NPS® is a metric that simplistically explains your reputation among those surveyed. The method is well-established in market and customer surveys and provides a value that can be linked to the marketing value of customers and also to future business. It is also used in the Net Promoter System approach, abbreviated as NPS.
The Question
NPS usually revolves around the question "How likely is it that you would recommend our company to a friend or colleague?". There are variations that may be more suitable in certain industries, such as in monopolistic industries.
The scale is from 0 (not at all likely) to 10 (extremely likely).
Grouping Respondents by Behavior
NPS is based on the behavioral patterns of customers, and the question is designed to capture the behavior or relationship between the customer and your company. Once the grouping is done, a simple calculation is made.
There are three different relationships:
- Critics - Someone who would rather recommend another provider. These individuals may continue to be customers, but you are not their preferred choice.
- Passively Satisfied - Someone who is ambivalent towards you and may well choose another provider if they have a better offer, campaign, or similar.
- Ambassadors - These individuals spread your good reputation and are loyal to the company. If they have the choice, they prefer to remain customers with you.
Presentation
Common ways to present NPS include color-coding the different groups: Ambassadors (green), Passively Satisfied (yellow), and Critics (red). This shows the distribution of the different groups to provide context to the NPS value.
It is also common to present NPS as a single metric, which is a value between -100 to +100. To distinguish between positive and negative values, red is often used for negative values and green for positive values. This should not be interpreted as values above 0 being good or values below 0 being bad; read more about good and bad values below.
Calculation of the NPS Metric
NPS is calculated by taking the proportion of customers who are Ambassadors (e.g., 50%) minus the proportion of customers who are Critics (e.g., 25%). The result is the NPS (e.g., 25).
NPS is normally not expressed as a percentage but as an absolute value between -100 to +100. It is a common misunderstanding that the Passively Satisfied are not included in the calculation, but since the proportion of Ambassadors and Critics is taken into account, the Passively Satisfied are indirectly included in both of those figures.
Feel free to calculate NPS using the NPS Calculator.
Good and Bad Values
NPS varies by industry and is also somewhat culturally conditioned. Therefore, there is no absolute value that is good or "where one should be". The simplest answer to where one should be is better than one's competitors in the same market and where NPS is measured in a comparable way. Benchmark values are therefore a good way to get an idea of what is a correct level, but you also need to know how those values are obtained. For example, if they are obtained from people who called customer service, people who have just become customers, or through a relationship survey that includes all customers.
NPS as a Working Method
NPS is not just a metric but an entire working method to create loyal customers and actively work with marketing and areas such as customer losses. The metric is a way to see the effect of that work. When referring to the working method, the abbreviation NPS is also used, but then it stands for Net Promoter System instead of Net Promoter Score.
Comparability with Customer Satisfaction
NPS measures more than how satisfied the customer is and is therefore usually called loyalty rather than satisfaction. Factors such as brand and previous reputation play a role, among others. An article on the subject is available on Quicksearch's website: About the Difference between NPS and Customer Satisfaction.
Registered Trademark
NPS® and Net Promoter® are registered trademarks owned by Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld. The first time NPS is mentioned in running text, the registered trademark symbol needs to be used, along with a reference to the owners on that page. However, it is not necessary to use the mark in every subsequent use or other cases such as in variable names or result headings.