NPS tells you how willing your customers are to recommend you to friends, family or colleagues. Customers are asked on a scale of 0-10 how likely are you to recommend this company’s product or service to a friend, family member or colleague. NPS is expressed as a number.
Detractors – Give a score from 0-6. They generally are unhappy with the product, service or experience. They can potentially damage the company’s reputation through negative word of mouth.
Passives – Give a score 7- 8. They are not particularly engaged. If an opportunity arises, they could easily switch to a competitor. They generally don’t spread any negative word of mouth but they are not likely to promote your company to others.
Promoters – Give a score 9 – 10. They are highly satisfied, engaged and loyal. They are so happy with the product service or experience, that they would recommend you to others. They are your advocates.
How is NPS calculated?
NPS = The % of your Promoters – The % of your Detractors.
The result can range in value from -100 where everyone scores you 0 to 6, to +100 where everyone scores you 9 to 10.
Benefits of calculating NPS
- Studies have shown that there is a strong correlation between NPS and other metrics like churn, retention and loyalty.
- It is easy to capture and to calculate.
- As it’s widely used by companies globally, it enables you to benchmark your performance against others.
Notes of Caution of Using NPS
- NPS is based on customer attitudes and opinions and therefore can be quite volatile
- NPS ignores the customers giving you a 7 or 8 out of 10 score
- NPS only tells you the degree to which customers are willing to recommend the product or a brand
- NPS is strongly influenced by how recent the interaction or experience occurred
Happens usually immediately after an interaction between the customer and the organisation – either following a purchase, a transaction online, or some other interaction in the recent past.
Refers to the score customers will give when they haven’t interacted with a product or service recently. Usually, the Relational NPS score is significantly lower than Transactional NPS as customers have less recall of the experiences they have had.