
The NPS question is always the same, “How likely are you to recommend company/brand/product X to a friend or relative?”
The respondent is invited to grade their response on an 11 point scale (i.e. Zero to 10) with 10 being most likely. Respondents are then framed into three categories, Promoters, Passives and Detractors.
This is done using the following metric;
Score of 0 to 6 = Detractor
Score of 7 to 8 = Passive
Score of 9 to 10 = Promoter
How do you measure a Net Promoter Score?
To arrive at the NPS, you simply detract the percentage of your Detractors from the Percentage of your Promoters. Respondents who fall into the Passive category are disregarded.
The NPS is therefore described as an absolute number and not a percentage. The number can be anywhere between +100 and -100. Your own NPS needs to be taken in context of your industry and peer group but be aware, the range of NPS scores in a given sector are generally dynamic and can have a big range due to the calculation method. A typical business may well generate a figure of -10 to +10 whereas sector leaders may generate a score of +60 or even more.
NPS though is essentially a tracking tool and so your initial score is effectively your own benchmark. On this basis, where your NPS is going is arguably more important than where it started. NPS scores generally do not flatter a business and are best suited to organisations serious about changing the customer experience rather than businesses that want to publish positive statistics.
Why should you use a Net Promoter Score?
Of course, when you have the answer to the ‘Ultimate Question’ you need to understand how you got there and what you can do about it. The NPS system (developed by Fred Reichheld of Bain & Company and now a trademark of Satmetrix Systems, Inc.) was never designed to be used in isolation. To understand the motives of Detractors and Promoters, you will need to introduce further questions (multiple choice or text) to gain information that you can actually use to make changes and drive your score up. Whether you want to make quick follow-up calls to your Detractors or work on moving more Passives into Promoters, a well thought out NPS survey/process will enable this.
Is the use of a Net Promoter System sufficient for measurement?
NPS has its own detractors. It has been considered too simple for complex markets and some have commented that it is best used in markets where there is strong competition where customers have a greater tendency to ask friends and family for recommendations.
There is also the formula itself. Many companies do not like the fact that respondents giving a score of 7 to 8 are disregarded especially when a business may well have congratulated itself in the past when a customer scored them 8 out of 10 (my own understanding of this is that customers giving a satisfaction rating of 7 to 8 are still in the zone of indifference and whilst generally satisfied, cannot be relied upon as ‘loyal’).
The formula also ignores score distribution in a way that would horrify many data analysts. For example, if business A. has 60% Promoters and 20% Detractors and business B. has no Detractors and 40% Promoters then they both generate an NPS of +40. Understanding score distribution and motives of those in each category is clearly essential if NPS tracking is going to generate any advantage.
In conclusion, NPS used in the right framework and with the appropriate sample size can be a highly effective tracking tool and can be used to drive change provided the basic question is backed-up with further fact finding and analysis.
For more information on different types of customer measurement techniques visit our pages on mystery shopping.