Net Promoter Score (NPS)
Use the NPS in surveys to measure client satisfaction with one question
The Net Promoter Score (NPS) is a powerful tool to measure client satisfaction with one single question, an indication of the growth potential of your company or product.
The NPS is a customer loyalty metric developed in 2003 by management consultant Fred Reichheld of Bain & Company in collaboration with the company Satmetrix. The objective was to determine a clear and easily interpretable customer satisfaction score which can be compared over time or between different industries.
The NPS assesses to what extent respondents would recommend a certain company, product, or service to friends, relatives, or colleagues. The idea is if you like using a certain product or doing business with a particular company, you like to share this experience with others. Specifically, the respondent is asked the following question:
How likely are you to recommend company/brand/product Xto a friend/colleague/relative?
This can be answered on an 11-point rating scale, ranging from 0 (not at all likely) to 10 (extremely likely).
Calculation
Depending on the score that is given to the Net Promoter question, three categories of people can be distinguished:
- Promoters = respondents giving a 9 or 10 score
- Passives = respondents giving a 7 or 8 score
- Detractors = respondents giving a 0 to 6 score
The NPS is calculated as the difference between the percentage of Promoters and Detractors. The NPS is not expressed as a percentage but as an absolute number lying between -100 and +100.
For instance, if you have 25% Promoters, 55% Passives, and 20% Detractors, the NPS will be +5. A positive NPS (>0) is generally considered as good.
What's the average NPS?
NPS is used by many large companies as a customer feedback tool. It gives organizations an unambiguous number that is useful as input for managers to steer the company. The NPS also gives a good indication of growth potential and customer loyalty for a company or product. You can track the evolution of the NPS over time or compare it with a predetermined target. You can also benchmark different areas or products or check where your company positions itself versus the industry average if this is available.
To give an indication, according to Reichheld, the average American company scores less than +10 on the NPS, while the highest performing organizations are situated between +50 and +80. These values may vary considerably from sector to sector and from culture to culture.
To understand the motives of Promoters and Detractors, it is recommended to accompany the NPS question by one or more open questions that probe the underlying reasons behind the given score. This allows you to make the appropriate adjustments to increase the future NPS, either by boosting the percentage of Promoters, either by reducing the proportion of Passives and Detractors (or a combination of both).
NPS in Agile Research
To respond to the increasing popularity of the NPS, Agile Research has added the NPS question as standard question in the tool. If you want to use the NPS in your survey, you have to select this question type. It is still possible to modify the formulation of the question or the naming of the endpoint value labels.
Once the responses start coming in, you will see a bar chart in Reporting, showing the percentage of Detractors (red), Passives (orange), and Promoters (green). Under that is the detailed response distribution for the 11 possible scores. Based on these percentages, the actual NPS is calculated. Your NPS is represented on a gauge (showing positive NPS in green, negative in red). This allows you to see how well your product or business is performing.
Critical assessment
From a scientific perspective and in certain market research circles, there is some skepticism about the NPS. Opponents of the NPS concept argue that there is insufficient scientific base for the outcome and that the model is too simple. They claim customer loyalty and satisfaction is not only about numbers and percentages, but also about causes, consequences, and correlations.
It is also suggested that the NPS method cannot accurately measure customer behavior. Customers can claim they will recommend a company or product in a greater or lesser extent, but it is not proven they will actually do that in practice. Besides that, the recommendation of one customer is not always as valuable as that of another one. It is also a fact that the NPS is more useful in markets with a lot of competition where potential buyers have a greater tendency to ask friends or acquaintances for advice before deciding about a purchase. Another limitation of NPS is that it only takes into account customers, while also a lot of non-customers can act as detractors and generate bad word-of-mouth publicity.
Additionallyl, the NPS disregards important differences in the answer score distribution: no distinction is made between a 0 score and a 6 score, while there is obviously a substantial discrepancy between those two. It also makes no difference whether there are 70% Promoters and 30% Detractors or 40% Promoters and 0% Detractors. Both result in an NPS of +40 which doesn't seem very logical.
Some caution is, therefore, required. While the NPS on its own may not be sufficient as a management tool, in the right framework and with some additional motivational questioning, it can be a useful metric. Its greatest strength is the simplicity, making it functional and interpretable for every stakeholder. Considering the large number of big companies using this tool on a continuous basis, it has proven its worth.
To be clear, NPS is only a starting point. After the analysis, you can take steps to improve your organization and boost your NPS. This will be a long-term project, but the NPS allows you to assess at which stage your organization is in this growth process.
