Net Promoter Score (NPS) Term Meaning

Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction. It is calculated based on responses to a single question: “How likely are you to recommend our product or service to a friend or colleague?” Respondents provide a rating on a scale from 0 to 10, which classifies them into three categories: Promoters, Passives, and Detractors.

Detailed Explanation

NPS is a widely used customer satisfaction metric because of its simplicity and effectiveness in capturing customer sentiment. The NPS survey asks customers to rate their likelihood of recommending a product or service on a scale of 0 to 10. Based on their responses, customers are categorized as follows:

• Promoters (9-10): Highly satisfied customers who are likely to recommend the company to others and contribute to positive word-of-mouth.
• Passives (7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (0-6): Unhappy customers who are unlikely to recommend the company and may even discourage others from using it.

The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. The resulting score can range from -100 to +100. A positive NPS indicates that a company has more Promoters than Detractors, suggesting high customer loyalty and satisfaction. Businesses use NPS to gauge overall customer sentiment, identify areas for improvement, and track changes in customer satisfaction over time. By addressing the feedback from Detractors and enhancing the experiences of Passives, companies can improve their NPS and foster greater customer loyalty.

Key Points

• What it is: A metric used to measure customer loyalty and satisfaction, calculated based on responses to a single question about the likelihood of recommending a product or service.
• Why it matters: Provides a simple and effective way to gauge customer sentiment, identify areas for improvement, and track changes in customer satisfaction over time.
• How to use it: Survey customers to collect NPS data, categorize respondents into Promoters, Passives, and Detractors, and calculate the NPS by subtracting the percentage of Detractors from the percentage of Promoters. Use the feedback to improve customer experiences and increase loyalty.

Examples

1. NPS Survey: A software company sends an NPS survey to its users, asking how likely they are to recommend the software to a friend or colleague. The company analyzes the responses to identify Promoters, Passives, and Detractors and calculates the overall NPS.
2. Customer Feedback Analysis: A retail business uses NPS to gather customer feedback and identify common issues raised by Detractors. The business implements changes to address these issues and improve the customer experience, resulting in a higher NPS over time.

Related Terms

• Customer Satisfaction
• Customer Loyalty
• Customer Feedback
• Customer Experience