What is Net Promoter Score

Nigel Tsopo
30 November 2022
6 min read

When it comes to employee feedback, no other tool is as widely used nor as trusted as the Net Promoter Score® (NPS). That's because the net promoter system has been proven repeatedly to be an accurate predictor of growth.

In fact, a study by Bain & Company found that companies with high NPS scores grow 2.5 times faster than companies with low NPS scores. NPS is closely linked to business growth.

Net Promoter Score Definition

Net Promoter Score is a way to gauge customer satisfaction and loyalty. It is based on a simple question: "How likely is it that you would recommend our company/product/service to a friend or colleague?" with responses on a 0-10 scale.

Customers are asked to rate their answer on a scale from 0-10, with 0 being the least likely and 10 being the most likely.

NPS was developed by Bain & Company in 2003, and has since been adopted by companies across a range of industries as a way to measure and track sentiment on the customer journey.

Based on the responses, customer perception is categorized into three groups:

Detractors 

Detractors (0-6) are unhappy customers who are unlikely to recommend the company to others.

Passives 

Passives (7-8) are generally satisfied but unenthusiastic customers who may be lured away by a competitor.

Promoters 

Promoters (9-10) are loyal enthusiasts who are likely to keep doing business with the company and refer others.

Here's How to Calculate Net Promoter Score

NPS Survey

There are several different ways to calculate NPS, but the most common is to run an NPS survey first, take the percentage of respondents who answered 9 or 10 (promoters) and subtract the percentage who answered 0-6 (detractors).

Here's how that formula looks

NPS = % Promoters - % Detractors

For example, if you had 100 survey responses and 30 were promoters, 50 were passive, and 20 were detractors, your NPS would be 10 (30% - 20%).

1 - 5 Scale

NPS can also be calculated using a 1-5 scale, but the formula is slightly different.

In this case, you would take the percentage of respondents who answered 5 (promoters) and subtract the percentage who answered 1 (detractors).

Here's how that formula looks

NPS = % Promoters - % Detractors

For example, if you had 100 survey responses and 30 were promoters, 50 were passive, and 20 were detractors, your NPS would be 10 (30% - 20%).

What is a good NPS score?

There is no definitive answer to this question.

Different NPS scores may be considered good or bad depending on the specific industry and company. 

Regarding the net promoter score system, NPS surveys can yield results that can be interpreted differently from industry to industry.

Generally speaking, however, a score of above 50 is considered excellent, while a score below 50 indicates room for improvement. Scores in the 70-80 range are considered world-class.

What is a bad NPS score?

Generally speaking, a score below 50 indicates room for improvement and sometimes customer dissatisfaction.

Keep in mind that NPS is just one metric you can use to measure customer satisfaction.

To get a complete picture of how your business is doing, it's important to also look at other ways of measuring customer loyalty, such as customer retention rates and customer surveys.

Our Net Promoter Score at Startup House

At Startup House, we use Net Promotor Score (NPS) as our north star because it allows us to measure our progress and ensure we continue to move in the right direction.

Our NPS last year was 63; this year, in Q3, it was 83.

This shows that we are constantly improving and that our customers are satisfied with our products and services.

We will continue to monitor our NPS score and ensure that we always provide the best possible experience for our customers. So... Thank you for your feedback!

Why is NPS important?

NPS can be a valuable metric for businesses of all sizes, but it's especially useful for startups and small businesses that are looking to grow quickly.

That's because NPS is closely linked to growth: companies with high NPS scores tend to grow faster than those with lower NPS scores.

If you're thinking of using NPS to track customer satisfaction at your business, there are a few things to keep in mind.

First, NPS is best used as a long-term metric: it's more helpful for tracking trends over time than for measuring one-time events.

Second, NPS should be just one of several metrics you use to track customer satisfaction; it's important to get a complete picture of how your customers feel about your business.

How To Improve Your NPS Score and Customer Loyalty

If you're looking for ways to improve your NPS score, here are a few things you can do:

  • Make sure your product or service is meeting customer needs and expectations.

  • If customers are unhappy with what they're getting, they're not going to be promoters. So, focus on providing an excellent customer experience.

  • Promoters are customers who had a great experience with your business, so make sure you're doing everything you can to give your customers the best possible experience.

  • Train your employees to deliver exceptional customer service.

  • Your employees are the face of your business, so it's important to make sure they're giving customers the kind of experience that will turn them into promoters.

  • Get customer feedback. Promoters are more likely to give you positive feedback, but even detractors can be helpful in identifying areas where you need to improve.

Why Net Promoter Scores can be Trusted by Your Workforce

If you're looking for a feedback tool that your workforce will trust, look no further than NPS. Here's why:

  • NPS is based on a simple question: "How likely are you to recommend our company to a friend or colleague?" This question is easy to understand and answer, making it highly accessible to employees.

  • NPS is highly actionable. The feedback you receive from NPS can be used to make concrete changes that will improve the workplace for everyone.

  • NPS is backed by years of research. Unlike other feedback tools, NPS has been rigorously tested and proven to be valid and reliable.

  • NPS is used by some of the world's most successful companies. If it's good enough for them, it's good enough for your workplace!

What Can Your Company Do With NPS Results

There are a number of different things that companies can do with net promoter score results. One of the most important is to use the results to identify areas where improvements can be made.

This could involve changes to products or services, or changes to the way that company communicates with customers.

Additionally, companies can use net promoter score results to benchmark their performance against other companies in their industry.

This can help to identify areas where a company may have an advantage or disadvantage, and can also be used to set goals for future improvement.

Finally, companies can track customer satisfaction over time by using net promoter score results.

This can help to identify trends and patterns, and can be used to make adjustments to improve customer satisfaction in the future.

Conclusion & Summary

Overall, NPS is a helpful metric for businesses of all sizes to track customer satisfaction and loyalty.

It can be especially useful for startups and small businesses that are looking to grow quickly. NPS is closely linked to growth: companies with high NPS scores tend to grow faster than those with lower NPS scores.

To improve your NPS score, focus on providing an excellent customer experience and train your employees to deliver exceptional customer service.

Get feedback from your customers regularly to identify areas where you need to improve. By following these tips, you can use NPS to track customer satisfaction at your business and help you grow.

 

You may also like...

Startups

Startup House has been honoured with Forbes Diamonds 2023

We are delighted to share that Startup Development House is an official recipient of a Forbes Diamond in 2023. 

Startup Development House
02 February 2023
2 min read
Startups

How Accelerators Help Startups

Airbnb, Dropbox, and AirHelp. It's quite likely you're familiar with these company names, given their prominence among the more successfully accelerated startups of the...

Ewa Rutczyńska-Jamróz
26 January 2023
11 min read