NPS meaning: Net Promoter Score (NPS) represents the answer to the question "How likely are you to recommend our company/product/service to your friends and colleagues?".
The net promoter score system was developed by (and is a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It attempts to measure the loyalty between a company (the provider) and the customer (for example purchaser, employee or user of a service). A positive score is 'good' a negative score is 'not good'. It is a measure of loyalty not satisfaction.
NPS =(%Promoters)-(% Detractors)
Ask customers to rate "How likely are you to recommend our company/product/service to your friends and colleagues?" on a scale of 1-10.
- 9-10 = 'promoter'
- 7-8 = 'passive'
- 0-6 = 'detractor'
Once you have processed the responses into those three categories you take the percentage that are 'promoters' and subtract the percentage that are 'detractors'. This gives your Net Promoter Score. The results can range from -100% (worst possible result) to +100% (best possible result).
NPS Example Calculation
Here is and example showing how net promoter score is calculated...
Let's say you are running and exotic ice cream stand specialising in 'flavours for the brave or deranged'. After serving each of ten customers you ask them to fill in a form with one question..
How likely is it that you would recommend the 'Mustard Flavour Ice Cream Stand' to a friend or colleague?
The scores are:
9, 10, 6, 4, 2, 2, 7, 9, 10, 2
- This gives 4 promoters, 1 passive and 5 detractors (unhappy customers).
- 40% promoters, 10% passives, 50% detractors
- NPS = 'promoters'-'detractors' = 40%-50% = -10%
Perhaps time for your to revaluate your ice cream flavours.
It is argued that NPS is less susceptible to the mood of the customer at the time the question is answered than traditional 'satisfaction' assessment methods.
In order to understand why the customer responded in the way that they did additional supporting questions/methodologies are needed.
There is debate about whether NPS is any better at predicting growth than previous customer satisfaction measurement techniques.