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What Is NPS (Net Promoter Score) And How Is It Calculated?

Do you know what NPS means? The Net Promoter Score is a market research metric that measures the level of customer satisfaction regarding a company, product, or service. It’s typically used in a single-question survey format where respondents are asked if they’re satisfied with a product and whether or not they’d recommend it to friends or colleagues. This score is derived from different demographic surveys, for example the Latino community in the United States.

Surveys that measure NPS are one type of questionnaire available through the SABEResPODER Rewards Program. To make the most of the NPS, it's important to understand how it works and how taking our paid surveys can help improve your own

Definition of NPS

Net Promoter Score (NPS) is a metric essential to gauging customer satisfaction. It was created in 2003 by consulting firm Bain & Company and is now used by millions of businesses to measure and track how they’re perceived by customers.

This score aims to simplify the customer evaluation process, and is also used to improve the efficiency and innovation of a brand or company. Some organizations pay a portion of their users to gather feedback and use those results to improve products and services. The NPS also determines brand loyalty and provides input on how to develop more effective advertising strategies.

NPS Objectives

The NPS measures the level of customer satisfaction with a company's products and services. Survey results attempt to predict potential recommendations that respondents will make for a specific brand. Similarly, the NPS seeks to provide a clear picture of a company's performance. Some objectives used by a Net Promoter Score are: 

  • Measure a brand’s degree of customer loyalty
  • Estimate how many satisfied users could be designated as brand ambassadors
  • Optimize products, services, and experiences
  • Improve a brand’s market position or reputation
  • Provide useful data for creative process innovation and product development

How is NPS Calculated?

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Calculating the NPS involves several phases, all of which determine the degrees of brand loyalty and customer satisfaction. NPS scores are determined using a single-question survey and reported as a number ranging from -100 to +100. The following steps are involved in calculating an NPS:

  • Determine the target population involved in the study
  • Develop and distribute a short, simple survey to the brand's customers
  • Quantitatively rank the responses people provide
  • Calculate the average approval score for the brand

Loyalty levels

Loyalty levels define the way a brand's users are evaluated and classified. These groups are based on the degree of loyalty or identification they have with the company's products and services. Customers fall under three main categories: promoters, passives, and detractors. Let’s look at each in more detail:

Promoters

These are customers who completely identify with the brand and are extremely satisfied with its products and services. Typically, these customers become brand ambassadors, communicating benefits and recommending products to others. Some businesses provide personalized services to this group, such as different perks and status recognition.

Passives

This group of customers is satisfied with a brand’s service but not enthusiastic enough to recommend it or be considered promoters. They’re people with high standards who expect more from the brand. People in this category are more likely to switch to a company that meets their specific needs.

Detractors

This is the group that is least satisfied with the brand. They’re unhappy customers who are unlikely to return and may even discourage others from making a purchase from the company.

Example of NPS calculation

In order to calculate NPS, you need to determine how loyal your customers are. Users are organized into groups based on how they answered survey questions on a scale from 0 to 10. For example, 0-6 are detractors, 7-8 are passive, and 9-10 are promoters. After that, a mathematical formula is used to determine a proportion by taking into account the largest parts of the sample. The formula is as follows:

NPS = (Promoters - Detractors) / Total respondents

Using this formula provides a result that shows how users already feel about the products and services a brand offers. This can be compared to the following scale, which will help you get a better idea of how well or how poorly your strategy is resonating:

  • Excellent: Between 75% and 100%
  • Very Good: Between 50% and 74%
  • Reasonable: Between 0% and 49%
  • Bad: Between -100% and -1%

Examples of NPS questions

The personal verification survey given to each person who uses a company's services is a key part of an NPS. In these surveys, there are a number of questions that can be answered based on how a customer has interacted with the brand. The following are some examples of NPS survey questions:

  • From 0 to 10, how would you rate your experience with our product?
  • From 0 to 10, how likely are you to recommend our services?
  • From 0 to 10, how well did our products help you solve problems?
  • From 0 to 10, how would you rate your experience as a customer with us?
  • From 0 to 10, how likely are you to want to use our brand's products in the long term?


The Pros and Cons of NPS

There are arguments both for and against using the NPS method, and there is much debate in the business world about how useful these surveys are and how they might cause problems when evaluated. 

In general, the debate centers around how hard it is to prove that the surveys were taken correctly and how broad the results are, meaning that the person making the decision has to decide how they’ll be interpreted. Some of the primary pros and cons of the NPS are:

Pros

The main advantages of NPS are:

  • Optimization of brand products and services
  • Improvement of the brand identification process
  • Creation of digital marketing campaigns
  • Analysis of potential competitors
  • Checking the brand’s current sentiment among customers

Cons

The main disadvantages are:

  • Sample size is usually small
  • Lack of complementary information to understand the results
  • Slow processing time
  • Surveys can be manipulated by the respondents in favor of a specific outcome
  • Dispersion of main themes

Alternative and/or complementary indicators

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The NPS can be swapped out for other metrics that will provide the company with a more complete picture of how its customers see the products and services it offers. It’s common for these indicators to focus on certain areas that also impact how satisfied a customer might be with a brand. Some of the main alternatives to NPS are:

Customer Satisfaction Score (CSAT)

Like its name indicates, the Customer Satisfaction Score measures satisfaction with a certain service or product. It tries to determine if the people who typically use a product like it and can relate to what it has to offer. This metric is gauged on a scale from 0 to 5 or from 0 to 10.

Customer Effort Score (CES)

This indicator focuses on the service experience users have with respect to the brand. The ease of accessing and using a product or service is fundamental, so this metric evaluates the effort made by customers in these arenas. The CES measurement score usually ranges from 0 to 7.

Customer Profitability Score (CPS)

This method evaluates the amount of revenue that a company earns from customers in a certain period. This calculation is of great importance since it allows for comparison between the amount invested by the brand versus what a customer spends on the organization.

What Industries Should Use the NPS?

Various types of businesses and brands need to stay in touch with customers to understand what they want so they can develop strategies based on those demands and achieve market dominance. Businesses that need an NPS depend on daily drive for their products or services. This makes the NPS the best way to stay in touch with the public. The NPS is recommended in the following fields:

  • Fast moving consumer goods (FMCG) 
  • Tech 
  • Retail 
  • Financial services
  • Industrial goods
  • Advertising and marketing services

How to Implement NPS Results

Implementing NPS results means keeping the company’s goals in mind when using this method. If a product needs to be improved or redeveloped, using the NPS results means taking into account what customers think and what can be done. In other words, putting results into action means developing a strategy that focuses on keeping customer satisfaction levels high.

Frequently Asked Questions

What’s the average NPS score?

There is no average NPS score. Instead, the metric is based on population surveys and the results are then evaluated based on what is typically considered positive or negative.

What makes an NPS score good or bad?

As shown in the scale above, most of the time any result above 60% can be considered “good,” and anything below 60% is usually interpreted as “bad.”

Who created the NPS?

The NPS dates back to 1993, when Fred Reichheld developed the metric by creating surveys for various companies that needed to know the status of their products as well as customer loyalty. Later, in 2003, it was adopted by Bain & Company and Satmetrix, with the goal of developing a method to forecast user behavior in relation to the purchase of various products and services.

Participate in NPS surveys!

The use of tools like NPS is critical for businesses and ventures that want to succeed. It’s important to always keep customer opinion and satisfaction top of mind, as this serves as the foundation for developing a strategy that prioritizes growth and expansion. The NPS is very effective for determining which areas need improvement and what your brand’s strong suits are so it can continue growing.

Don’t forget to check out SABEResPODER’s Survey Center, where you can take surveys to measure NPS, earn money, and benefit the community with the development of better products and services. Sign up now!