The Net Promoter Score (NPS for short) is a key figure in the area of customer satisfaction. With the help of a short customer survey, it provides information about the loyalty of customers to a company or organization.
The Net Promoter Score is based on the question of how likely it is that customers would recommend a product or service to a third person (a friend or colleague). The NPS bundles the results of this survey into one number and thus provides an indicator of customer loyalty. Due to the simplicity of data collection and the general question regarding a company or brand, NPS is widely used by companies worldwide.
As part of a customer survey, usually one to two minutes, a group of customers is asked the question:
“How likely is it that you would recommend this product/company to a friend or colleague?”
Customers have the option to enter their answer on a scale of 1 to 10, with 1 being unlikely and 10 being very likely. In this way, a general picture of the mood can be captured with a simple question.
The customers involved in the survey are then divided into three groups based on their answer:
Detractors
Respondents with a score between 0 and 6 are called detractors. They are generally dissatisfied with the product or the company. Friends and relatives would advise you against becoming a customer or using the service. In addition, there is a risk of negative ratings and reviews and even migration to competing companies.
Indifferent
Respondents with a score of 7 or 8 are called indifferents. They are neither positive nor negative about the company or the product and would probably refrain from recommending it. There is a risk of possible migration should the competition offer a better product or a more attractive price. Indifferent people play a subordinate role in the subsequent calculation of the Net Promoter Score.
Promoter
Respondents with a score of 9 or 10 are called promoters. They are most satisfied with the product or the company and would recommend it to others. The active recruitment of new customers is also not ruled out. Here, there is the possibility of increased added value through more intensive buying behavior or greater brand loyalty.
The Net Promoter Score is now calculated from the calculation of the percentages of promoters and detractors. For this purpose, the proportion of detractors is deducted from the share of promoters; indifferents are not included here and are primarily used only to determine the promoter and detractor shares.
A company conducts a survey with a group of 100 customers and receives the following data: 25 detractors, 10 indifferents and 65 promoters. The Net Promoter Score is therefore as follows:
NPS = Proportion of Promoters — Proportion of Detractors = 65% — 25% = 40
A company conducts a survey with a group of 200 customers and receives the following data: 62 detractors, 26 indifferents and 112 promoters. The Net Promoter Score is therefore as follows:
NPS = Proportion of Promoters — Proportion of Detractors = (112/200 — 62/200) *100 = 56% — 31% = 25
The method of calculating the NPC gives theoretically possible maximum and minimum values of 100 and -100, but these are almost impossible to achieve. In general, it can be said that a value above 0 can be considered positive, as a company therefore has more promoters than detractors. Values above 50 are already described as very good, values above 70 as excellent. Depending on the sector, however, these figures are highly unlikely.
Due to the fact that the Net Promoter Score only includes one question in the calculation, it may be useful to use the development of the NPS over a longer period of time instead of each individual NPS value for the analysis of customer satisfaction.
Because the Net Promoter Score is a measure of customer satisfaction and loyalty, customer experience is paramount, especially for service companies, when it comes to finding ways to improve. However, the entire customer journey should still be considered in order to find potential problems that have led to bad experiences for customers. Various measures can be taken to improve the Net Promoter Score:
An improvement in the Net Promoter Score therefore automatically leads to a well-thought-out customer journey and thus an improved customer experience for customers, which has a long-term effect on the company's success.
