Net promoter score, often referred to as NPS, is an important metric that measures how likely customers are to recommend a business. The idea behind NPS is companies who are recommended by their customers are more likely to grow.
In 2003, business strategist Frederick F. Reichheld published a groundbreaking article in Harvard Business Review titled, "The One Number You Need to Grow." Reichheld suggested that instead of focusing on growing profits, companies need to focus on growing loyal customers. In an era when customer loyalty was gauged by satisfaction surveys and retention rates, this was a radical idea.
Companies who receive positive word of mouth and customer recommendations are more likely to grow, Reichheld explained. This claim, and the years of research to back it, led to the creation of the Net Promoter Score (NPS), which is widely used today to determine customer loyalty.
Reichheld's research, which linked customer survey results with purchasing patterns, referrals, and ultimately company growth, culminated in what he called "The Ultimate Question"—the most reliable way to actually determine customer loyalty. That ultimate question is the single most important item Reichheld suggested including on a customer survey:
"On a zero to ten scale, how likely is it that you would recommend our product, service, or brand to a friend or colleague?"
He suggested following with the qualifier, "What is the primary reason for your score?" and leaving it open for customers to complete in their own words.
Reichheld called customer satisfaction surveys "long and complicated, yielding low response rates and ambiguous implications that are difficult for operating managers to act on." In contrast, Reichheld claimed that NPS survey responses are the most reliable indicator of a company's ability to grow, regardless of industry.
"By substituting a single question for the complex black box of the typical customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth." Frederick F. Reichheld, Harvard Business Review
Customer satisfaction (CSAT) surveys are commonly sent to customers shortly after an interaction with a company. These can help you understand how your customers really feel about the service they've just experienced and show you if you're meeting their expectations. These post-contact surveys are usually conducted via channels like SMS, email, /docs/glossary/what-is-ivr, or a star rating after a web chat. The results yield what is known as a company's customer satisfaction score, the percentage of customers who are satisfied with the service they receive.
While CSAT surveys can give you a measurement of short-term happiness regarding your customer experience, they may not tell you what Reichheld says you really need to know: will your customers be back for more?
In contrast, an NPS survey asks customers about their satisfaction in a different way. Rather than focusing on a recent experience, NPS surveys look to the future by asking how likely customers are to recommend your company. If they're likely to recommend you, they're likely to remain loyal themselves.
Following the question, "On a zero to ten scale, how likely is it that you would recommend our product, service, or brand to a friend or colleague?" The customer is presented with a rating scale of 0-10 .
Customer responses are categorized into three groups:
Detractors: customers who gave a score of 0 to 6 are dissatisfied with your company. These customers are considered more likely to discourage friends or colleagues from using your product and services than to recommend you. Detractors are at risk of switching to a competitor and encouraging others to do the same.
Passives: customers who gave a score of either 7 or 8 are neutral and indicating that they probably won't be recommending your company to others any time soon. They might not be unhappy, but they aren't happy enough to promote your company. Passives could be easily swayed by competitors.
Promoters : customers who gave a score of 9 or 10 are happy and most likely to actively recommend you and become repeat customers. Promoters are your loyal supporters and the ones who will spread the word about your company.
Your NPS is calculated by adding up the total from each category and determining its percentage of the total number surveyed, with a range from -100 to +100. The highest possible score would be 100, which would mean 100% of your customers are Promoters. At -100, all of your customers are Detractors. Passives are essentially considered neutral.
Subtract the percentage of your detractors from the percentage of your promoters and voilà! You have your NPS. Since any score above zero indicates more Promoters than Detractors, a score of 50 or more would be considered "excellent" by global standards. This indicates that your company has significantly more satisfied and loyal customers than dissatisfied ones.
"The only path to profitable growth may lie in a company's ability to get its loyal customers to become, in effect, its marketing department." Frederick F. Reichheld, Harvard Business Review
When you follow your main NPS survey question with the qualifier "What is the primary reason for your score?" pay attention to the feedback your customers leave. From this information, you'll see why Detractors aren't happier, what's holding Passives back from being Promoters, and why Promoters love your company so much. With that feedback in hand you can develop a plan on how to improve your score.
You'll likely want to send an NPS survey every three to six months to a representative sample of your customer base, not just the ones who've purchased recently. Over time, your NPS should ideally increase. To make that happen, Reichheld recommends three steps:
"The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It's that simple and that profound."
Frederick F. Reichheld, Harvard Business Review
Despite its widespread use, the accuracy of NPS has been widely debated. Aresearch study reported in The Journal of Service Research looked at this debate, which centers around the question of whether NPS should be treated as being equivalent across customers. The study measured the NPS and online word-of-mouth messages of 189 customers.
While promoters consistently spread positive messages and detractors' messages were negative, passives—who have no weight in calculating the NPS—spread both positive and negative messages online. The study concluded that "companies should flag passives for further attention and action."
Want to know how likely your customers are to recommend your company to others? Ask them. With a contact center based on APIs like Twilio Flex, you can easily conduct post-contact surveys over any channel.