NPS – A comprehensive guide to understanding Net Promoter Score

Sending out Net Promoter Score surveys, doing your NPS calculation and comparing it against the NPS scale can feel like too much work.

Fret not, as this guide will walk you gently through the whole process.

Let’s start from the beginning.

Understanding Net Promoter Score

NPS or Net Promoter Score is a tool to measure customer satisfaction and loyalty to the company. Thus, the Net Promoter Score is a measure of customer loyalty that seeks to determine if a person is

1)    ready to recommend your business

2)     satisfied but not ready to recommend or

3)     disappointed

Looking for a tool to measure your NPS? Book a meeting for a tour of Trustmary!

Why Should You be Interested in NPS?

Lets look at this first on the basis of popularity of NPS. NPS is the most widely used customer satisfaction indicator internationally. According to some studies, two thirds of Fortune 1000 companies use NPS as a measure of customer loyalty.

On its own, it can actually be said that NPS is by far the most commonly used metric in all business. The prevalence of use doesn’t make it useful or tell us about its usefulness, but great popularity is always based on something.

Originally Net Promoter Score was brought up in Harvard Business Reviews article “One number you need to grow” year 2003. The title of this article sums up the most important point of view, from which the NPS was originally interpreted and why it has gained such popularity.

“The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department.”

Anyone can read the article and draw conclusions based on it.

In summary, the article argues that NPS as a measure strongly correlates with business growth rates in various sectors. If your company has a high Net Promoter Score, then it is likely to grow fast as well.

The NPS Question, What Does the NPS Question Ask?

As already indicated above, NPS is investigated with only one question.

How likely are you to recommend our company/product/service to a friend or colleague?

The question is answered on a scale of 0 to 10, where 0 means highly unlikely recommendation and 10 means highly likely recommendation.

For NPS, it’s essential that the question is not modified, since the layout of the question always affects the answer received. The question should be kept in a standardized format whenever possible so that internationally comparable data can be obtained from the study.

The NPS question is typically followed by an additional open-ended question: “What is the primary reason for your score?”

NPS Scale and Interpretation of Responses

Respondents are divided into three categories based on their responses:

9-10 = Advocates / Promoters

7-8 = Neutral / Passives

0-6 = Critics / Detractors

In practice, this means that

• All answers between 0 and 6 are interpreted as negative answers
• 7-8 are neutral and are not taken into account in the NPS formula.
• Answers between 9 and 10 are positive

You might wonder why would the NPS score 6 be a negative value? It’s above the mid-point of the scale.

On what basis are NPS scores 7-8 neutral, even though they are clearly at the top of the scale?

European NPS Scale

If you disagree with the typical NPS scale where 8 isn’t a promoter, you just might be a European or “european-minded”.

In fact, some suggest that the NPS scale should be weighed differently in Europe. In the European context, the NPS score 8 means “good” and customer giving you 8 are actually happy with the service they’ve got.

Depending on which side of the Atlantic you operate on, it might be a good idea to have a look at the scale you’re using.

What Is NPS Scale Based on?

The NPS scale isn’t something someone just came up with randomly. As a starting point, its inventors tried to keep the scale as simple as possible. As the original article states:

“We settled on a scale where ten means “extremely likely” to recommend, five means neutral, and zero means “not at all likely.”

But when looking at customer testimonials and repurchases, three clear groups were found based on their behavior.

It turned out that the given NPS estimate can be used to predict the customer’s repurchasing behavior.

1. The Promoters (9-10) were not only more likely to recommend the company to others, but were also more likely to buy again.
2. Passively satisfied (7-8) and
3. Detractors (0-6) didn’t recommend the company to others nor did they buy again.

This doesn’t mean that someone giving score 7 never buys again. They’re just less likely to do so than someone who gave a rating of 9 or 10.

Furthermore, it can be assumed that your detractors might have a negative word or two to say about your company. This type of negative word of mouth can be really harmful, so you need to react to all feedback ASAP!

NPS Results

The only step that may seem a bit complicated in measuring NPS is calculating the results. NPS is calculated by subtracting the percentage of critics from the percentage of advocates. The number is between -100 (no advocates) and 100 (no critics).

Thus, the meter itself does not distinguish between a rating of 1 or 6. If a person is a critic, he or she is a critic.

You can go to Net Promoter Score – the Definitive Guide to use the NPS calculator and try different samples on your own, to get clear idea on how the NPS will be calculated.

Interpretation of NPS

Interpreting the Net Promoter Score is, in a way, the most subjective part of the whole process. Or maybe subjective is the wrong word, but I mean that while in some areas 60 NPS may be bad, in others it is excellent.

Of course, you can find different benchmarks online, for example at NPS Benchmark (https://npsbenchmarks.com/companies).

A few highlights from their data could be the average for the software industry 42, the average for airlines 37, the average for grocery stores 39 and the average for consumer brands 48.

Being satisfied with the average is not necessarily a sensible strategy if you want to get the most out of NPS. Its benefits are rarely fully linear. Likewise, there is also a certain point on the NPS scale, the so-called Tipping point, which will give you maximum benefit.

How to Interpret NPS Results?

In practice, a 40-> 50 rise in NPS may not be realized in business with the same benefit as an increase in NPS 50-> 60.

The so-called target level is quite situational and the development of NPS in the current customer base is not always a relevant indicator for the company. For example, it may be more effective to just focus on customer acquisition on customers who will most likely have higher NPS than to save current ones.

Rather than focusing on whether NPS is good or bad, it is more important to think about why people give a certain rating.

Even if the NPS would results in -10 with a sample of thousand companies, 55% of which are critics and 45% of which are advocater, a closer examination may reveal that there is no point in developing NPS in the current customer base because the company’s services do not just meet their needs.

However, the end result can be very useful at the same time if you find the connecting factors as to why that 45% would recommend and 55% would not recommend the company to others. In this way, product and service development and customer focus can be directed to where they are most useful. 

NPS Scale in Practice

How does it work in practice?

Some measure NPS out of sheer curiosity (or because others reportedly do so) without utilizing the feedback in any other way. Some don’t even know what can be done with the collected data.

Personally, I think that if NPS is measured you should take full advantage of the data you get out of it.

This means something more than presenting the NPS figures on the management team. It translates to taking action based on the feedback or developing new ideas.

How to Take Full Advantage Out of NPS Measurement

1. Make the NPS Measurement Continuous

The first and most important thing is to make the measurement continuous so that the measurement does not remain a one time operation with a business impact close to zero.

Measure NPS at regular intervals and monitor the impact of changes and improvements made to it. If possible, measure NPS segmented based on location, purchased service / product, or customer profile, for example.

2. Use Positive Feedback to Boost Sales

In addition to the NPS, find out the causes and consequences of its formation by gathering open feedback.

When you get positive comments and recommendations from your customers, you should use them in your marketing. Is there any better marketing materials out there than comments from satisfied customers?

The next pitfall, of course, is to ask for reviews and testimonials, but leave them unused.

Although it requires a little extra effort, add reviews to your company website. I guarantee that your website will generate more leads and sales as a result.

3. Find the connecting factors: Why your business is recommended and why some are dissatisfied with your service

Even if NPS correlates with growth, it alone doesn’t tell you what steps you should take to develop your business.

Especially if the NPS is low, it’s worthwhile to conduct a more extensive customer survey after the initial NPS survey to find out more about the pain points your customers are experiencing.

To boost your open rates, remember to create a catchy survey subject line.

If you need more tips on how to improve your NPS, here’s our 7 ways you can try to improve your NPS.

In Summary of NPS and NPS Scale

NPS is a simple and functional metric that strongly correlates with organic business growth.

If your goal is to grow, NPS is an important tool for you. It helps you to determine if you’re focusing on the right areas.

We recommend benchmarking your NPS to others in your industry! You should also consider trying out one of the 5 best NPS software to automate the whole process.