What is a Net Promoter Score and How do You Calculate It?

Never underestimate the power of word of mouth. It can often make or break a business, and often holds more weight than traditional advertising tactics. A satisfied customer will not only turn into a loyal one, but they can also become an advocate for your brand.

But measuring customer satisfaction and loyalty is tough. Sure, you can look at purchase history, but in many industries, spending habits and enthusiasm are not always directly related.

Fortunately, companies have a simple yet effective metric to measure customer loyalty: the net promoter score.

What is a net promoter score?

Commonly known as NPS, the net promoter score is a customer survey question and analysis approach to predict customer loyalty and assess customer satisfaction. It was first developed in 2003 by Bain and Company. Now, it’s used by businesses both large and small to track how they’re perceived by customers.

The net promoter score survey consists of a single question:

“On a scale of 1-10, how likely would you recommend our company to a friend?”

After answering the question, customers are grouped into three categories:

  • Promoters – customers who rate your company a 9 or 10. These people think very highly of your company and they’re ready to share positive reviews with their friends.
  • Passives – customers who rate your company a 7 or 8. These people are neither very satisfied nor very dissatisfied. They aren’t likely to go around telling terrible things about your company, but they aren’t likely to promote your brand either. Fortunately, if you make them a bit happier, they’re easy to convert to “promoter” status.
  • Detractors – customers who rate your company anything below 6. These people are likely to spread negative feedback about you and avoid repeat business.

How to calculate your net promoter score?

Net promoter score calculation is fairly easy. Once you’ve categorized your customers, you can calculate your net promoter score.

The first step is to determine what percentage of your customers are promoters, and what percentage are detractors. Once you’ve subtracted those, you can drop the percent sign. This is your raw NPS.

Here is the net promoter score formula:

NPS= (Number of Promoters / Total Respondents – Number of Detractors / Total Respondents) x 100

If your company has more detractors than promoters, your score will be negative, and vice versa.

What is a good net promoter score?

According to HubSpot, any score above zero is technically a good score. It implies you have more promoters than detractors. Any score above 50 is stellar, and anything above 70 is outstanding. However, achieving that is rare.

As there isn’t a universal standard for the net promoter score, most businesses compare their NPS to other companies in the same industry. This gives them an idea of how their customer experience is faring compared to their competitors. If they see their score falling behind, they then analyze the top industry performers and adapt their approach to customer service.

Benefits of knowing your net promoter score

Your net promoter score is one of the most adaptable and powerful metrics for assessing the daily performance of your company. No matter your score, here are some ways your net promoter score helps you improve overall customer service performance:

  • Aligns your team – it gives your team a clear goal that pushes your company into hyper growth. When you make your NPS a key metric, you can find more ways to ensure each customer enjoys a positive experience with your business.
  • Measures consumer loyalty and word-of-mouth traffic – a great marketing strategy focuses on creating a steady word-of-mouth pipeline. Your NPS can effectively gauge the performance of your word-of-mouth traffic and customer loyalty, especially the likelihood of current customers referring your company to prospects.
  • Identifies areas for improvement – collecting customer feedback is essential when you create a new product or launch a new service. Tracking your net promoter score lets you see the side effects of those products and services, and then troubleshoot changes in real time.

Your net promoter score isn’t the only metric you need to keep an eye on to measure the performance of your company. However, it’s a helpful tool to improve your customer service approach and business operations as a whole. For more information and inquiries about net promoter score, create a FanExam account today. We provide the best way to consistently measure customer satisfaction and collect actionable insights for your website.

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