Product management glosary

Net promoter score (NPS)

What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction. It is a simple yet powerful tool that helps businesses understand how likely their customers are to recommend their products or services to others.

How is NPS calculated?

NPS is calculated based on a single question: "How likely are you to recommend our product/service to a friend or colleague?" Customers are asked to rate their likelihood on a scale of 0 to 10, with 0 being "not at all likely" and 10 being "extremely likely".

Based on their responses, customers are then divided into three categories:

  • Promoters (score 9-10): These are customers who are extremely satisfied with the product/service and are likely to recommend it to others.
  • Passives (score 7-8): These are customers who are satisfied with the product/service but are not likely to recommend it to others.
  • Detractors (score 0-6): These are customers who are unhappy with the product/service and are likely to discourage others from using it.

The NPS score is then calculated by subtracting the percentage of detractors from the percentage of promoters. The score can range from -100 (if all customers are detractors) to +100 (if all customers are promoters).

Why is NPS important?

NPS is important because it provides businesses with a simple and effective way to measure customer loyalty and satisfaction. By tracking NPS over time, businesses can identify trends and make improvements to their products or services to increase customer satisfaction and loyalty.

NPS is also important because it is a widely recognized metric that is used by businesses across different industries. This makes it easy for businesses to benchmark their performance against their competitors and industry standards.

How can businesses use NPS?

Businesses can use NPS in a number of ways:

  • As a performance metric: NPS can be used to track the performance of a business over time and identify areas for improvement.
  • As a customer feedback tool: NPS can be used to gather feedback from customers and understand their needs and preferences.
  • As a marketing tool: NPS can be used to promote a business's products or services and attract new customers.

Overall, NPS is a valuable tool for businesses that want to improve customer loyalty and satisfaction. By measuring NPS and taking action based on the results, businesses can create a better customer experience and drive growth and success.