What is the Net Promoter Score?
The Net Promoter Score (NPS) has proven to be a powerful tool to measure customer satisfaction or customer loyalty. The higher this Net Promoter Score (NPS), the more satisfied and loyal customers and users are. In this blog, we will tell you all about the Net Promoter Score (NPS).
The Net Promoter Score (NPS) was developed by Fred Reichheld and a team the renowned management consulting firm Bain. A project was launched, in collaboration with Satmetrix, asking some questions. This survey analysed which answers had the highest correlation with customer behaviour. The research revealed one question that has the most correlation with customer behaviour: the Net Promoter Score (NPS) question.
How does the Net Promoter Score (NPS) work?
In order to establish the Net Promoter Score (NPS), we therefore answer the question:
“To what extent would you recommend Company X to friends or family?”
Customers can answer on a scale of 0 (very unlikely) to 10 (very likely). The answers given are divided into three categories:
Detractors (give a number from 0 to 6): these are customers who tend to be more dissatisfied with your company or product.
Passives (give a 7 or an 8): these are customers who have a neutral attitude towards your company or product. They are satisfied but would not necessarily recommend you to others.
Promoters (give a 9 or 10): these are the ambassadors of your company. They are very satisfied and will actively spread the word to others.
As a company, you obviously want as many promoters, or ambassadors, of your company as possible. After all, research shows that promoters:
- Spend more.
- Are less price-sensitive.
- Are less likely to switch to a competitor.
- Buy additional products and services.
- Are less likely to have complaints.
- Recommend your company to others.
How is the Net Promoter Score (NPS) calculated?
The Net Promoter Score (NPS) is ultimately calculated by the difference between the percentage of promoters and the percentage of detractors. The score that comes out of this can vary between -100 and 100. The Net Promoter Score (NPS) is not expressed as a percentage, but as an absolute number. Whether this score can be considered good varies from company to company and from industry to industry. However, a reliable comparison can be made between companies from the same industry. A positive score, however, is considered good.
More than a Net Promoter Score (NPS)
Of course, it is nice to see what your Net Promoter Score (NPS) is, but this does not tell you everything. The Net Promoter Score (NPS) relies on a single score, but there is more than the score. For instance, the motivations on the Net Promoter Score (NPS) and various statements provide valuable insights on which a company should focus. By using statistical analysis, you can determine what has the most impact on the Net Promoter Score (NPS).
At AlphaRainbow, we use comprehensive statistical analysis methods to analyze whether there is a link between Net Promoter Score (NPS) and motivations. Through these analyses, we define what the key components are to increase customer satisfaction (also known as key drivers). This allows you as a company to focus on what is really going to make the difference in terms of customer satisfaction. You can read more about our analyses here.
Want more information on how we measure customer satisfaction? Then click below.