Product management glosary

Net Promoter Score (NPS)

What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a popular metric used by businesses to measure customer satisfaction and loyalty. It is a simple, yet powerful tool that helps organizations understand how likely their customers are to recommend their products or services to others. By gauging customer sentiment, companies can identify areas for improvement and make data-driven decisions to enhance customer experience and drive growth.

How is NPS calculated?

NPS is calculated by asking customers a single question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?" Based on their responses, customers are then categorized into three groups:

  1. Promoters (9-10): These are loyal customers who are highly likely to recommend your product or service to others. They are enthusiastic about your brand and are more likely to make repeat purchases and refer new customers.
  2. Passives (7-8): These customers are satisfied with your product or service but may not be enthusiastic enough to recommend it to others. They are more likely to switch to a competitor if a better offer comes along.
  3. Detractors (0-6): These customers are unhappy with your product or service and are likely to discourage others from purchasing it. They may also share negative feedback about your brand, which can harm your reputation.

To calculate the NPS, subtract the percentage of Detractors from the percentage of Promoters. The result is a score that ranges from -100 (all Detractors) to +100 (all Promoters). A positive NPS indicates that you have more Promoters than Detractors, while a negative score suggests the opposite.

Why is NPS important?

NPS is a valuable metric for businesses for several reasons:

  • Customer loyalty: A high NPS indicates that your customers are loyal and more likely to recommend your products or services to others. Loyal customers are essential for business growth, as they tend to make repeat purchases and bring in new customers through referrals.
  • Competitive advantage: By tracking your NPS over time and comparing it to industry benchmarks, you can gain insights into how well your company is performing compared to your competitors. A higher NPS can give you a competitive edge in the market.
  • Customer feedback: NPS provides valuable feedback from your customers, helping you identify areas where your product or service may need improvement. By addressing these issues, you can enhance customer satisfaction and increase your NPS.
  • Predictive power: Research has shown that NPS can be a strong predictor of future business growth. Companies with higher NPS scores tend to have higher customer retention rates, increased revenue, and better overall business performance.

How to improve your NPS?

Improving your NPS involves taking steps to enhance customer satisfaction and loyalty. Here are some strategies to consider:

  • Listen to your customers: Regularly solicit feedback from your customers and take their concerns seriously. Address any issues they raise and make improvements to your products or services based on their input.
  • Offer exceptional customer service: Ensure that your customer service team is well-trained, knowledgeable, and empowered to resolve customer issues quickly and effectively. A positive customer service experience can turn a Detractor into a Promoter.
  • Focus on quality: Continuously strive to improve the quality of your products or services. A high-quality offering will not only satisfy your customers but also make them more likely to recommend your brand to others.
  • Build strong relationships: Engage with your customers regularly through various channels, such as email, social media, and in-person events. Building strong relationships with your customers can foster loyalty and increase the likelihood of them becoming Promoters.

In conclusion, Net Promoter Score (NPS) is a valuable metric that helps businesses measure customer satisfaction and loyalty. By tracking your NPS and implementing strategies to improve it, you can enhance customer experience, gain a competitive advantage, and drive business growth.