What Is Net Promoter Score (NPS)? A Guide to the Key Business Metric

Net Promoter Score

Net Promoter Score (NPS) surveys quickly became the gold standard of customer experience management (CXM) teams.

The final score is a simple, baseline metric that’s used to measure customer loyalty. But it’s far more powerful than just one simple metric.

Within this exploration of all things Net Promoter Score we will define NPS, explain the nuts and bolts of calculating your NPS score, and break down the components of a Net Promoter Score survey.

Finally, we’ll lay out the most powerful tools that can help you improve your NPS score.

Let’s jump right in – feel free to click around to the section most valuable to you. 

  1. What Is a Net Promoter Score?
  2. How to Calculate Your Net Promoter Score
  3. The Importance of Net Promoter Score: NPS Economics
  4. What Is a Good Net Promoter Score?
  5. The Net Promoter Score System
  6. How to Implement Net Promoter Score
  7. How to Analyze & Improve Your Net Promoter Score
  8. Takeaways

What Is a Net Promoter Score?

What is NPS

Net promoter score, or NPS, is a customer experience management (CXM) metric designed to gauge customer loyalty by asking customers how likely they are to recommend a company on a scale of 0-10.

“On a scale from 0-10, how likely are you to recommend this company to a friend or colleague?”

Your scores, once gathered, are then divided into three groups: Promoters, Passives, and Detractors, according to the following criteria:

Detractors (scores 0 - 6)

These are unsatisfied customers that could potentially share negative feedback about your business. They’re also more likely to churn.

Passives (scores 7 - 8)

These customers are indifferent about your company. But you’ll need to keep an eye on these customers because they’re at risk of becoming Detractors, which might lead to them churning. On the upside, you might be able to turn them into Promoters.

Promoters (scores 9 - 10)

These are loyal customers that are very likely to promote your company through word of mouth. They’re your company advocates, so you’ll want to keep these loyal customers happy.

Once you’ve grouped your Net Promoter Score respondents, you’re then ready to calculate your NPS using its simple formula.

How to Calculate Your Net Promoter Score

Calculating your Net Promoter Score relies on a basic formula. You subtract the percentage of Detractors from the percentage of Promoters.

Image showing the NPS formula.

For instance, if you have 60% Promoters, 20% Passives, and 20% Detractors (60 - 20 = 40), you have an NPS of 40.

It makes sense. If you have more Detractors than Promoters, your Net Promoter Score will be negative; more Promoters than Detractors, your score will be positive. 

Regardless of what your result ends up being, any successful organization will use its Net Promoter Score to arm customer facing teams with actionable, feedback-driven insights.

Your Net Promoter Score is of the greatest value in context, meaning relative to how you could be performing and relative to your respective industry.

Here are some helpful data points to contextualize your NPS calculation:

  1. Per HBR, drawing from 400 companies across 28 industries, the median Net Promoter Score was only 16. That’s a low bar, and underlines the high standard that NPS requires.

  2. Reinforcing this, a 2018 Satmetrix study found NPS averages ranging between -1 (Internet service providers) and 65 (department/specialty stores). That’s a low scatter of scores again underlining the difficulty of attaining a high Net Promoter Score.

  3. While any score above 70 is considered an ‘excellent’ Net Promoter Score, even powerful, global brands consistently fall short – per Verint’s ForeSee Digital Experience index in 2018, Netflix had an NPS of 64, PayPal scored 63, Amazon 54, Google 53, and Apple 49.

  4. Finally, it is worth noting that a perfect Net Promoter Score of 100 has never been achieved by any company that has been surveyed using the metric. 

So, that is the lay of the NPS landscape – let’s get into why Net Promoter Score is important. 

The Importance of Net Promoter Score: NPS Economics

Importance of NPS

NPS’s true value lies in the impact of a loyal customer to your bottom line. 

CX experts from Bain & Co. developed the Net Promoter Score to be a customer experience metric, and specifically one that measured customer loyalty, due to loyalty’s outsized impact on revenue.  

Loyal customers aren’t just important in preventing churn. Loyalty, because it indicates an emotional bond between customer and company, has massive importance to further growth.

According to Bain & Co, a higher-than-competition Net Promoter Score accounts for 20-60% of a company's organic growth, with industry leaders consistently accruing Net Promoter Scores more than double that of their competitors.

The root cause? According to Fred Reichheld of the Harvard Business Review, when customers form an emotional tie with a company (i.e. become ‘loyal customers’), [these] promoters essentially become the company’s marketing department”

NPS’s massive impact on companies’ ability to remain competitive also stems from game theory: Net Promoter Score is a zero sum game because customers can only occupy one group. Thus, turning a detractor into a promoter brings about a double point swing effect per-capita. Situations where this is possible should be given as much attention as possible.

All told, any future-savvy company should move improving Net Promoter Scores to the top of their priority list. Here are some measures you can put into action to drive your Net Promoter Score upwards. 

What is a Good Net Promoter Score?

Maintaining a ‘good’ Net Promoter Score in 2021 can be difficult as product availability reaches unprecedented highs due to online marketplaces.

Let’s look at what constitutes a ‘good’ Net Promoter Score both in general and in context relative to industry, then move on to the single best technique to improve your NPS. 

In general, a good Net Promoter Score is any positive score, aka any score above 0:

NPS bar scale titled “What is a good NPS score?”. The scale is from -100 to +100. The red section is labeled as “NEEDS IMPROVEMENT” (from -100 to 0), the yellow section is labeled as “Good” (from 0 to +30), the light green section is labeled as “GREAT” (from +30 to +70), and the dark green section is labeled as “EXCELLENT” (from +70 to +100).

A positive score means you are on track, i.e. not actively hemorrhaging customers, as you have more promoters than detractors. 

Industry-relative good NPS varies, especially due to a mitigating factor known as customer tolerance level, which we will explain. In general, according to a 2020 survey by Retently, industry average Net Promoter Score is as follows:

A graph titled “Retently 2020 NPS Benchmark, showing NPS scores by industry.

Source

These industry relative scores are a direct reflection of customer tolerance level.

Customer tolerance level is a metric that reflects how likely customers are to become angry if they feel that their needs aren’t met by a company/service:

  • Low-tolerance industries (such as healthcare and airlines) have customers who are very likely to become angry if they are dissatisfied. 
  • High-tolerance industries (industries operating at lower stakes such as online fashion retailers and other luxury goods) have more tolerant customers who will likely just say ‘meh’ and move on if dissatisfied.

Customer tolerance level is joined by the following factors which also significantly impact Net Promoter Scores:

  1. Timing – When the survey is delivered can impact results.
  2. Channel – How you deliver the survey directly relates to response rate.
  3. Location and Culture – Different cultures have different standards of satisfaction – this is a geographic and cultural subcategory of customer tolerance level.

You can read more in depth explanations of all three of these influencing factors as well as how some companies have subverted expectations in our guide to achieving good Net Promoter Scores in 2021.

Which Net Promoter Score Strategy Should You Use?

Before creating and implementing NPS, you’ll need to know how often you want to send Net Promoter Score surveys.

Do you want to send them quarterly or annually to assess how your customers feel about your overall business from one period to the next.

You’ll be able to use your results to answer questions like, ‘How did customers feel compared to the previous year or quarter?’.

You might also want to send Net Promoter Score surveys after each major customer touchpoint, like after customers make a purchase or get a refund.

This will help you understand how customers feel about specific areas of your business. Questions will need to be worded to reflect your goals. For example, “On a scale from 0-10, how likely are you to recommend this product to a friend or colleague? ”

We recommend using a combination of these two types of NPS surveys, to understand where your business stands on a macro and micro level.

What Can You Measure Using Net Promoter Score?

Remember, you’ll need to know what your goals are before sending out your Net Promoter Score surveys, so that they make sense to you when it comes to analyzing the results. But also so that it makes sense to your respondents – that way they’re more likely to respond.

So ask yourself, ‘what do I want to measure?’.

As we mentioned in the previous section you can measure the overall customer sentiment toward your company or you can home in on one specific area, like customer service, a new product feature, or even a marketing campaign.

The goal is to help you understand which areas of your business need improving. Which customer touchpoint elicits negative scores? In other words, those with more Detractors than Promoters.

You can also use NPS surveys to measure employee satisfaction. This is known as the eNPS (employee Net Promoter Score). The question you’d ask here is “how likely are you to recommend [company name] as a place to work?”.

Now that you know what you can measure, let’s break down the components of a Net Promoter Score survey so that you can fine-tune your NPS approach to be the best it can be.

The Net Promoter Score System

Usually, an Net Promoter Score survey is made up of two components. The close-ended question (explained above), that gives you a score between 1 and 10, and an open ended question, meant to contextualize your customers’ scores.

However there are some other questions that Net Promoter Score surveys might contain.

Let’s go through each possible question in the Net Promoter Score system.

Demographic Questions

It’s very common to fill out your name, age, and gender in surveys, and the same goes for Net Promoter Score. While this data isn’t always necessary, it can be helpful if you want to segment customers during your analysis.

However, try to avoid these types of questions if they are not needed. You want as many of your customers to respond as possible. And overly long surveys might lead to survey fatigue.

The Close-Ended Question

This is the question that leads to the Net Promoter Score, which we explained above. This is the main driver for digging deeper into results and specific areas within your business.

The Open-Ended Question

Essentially, the close-ended questions give us results and the open-ended question helps explain these results. This is the key driver behind why great NPS is best achieved by a listening-then-adapting approach. While issues are detected in the close-ended portion of your survey, the open-ended qualitative responses lend in-depth info that can be transformed into valuable nuggets of customer insight.

Make a suggestion

This question gives respondents a chance to suggest what you can do to improve their customer experience. It could also serve up some new ideas. Perhaps your competition is doing something differently that you’re not aware of.

How to Implement NPS

Implement of NPS

Helpful survey delivery software can make delivering surveys to your customers simple. Let’s take a look at Hotjar and SurveyMonkey, both great options, and how they can streamline and upgrade your NPS implementation.

SurveyMonkey

SurveyMonkey is a simple-yet-powerful survey integration platform for businesses who are taking their first steps into feedback collection.

Net Promoter Score surveys are just the tip of the iceberg of what SurveyMonkey is capable of. Its survey offerings are vast and can be sent forth to collect whatever customer data strikes your fancy.

From there, the data it collects can be plugged into a more advanced feedback analysis platform to unlock limitless customer insight results.

Hotjar

Hotjar

Hotjar, on the other hand, uses behavior analysis to inform your NPS implementation. Their software complements a customizable survey distribution interface with user behavior trackers like their heatmap software (tracking mouse movement, scroll, and time viewed per user) in order to give you a complete, nuanced picture of how users are interacting with your site. 

With a focus on delivery and behavior respectively, SurveyMonkey and Hotjar give you the power you need to tailor your NPS to specific customer groups and see how they respond. Simply put, and with pre-made templates on offer if you get stuck, these services make sending NPS surveys easy. By using them your teams will have all the data they could ever desire. 

Next, the challenge becomes analyzing said data – let’s look at why a purposeful and comprehensive listening approach can be a game-changer and how AI can supercharge your path to great feedback analysis. 

How to Analyze & Improve Your Net Promoter Score

Improve of NPS

The single best technique to improving your NPS score is listening more effectively to your customers

This means moving away from the numeric, close-ended half of your Net Promoter Score survey and examining your open-ended, written component.

It’s in this additional comments box that your customers will explain the ‘why’ behind their rating. Accurately assessing and addressing their comments is key to unlocking their happiness. 

Actionable customer feedback analysis is part of any successful company wide voice of customer approach. Turning open-ended text feedback into quantified, actionable insights is the key to effective listening and unlocking Net Promoter Score improvement.

However, going through large amounts of raw text by hand is both resource intensive and prone to error. Data scientists themselves find manual analysis tedious and your team members could be doing far more with their time, such as developing and integrating strategy. 

Luckily there is a solution - automated text analysis, via machine learning, has transformed feedback analysis by allowing teams to scan and mine their feedback for insights at scale and in real time. 

The goal of any text analysis AI is to turn large amounts of raw text responses into results your customer experience teams can act upon. This process of turning responses into results is known as customer experience management (CXM).

Automated CXM platforms have changed the game, allowing companies to leverage their feedback at a higher clip than ever before with significantly more accurate results. 

These platforms are essentially hacks to NPS improvement, taking the reins to both how you send your surveys and how you analyze the results – let’s explain the form and function of a great CXM option - MonkeyLearn Templates – and how it can revolutionize your NPS approach.

Analyze NPS Comments with MonkeyLearn Templates

When it comes to NPS survey analysis, MonkeyLearn boasts the power and versatility to outdo all competitors – MonkeyLearn’s AI was specifically built for text analysis and is both powerful enough to handle any response archive and customizable enough to cater to any CX team’s wildest ponderings.

With MonkeyLearn Templates you can analyze and visualize your NPS data – all in one place. Create your Net Promoter Score analysis Workflow by following the steps below:

1. Choose the NPS template to create your workflow:

2. Upload your data:

If you don't have a CSV file:

3. Match your data to the right fields in each column:

Fields you'll need to match:

  • created_at: Date that the response was sent.
  • text: Text of the response.
  • score: NPS score given by the customer.

4. Name your workflow:

5. Wait for MonkeyLearn to process your data:

6. Explore your dashboard!

  • Filter by topic, sentiment, keyword, score, or NPS category.
  • Share via email with other coworkers.

Takeaways

No matter what way you shake it, Net Promoter Score is the future differentiator for online business, which will soon be the majority of business. 

Implementing automated Net Promoter Score tools now, will help future-forward customer experience departments get the leg-up on competition for years to come – a key advantage in the rapidly transforming digital market. 

It’s never too early to start making brand loyalty a priority.

To jumpstart your Net Promoter Score improvement journey browse MonkeyLearn’s suite of feedback analysis tools, or try out the full suite for free today

Unsure how it will fit with your specific company? Sign up for a complimentary demo and one of our automation professionals will walk you through it.

Or, continue your learning about the big, bad world of feedback analysis via our blog.

MonkeyLearn Inc. All rights reserved 2021