Net Promoter Score: The Concept and Formula to Calculate NPS

Image by Gerd Altmann from Pixabay

NPS is a customer loyalty metric that measures the willingness of customers to recommend a company’s product or service. It was developed by Fred Reichheld in 2003 with a goal to improve customer retention rates through positive word-of-mouth recommendations.

NPS can be used to gain insight into what customers really think about a company’s product or service and why. It can help businesses identify and fix detractors who are customers that are less likely to recommend a company’s product or service.

Why is NPS Important?

The Net Promoter Score is a key measure of customer loyalty and one of the most important metrics for businesses. It can help identify areas where a company’s product or service needs improvement.

By understanding what motivates customers to recommend a product or service, businesses can retain more promoters and convert more detractors into promoters.

How the Net Promoter Scoring Works

The whole concept of NPS starts with an ultimate question like, “how likely would you recommend our company to a friend?” One can answer that question on a scale of 1-10.

In simple words, net promoter score calculation is graded on a scale of 0 to 10, where 0 is the worst score, and 10 is the best. Respondents are asked how likely they are to recommend the company to others on a scale of 0 (not at all likely) to 10 (extremely likely).

How to Calculate Net Promoter Score?

There are 3 important elements to the NPS formula:

The number of promoters (those who give scores 9-10), The number of detractors (those who score 0-6), and the percentage of promoters respondents.

The Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.

NPS = Percent of Promoters – Percent of Detractors.

For example, if 70% of the surveyed people are promoters and 20% are detractors, then NPS is 50%.

You can check the infographic below by GetVoIP to get a visual idea of how to calculate NPS, along with some tips to improve it.