The Net Promoter Score (NPS) by Fred Reichheld is a metric widely used to measure customer loyalty and satisfaction. It predicts a business’ growth based on two things: customer satisfaction and the likelihood of a positive customer recommendation.
Entrepreneurs and ecommerce experts have long been crunching the numbers to calculate their NPS, but have they really been doing it right?
There are several tools and methods you can use for fast and easy NPS calculation. In this piece, we'll discuss how you can calculate NPS, plus some tools you can use to make the math easier.
The Net Promoter Score (NPS) usually comes from a single question that asks, “Now that you’ve received our product, how likely are you to recommend our business to a friend on a scale of 1 to 10?” It’s a fair bet you’ve been asked this question a few times in transactional surveys.
Ecommerce stores often use an NPS survey template that lets customers rate how likely they are to recommend a brand on a scale of 1 to 10.
The NPS scores can be classified into three main categories:
Detractors are the customers least likely to recommend your business to their friends and family.
Essentially, they're your unhappy customers. They’re also more likely to hightail it to a competitor or spread negativity about you. One of your business’s main goals should be to address their issues and make them happy.
Passives are customers who are merely satisfied with your brand. They probably don’t have any bad experiences with your business per se, but they’re not likely to recommend it either.
Keep an eye on customers in this segment because they might well churn. Modify your customer journey to impress them and turn them into promoters.
Promoters give a good score of nine or ten.
They are composed of ‘very satisfied’ customers that are likely to promote your brand within their network. If your business has a referral program, they’re the ideal customer segment to invite.
Let’s say you sent a standard NPS question and received 1,000 responses in total.
Now, how do you do the math to start your NPS calculation? If you want to do it manually, here are the steps you need to follow:
Following these steps, the NPS equation would look like this:
(Number of Promoters - Number of Detractors) / (Number of Respondents) x 100
Suppose that you received 1,000 survey responses and you’ve successfully classified each response:
If you do the math and find the percentage for each group, you’ll get 20% (detractors), 30% (passives), and 50% (promoters).
Next, subtract the percentage of detractors (20%) from the percentage of promoters (50%). The overall NPS is 30%. Note: it’s possible to get a negative NPS if most of your customers are detractors.
Calculating Net Promoter Score can seem like a hassle, but it’s useful for uncovering areas to focus on and improve customer experience.
For instance, accompany the NPS survey with an open-ended question like, “Why did you give this rating?” This will help you reveal the reason for answers, allowing you to improve your customer journey.
NPS will also determine how likely customers are to promote your brand, which is useful for predicting business growth.
This Nielsen study reports that 83% of people trust recommendations from friends and family, and a similar study found that 92% of people trust recommendations from other people—even strangers. Overall, 20 to 50% of all purchases are influenced by word-of-mouth marketing.
In a previous blog post, we reported that word-of-mouth marketing contributes to $6 trillion worth of consumer spending and accounts for 13% of sales.
Word-of-mouth marketing has the most influence when it comes to customers trying your product for the first time. After all, we’re likely to ask the opinions of friends and family if we have no prior experience with a brand.
So if you’re interested in getting an overview of your brand’s potential growth or customer perception, determining your NPS is a great way to get started. And if you want to know how your business fares against competitors in your industry, check out these NPS benchmarks from HubSpot.
Fred Reichheld—founder of Bain & Company, Inc—found companies that have enjoyed long-term profitable growth earned Net Promoter Scores (NPS) two times higher than the average.
If you are intimidated by Google Spreadsheets and Excel, you can opt for Net Promoter Score calculators to make the math easier.
With the NPS calculator, all you need to do is to determine the number of customers that answered ten, nine, eight, and so on.
For example, this dashboard shows how your NPS will be calculated.
Delighted—a customer feedback app—also has a well-designed NPS calculator that works the same way. The dashboard shows an overview of how NPS is calculated.
Understanding your overall NPS will do wonders for your business.
Not only will it help you to determine customer loyalty, but it can also help you find out the Customer Satisfaction Score (CSAT) of your business.
Determine your NPS, then follow up every three to six months. Having the latest data helps you understand the key drivers of customer perceptions and shows you how to modify your customer experience accordingly.
How do you plan to use NPS? Let us know in the comments below.