Definition: Net Promoter Score (NPS) is a customer loyalty metric that measures the likelihood of customers recommending a company, product, or service to others. It is based on the premise that customers can be categorized into three groups: Promoters, Passives, and Detractors. NPS provides insights into overall customer satisfaction and loyalty.
Calculation: NPS is determined by asking customers a single question: “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?” Based on their response, customers are classified as follows:
- Promoters (score 9-10): Customers who are highly satisfied and enthusiastic about recommending.
- Passives (score 7-8): Customers who are somewhat satisfied but not particularly enthusiastic.
- Detractors (score 0-6): Customers who are unhappy or dissatisfied and may spread negative word-of-mouth.
The Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters. The score can range from -100 to +100.
Benchmark: NPS benchmarks vary across industries, but generally, a positive NPS (above 0) is considered good, while an NPS above 50 is considered excellent. However, the benchmark also depends on the competitive landscape and the specific industry norms.
Importance: NPS provides businesses with an indication of customer loyalty and the likelihood of referrals. It helps identify areas for improvement, prioritize customer-centric initiatives, and gauge the effectiveness of customer experience strategies. By focusing on increasing the number of Promoters and decreasing Detractors, companies can enhance customer satisfaction, retention, and overall business growth.
Alternate Terms: NPS