Net Promoter Score (NPS)

Definition

Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction by asking customers how likely they are to recommend a company or product to others on a scale from 0 to 10. This score helps businesses gauge customer sentiment, identify promoters and detractors, and improve overall user experience by connecting feedback with actionable insights.

5 Must Know Facts For Your Next Test

1. NPS is calculated by subtracting the percentage of detractors (scores 0-6) from the percentage of promoters (scores 9-10), resulting in a score that can range from -100 to +100.
2. A higher NPS indicates a strong customer loyalty base, while a low or negative NPS signals potential issues that need addressing.
3. NPS can be used as both a qualitative and quantitative metric, providing numerical data along with customer feedback that can offer insights into user experience.
4. Many companies use NPS as part of their overall customer experience strategy, linking it to other metrics like CSAT and CES for a more comprehensive understanding of user satisfaction.
5. Tracking NPS over time allows businesses to see trends in customer loyalty and satisfaction, helping them make informed decisions about product improvements and service enhancements.

Review Questions

• How does NPS differentiate between promoters, passives, and detractors, and why is this distinction important?
  • NPS categorizes respondents into three groups: promoters (scores 9-10), passives (scores 7-8), and detractors (scores 0-6). This distinction is crucial because it allows companies to identify their most loyal customers who actively promote their brand and those who may hinder growth through negative word-of-mouth. Understanding these groups helps businesses tailor their strategies to boost loyalty and address concerns effectively.
• Discuss how companies can leverage NPS data to enhance their user experience and customer relationships.
  • Companies can leverage NPS data by analyzing feedback from both promoters and detractors. By focusing on comments from detractors, they can identify pain points in the user experience that need improvement. Similarly, insights from promoters can highlight successful aspects of the product or service. By implementing changes based on this data, businesses can enhance user experience, strengthen customer relationships, and ultimately improve their NPS over time.
• Evaluate the implications of a declining NPS for a company's growth strategy and overall performance in the market.
  • A declining NPS can have serious implications for a company's growth strategy, signaling issues with customer satisfaction that could lead to reduced referrals and increased churn rates. If not addressed promptly, this decline may impact overall performance by harming brand reputation and diminishing market share. Companies must proactively analyze the root causes of declining scores and implement changes to rebuild customer trust, improve offerings, and foster loyalty for sustainable growth.

Related terms

Customer Satisfaction Score (CSAT): A metric that measures customer satisfaction based on their experience with a product or service, usually gathered through direct surveys.

Customer Effort Score (CES): A measure of how easy it is for customers to interact with a business, focusing on the effort required to resolve an issue or complete a task.

Promoters: Customers who score 9 or 10 on the NPS survey and are considered loyal enthusiasts who will likely refer others and contribute to positive word-of-mouth.