Business Metric #6 of N: Net Promoter Score (NPS)

Standard

In this post, you’ll see the definition, benefits and basic calculation tutorial for using Net promoter score (NPS)

What is it? 

Net Promoter Score is a nice indicator to measure customer loyalty and satisfaction. The way you do that is by measuring how users likelihood to recommend your products/services. You can do this by asking a simple question: In a scale of 0-10, How likely are you to recommend to a friend?

Here’s how you calculate it: 

1) After you get responses, you need to classify the range in three categories “Promoters”, “passive”, “Detractors”. It could something like:

0-5 -> Detractors

5-8-> Passive

9-10 -> Promoters.

2) Now, here’s the formula

(Total promoters – Total detractors)/(Total survey users)

How to interpret it? 

So, what’s a good NPS?

Let’s take an example.

1) Promoters = 100, passive = 100, detractors = 100 THEN NPS = 0

2) Promoters = 50, passive = 100, detractors =  10 THEN NPS = 0.25 (or 25%)

3) Promoters = 10, passive = 100, detractors = 50 THEN NPS = -25%

As a basic rule of thumb, higher the number then better it is for you! You don’t want this to be negative because as you can see from example below it indicates that you have more detractors then promoters.

Other than general rule of thumb, you might want to keep an eye on the trend of NPS on a monthly/quarterly basis to make sure it’s moving in right direction. You might also want to benchmark this against your Industry standard – because NPS tends to be different for different industries.

Conclusion:

In this post, you learned about Net Promoter score and how to use it to measure customer loyalty and satisfaction.

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