What is NPS and why should you care about it?

NPS stands for Net Promoter Score.  It is a customer loyalty metric developed by Fred Reincheld, Bain and Company along with Satmetrix.  It was published in the 2003 Harvard Business Review entitled “One Number You Need to Grow.”

In short it is the metric that measures how happy your users are with your website and therefore how likely they are to recommend you.  Hence the name “Net Promoter Score”.

A lot of time is invested tracking and analyzing how to improve critical needles such as revenue, installs, daily users, etc… Yet too often there is very little insight into exactly what your users think and feel about your site.  That is where NPS comes in.

NPS Definition

NPS is a measure that gauges how likely your users are to recommend or promote your site or service.  What is intriguing about NPS is that it is not simply a yes or no question.  Rather, users vote on a scale of 0-10 in terms of their likelihood to recommend your site.

Many NPS survey services will prompt for your users to answer a single question: “How likely are you to recommend XYZ Website?”  The user is then presented with a radio box scale of 0-10 and selects the value.  0 being “won’t recommend” and 10 being “will recommend”.  The average of this score is your NPS Index.  The index looks something like this:

NPS Scale Index

The above image shows a simple example of someone being asked to gauge how likely they would be to recommend your company.

NPS – Score Index

The NPS index of 0-10 is not simply calculated to provide an average.  Rather, users are broken down into 3 sub groups.  Promoters, Passives and Detractors.

NPS Promoter Passive Detractor

Let’s see how these groups are broken down.

  • Promoter (scores of 9-10).  Promoters are loyal users who will keep buying from you and referring others, even during a hard time.  They fuel your company.
  • Passive (scores of 7-8).  Passive users are satisfied with the service and feel they got a fair deal.  They do not speak badly about your company – however they are not loyal and are susceptible to competitive offers and changing landscapes.
  • Detractor (scores of 0-6). Detractors are users who are unhappy and can damage your brand with their complaints and negative word of mouth.

Notice how the Detractor group is much larger then the other groups.  This is primarily due to the effect that detractors can have on your brand.  Their negative reviews can do a lot more damage then a positive review can do good.  Users who are even in the 4-5 range may tell friends something along the lines of “the service was ok but I wouldn’t recommend them”.  This is a classic case of users who are not particularly “angry” with your brand, but are still actively detracting from it with a negative review.  Many times they are not even meaning to be negative.

NPS – Algorithm

The NPS value is then calculated by taking the percentage of promoters and subtracting the percentage of detractors.

NPS Algorithm

In this algorithm the passive users are not even included.  This is because they do not add to your customer base nor do they detract from it.  They are neither promoting your brand or detracting it from it with negative reviews.

When the NPS is calculated your score can be as low as -100 (everyone is a detractor) or as high as 100 (everyone is a promoter).  An NPS that is positive is generally a sign that you are on the right track.  An NPS score of 50+ is considered excellent (very difficult to achieve) and is what many companies strive for.

NPS – How to Gather Data

There are several services that will run an NPS gathering tool for your site.  An NPS index however is rather easy to run on your own.  In it’s truest form an NPS survey is a one question survey.  “How likely are you to recommend XYZ to a friend or colleague?”.  Present the user with a scale of 0-10, 0 being the lowest and 10 being the highest.  Once the data is collected you can then perform the above calculation against it.

NPS – An Example

Let’s run through a quick example.  Let’s assume the following Data Set:

NPS Data Sample

In this example we can break our base into our 3 groups with the following tally:

NPS Group Breakdown

We then perform the following calculation

40% – 30% = 10%

Using this data we achieved an NPS score of 10.  This is a positive score and we should be proud of it.  The combination of our Promoters and Detractors is a net positive.

Like this thread?  READ MORE:

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What is NPS and why should you care about it?

What is NPS and why should you care about it?

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