An Introduction to the Net Promoter Score (NPS)
The Net Promoter Score (NPS) measures customer loyalty through the lens of how likely a customer is to refer your business to a friend or colleague. The metric's thesis is the more promoters and evangelists you create, the greater their loyalty, referral potential, and net retention.
Developed by Fred Reichheld, codified as a best practice by Bain & Company, and defended as an effective loyalty metric in 2006's The Ultimate Question: Driving True Profits and Revenue Growth by Mr. Reichheld, an estimated two-thirds of the Fortune 1000 companies now use the Net Promoter Score as their standard measurement of customer brand perception and retention predictor.
NPS is easy to implement but slightly more complex to measure vs. other customer sentiment scores like Customer Effort (CES) or Customer Satisfaction (CSAT). The Net Promoter Score is built on a scale of from 0 to 10 and replies are broken into segments of detractors (0 - 6), passives (7 & 8), and promoters (9 & 10). Detractors are considered and the least likely to refer your business and potentially high churn risk. Passives generally feel your service meets their expectations but not to the point where they'd advocate for it with their networks. Promoters are your most loyal customers, potential brand evangelists, and have the highest likelihood of referring you to a friend or colleague.
The survey question itself is very straighforward and typically reads like:
To calculate your NPS score, subtract your total detractors from your total promoters and then divide that number by the number of respondents. Multiply your answer by 100 and you'll have your final score. It's important to note that NPS is not expressed as a percentage but as an absolute number lying between -100 and +100. Therefore, the possibility of having a negative score does exist. The math looks like this:
NPS should not be used as your sole customer loyalty metric nor viewed as a replacement for your Customer Effort Score (CES) or Customer Satisfaction Score (CSAT). Customer Effort Score watches how hard it was for your customers to achieve value with their most recent interaction. CSAT monitors the customer's perception of the overall outcome of an engagement with you. NPS focuses on customer loyalty through their willingness to promote your brand. All are correlated with better predicting customer retention and company performance but achieve it through very different lenses.
Understanding when and where to deploy your customer success metrics will be key to assuring you and your customer's success. The most important item above all is you are proactively seeking your customer's input, asking them appropriate questions, listening effectively to their responses, and acting on them accordingly.