Meaningful Metric May 2021 | Net Promoter Score

Net promoter score (NPS) is the gold standard of customer experience metrics. First developed in 2003 by Bain and Company, it’s now used by millions of businesses to measure and track how they’re perceived by their customers based on one simple question:

How likely is it that you would recommend (your organization or product) to a friend or colleague? 

Respondents give a rating between 0 (not at all likely) and 10 (extremely likely) and, depending on their response, customers fall into one of 3 categories to establish an NPS score:

  • Detractors (score 0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth
  • Passives (score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
  • Promoters (score 9-10): Loyal enthusiasts who will keep buying and fuel growth by referring others.

How do you calculate NPS?

It’s simple to calculate your final NPS score – just subtract the percentage of Detractors from the percentage of Promoters.

For example, if 10% of respondents are Detractors, 20% are Passives and 70% are Promoters, your NPS score would be 70-10 = 60.

What can you measure using NPS?

You can measure almost anything using an NPS score. In addition to understanding the overall NPS for your organization, you can track scores for everything from individual products, stores, web pages, locations, designs, processes, etc... The goal is to gain loyal customers who become brand evangelists instead of consumers.

How do you create an NPS Survey?

NPS surveys are relatively easy to create. You could use survey software or specific NPS software to get a comprehensive view of your customers. Customer experience management platforms and most CRM systems allow you to keep track of all the interactions your company has with your customers, both current and potential. Just get started, be consistent, and monitor your results continuously.

How do CFOs use NPS?

Experienced CFOs know that how businesses generate profits is as important as how much profit is generated. Because NPS is an effective measure of customer loyalty, the profits from businesses with high NPS scores are likely to be more sustainable. Strong NPS scores can also help businesses earn higher multiples for their valuations. 

This makes the Net Promoter Score an excellent complement to the financial metrics of a business.

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