What is NPS: the Concept and Formula

You hear the term tossed around in most any meeting focused on customers: “What’s the NPS? How many Promoters do we have? How many Detractors?” You may be asking yourself “What is NPS and what should we be doing with it?” 

Net Promoter Score (NPS) is a simple, powerful measure of customer loyalty. By asking customers to rate their likelihood to recommend a product or service on a 1-10 scale, you can gain actionable insights to guide decisions across your business.

Let’s break down NPS and see how it works.

The NPS survey

The NPS survey asks your customers this simple question:

It then logs the response and gives the responder a chance to explain their answer in an open-text format.

That’s it! Because the survey is short, sweet, and to the point, customers are more likely to respond. And you’ve just gained valuable information ready to be turned into insights and used to improve your offerings.

Net Promoter Score calculations

Once you have the customer feedback, the fun part begins.

First, respondents are classified into three groups based on their answers:

• Promoters. Rating 9 or 10. Loyal customers who are a great source of referrals.
• Passives.  Rating 7 or 8. Customers who are satisfied with the service but are susceptible to competitors.
• Detractors. Rating 0 – 6. Unhappy customers who can damage your brand.

Calculating overall NPS

Calculating your NPS gives you a clear indication from one moment to the next how happy your customers are. Real-time tracking can alert you to threats to your business, allowing you to take quick action. Tracked over time, it gives you insight into which of the company’s actions have resulted in the most customer value.

To calculate your NPS, subtract the % of respondents who are Detractors from the % of respondents who are Promoters.

NPS = % Promoters – % Detractors

Mining customer feedback

The answer to the open-ended NPS follow-up question tells you the “why” behind the rating. Mining this text for insights is what makes NPS so powerful, because it gives you rich information on the customer experience you’re providing. So analyze the text answers and use them to guide the actions you take.

Don’t forget to follow up with the customer and close the feedback loop. Imagine immediately responding to a Detractor’s complaint, targeting your Passives with an information campaign, or asking a Promoter to review your product online.