What is the Net Promoter Score (NPS)?

Origin and background

In today's increasingly competitive business environment, understanding what your customers think is crucial. This is where the Net Promoter Score (NPS) comes in, a simple but powerful indicator for measuring customer satisfaction and deducing customer loyalty.

This indicator can be used to assess the likelihood of a customer recommending or not recommending a product and/or brand to others. By asking them a single question, companies can obtain valuable information on their level of satisfaction, and thus track the evolution of their relationship with them.

The NPS is the result of years of research. Although it's a simple calculation, this KPI was carefully thought through before it saw the light of day. In December 2003, Frederick F. Reichheld of the consulting firm Bain & Company introduced and defined the NPS index in his article The One Number You Need to Grow published in the Harvard Business Review.

How is NPS calculated?

The only question that matters

The NPS is based on this essential question:

"On a scale of 0 to 10, how likely is it that you would recommend [X] to those around you?"

The structure of the question may differ depending on the context, but the objective always remains the same: to measure customer engagement and satisfaction in a single figure. But why is it so powerful? Because it forces users to synthesize their experience in a quantitative rather than qualitative way. Recommending a brand, product or service is an act of trust and satisfaction. Through this question, the NPS will capture the attachment and feelings of customers.

The principle of promoters, passives and detractors

The score obtained in response to this simple question is then used to classify customers into three categories:

• ‍LesPromoteurs‍

These are customers who score between 9 and 10. These are highly satisfied and loyal customers, who pass on a positive experience to those around them and contribute to the development of the brand. Not only do they generate positive recommendations, but they are also more inclined to repeat purchases and remain customers over the long term.

• ‍Liabilities

Passives are customers who are satisfied, but not enthusiastic about the experience. They give scores between 7 and 8, indicating that they are not dissatisfied, but are not convinced enough to recommend the brand. They remain neutral, facilitating free access to the competition, should a better offer present itself.

• ‍TheDetractors

Detractors are the most dissatisfied customers, with a score of 0 to 6. These customers are likely to have had a bad customer experience or to have been disappointed by the product or service. They can damage the company's reputation through negative or unfavorable reviews. Detractors represent a direct risk to company growth, customer retention and brand image.

The NPS magic formula

Calculating NPS is simple: first convert the number of responses per category into a rate, then subtract the percentage of detractors (NPS score from 0 to 6) from that of promoters (NPS score from 9 to 10).

Let's take the example of a DIY store that wants to calculate its NPS. If 70% of customers are promoters, 20% passive and 10% detractors, the store's NPS will be 60.

An NPS score between 50 and 100 means that customers are satisfied with the services and/or products provided by the company. An average score is generally between 0 and 50, and a score below 0 indicates that there are more dissatisfied customers than satisfied ones, so improvement is needed.

What are the benefits of NPS?

Easy to use

NPS is easy to deploy and does not require complex technical resources. What's more, automated tools enable scores to be tracked in real time, facilitating rapid adjustments in customer satisfaction improvement strategies.

It's important to note that the way in which the survey is sent out plays an essential role in interpreting the results. For example, sending out the NPS survey shortly after a specific purchase or interaction captures the immediate feeling, while sending it out later may give a more global perception. In any case, maintaining consistent timing is essential to make this KPI comparable over time.

A value that sets the standard

This KPI is a globally recognized indicator, used by companies of all sizes and sectors. Its widespread adoption by companies around the world makes it a true standard, offering an opportunity for easy benchmarking against the competition. By measuring customer satisfaction in a standardized way, the NPS helps identify a company's strengths and weaknesses.

The limits of NPS

Although NPS is extremely practical and useful for obtaining a quick overview of customer satisfaction, it lacks depth. Indeed, quantitative data do not allow us to explore in detail the motivations behind an evaluation. It's difficult to understand the real reasons behind dissatisfaction or moderate enthusiasm. The NPS score alone cannot provide a complete view of the customer experience.

At Episto, when we carry out NPS surveys for our customers, we enrich the famous scoring question with open-ended questions to enable respondents to express their feelings. This approach helps us to better understand the specifics of satisfaction or dissatisfaction. This type of research can also be combined with other analysis tools, such as detailed post-purchase satisfaction surveys or qualitative ad hoc feedback, in several waves. It is the variations and evolutions over time that enable us to gain a significant insight into overall satisfaction, and to adjust strategies accordingly.

Let's take the example of our DIY chain, which surveys its customers after an online purchase, asking them to rate their experience using an NPS. One customer gives a 6/10. Without additional questions, it's impossible to know whether this moderate rating is due to a problem navigating the site, the quality of the product or poor delivery. By including an open-ended question such as: "Can you explain why you gave this rating?", the customer could specify that the order arrived late or that the assembly instructions were difficult to understand. By carrying out NPS surveys at regular intervals, the retailer will be able to observe variations and evolutions in scores over time, providing a meaningful insight into overall satisfaction.

NPS and its "competitors

Although the Net Promoter Score is the most widely used CX (Customer Experience) metric, other indicators can also be used to measure customer satisfaction.

Such is the case with CSAT(Customer Satisfaction), a metric used to measure overall customer satisfaction with a product or service. It is used following a customer purchase, to gather feedback from buyers. To obtain CSAT, simply ask the following question:

"Are you satisfied with [X]?"

Responses are based on a scale of 1 (very dissatisfied) to 5 (very satisfied).

The Customer Effort Score is an indicator that measures the quality of the customer journey. The question asked is:

"How much effort did you put into getting your request processed?"

The purpose of this question is to measure the effort made by the customer when interacting with the company. The less effort required of the customer, the more likely he is to remain loyal.

A^3rd relevant indicator is the re-purchase rate, better known as the customer retention rate. Unlike CSAT and CES, this KPI focuses solely on objective, quantitative data, measuring the level of active customer loyalty by observing the proportion of customers who continue to buy or use a service over a given period.

Conclusion

The Net Promoter Score (NPS) is a simple yet powerful tool for understanding how satisfied customers are, and how likely they are to recommend a brand or service. However, its simplicity can sometimes be a limitation, as it doesn't allow for in-depth exploration of the reasons behind a score. That's why it's essential to complement it with open-ended questions, to gather richer information.

What's more, to extract really useful information, it's necessary to carry out regular NPS measurements. By doing so, companies can track the evolution of customer satisfaction over time and identify trends. Properly used, NPS can become a powerful lever for adjusting customer loyalty and engagement strategies.