What is the Net Promoter Score (NPS)?

Origin and Context

In an increasingly fierce competitive landscape for businesses, understanding customer sentiment is now crucial. This is where the Net Promoter Score (NPS) emerges, a simple yet powerful indicator for measuring satisfaction and inferring customer loyalty.

This indicator allows for assessing the likelihood of a customer recommending a product and/or brand to their network. By posing a single question, businesses can obtain valuable insights into customer satisfaction levels and monitor the evolution of their relationship with them.

The NPS is the result of several years of research. Although it is a simple calculation, this KPI was thoroughly considered before its inception. It was in December 2003 that 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 the NPS calculated?

The Only Question That Matters

The NPS is based on this essential question:

“On a scale of 0 to 10, how likely are you to recommend [X] to your network?”

The question's structure may vary depending on the context, but the objective always remains the same: to measure customer engagement and satisfaction with a single metric. But why is it so powerful? Because it compels the user to synthesize their experience quantitatively rather than qualitatively. Recommending a brand, product, or service is an act of trust and satisfaction. Through this question, NPS effectively captures customer attachment and sentiment.

The Principle of Promoters, Passives, and Detractors

The score obtained from this simple question then allows customers to be classified into three categories:

• ‍Promoters‍

These are customers who have given a score between 9 and 10. They are highly satisfied and loyal customers who share positive experiences with their network and contribute to brand development. They not only generate positive recommendations but are also more likely to repeat purchases and remain long-term customers.

• ‍Passives

Passives are satisfied customers, but not enthusiastic about the experience. They give scores between 7 and 8, indicating that they are not dissatisfied, but not convinced enough to recommend the brand. They remain neutral, allowing easy access for competitors if a better offer emerges.

• ‍Detractors

Detractors are the most dissatisfied customers, having given a score from 0 to 6. These customers have likely had a poor customer experience or were disappointed by the product or service. They can harm the company's reputation through negative or unfavorable reviews. Detractors represent a direct risk to business growth, customer retention, and brand image.

The NPS Formula

Calculating the NPS is simple; first, you need to convert the number of responses per category into percentages, then simply 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 retailer that wants to calculate its NPS: if 70% of customers are promoters, 20% are passives, and 10% are detractors, the retailer's NPS will be 60.

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

What are the advantages of NPS?

Ease of implementation

NPS is easily deployed and does not require complex technical resources. Moreover, automated tools enable real-time score tracking, facilitating rapid adjustments in customer satisfaction improvement strategies.

It is important to note that the survey distribution methods play a crucial role in interpreting the results. For instance, sending the NPS survey shortly after a purchase or specific interaction captures immediate sentiment, whereas a later distribution might provide a more holistic perception. In any case, maintaining consistent distribution timing is essential to ensure this KPI is comparable over time.

A Standardized Metric

This KPI is a globally recognized indicator, utilized by companies of all sizes and sectors. Its widespread adoption by businesses worldwide establishes it as a true standard, offering an opportunity for easy benchmarking against competitors. By measuring customer satisfaction in a standardized manner, NPS enables the identification of a company's strengths and weaknesses.

NPS Limitations

While NPS is highly practical and useful for quickly gaining an overview of customer satisfaction, its lack of depth is noticeable. Quantitative data, by its nature, does not allow for a detailed exploration of the motivations behind a rating. It is challenging to understand the true reasons for dissatisfaction or even moderate enthusiasm. The NPS score alone cannot provide a comprehensive view of the customer experience.

At Episto, when we conduct NPS surveys for our clients, we enhance the standard scoring question with open-ended questions, enabling respondents to articulate their sentiments. This approach aids in a deeper understanding of the specific drivers of satisfaction or dissatisfaction. This type of research can also be integrated with other analytical tools, such as detailed post-purchase satisfaction surveys or qualitative ad hoc feedback, deployed in multiple waves. Tracking variations and evolutions over time provides meaningful insights into overall satisfaction, allowing for strategic adjustments.

Consider the example of our DIY retailer, which surveys its customers after an online purchase, asking them to rate their experience via an NPS. A customer gives a 6/10. Without supplementary questions, it's impossible to determine if this moderate score stems from a website navigation issue, product quality, or a poor delivery experience. By integrating an open-ended question like: « Could you please explain why you gave this rating? », the customer might specify that the order arrived late or that the assembly instructions were difficult to comprehend. By conducting NPS surveys at regular intervals, the retailer can track score variations and evolutions over time, thereby gaining significant insight into overall satisfaction.

NPS and Related Metrics

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

This is the case for CSAT (Customer Satisfaction); this metric measures overall customer satisfaction with a product or service. It is typically deployed after a customer purchase to gather buyer feedback. To obtain the 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 used to measure the quality of the customer journey. The question asked is:

« How much effort did you have to put forth to get your request handled? »

This question aims to measure the effort exerted by the customer during their interaction with the company. The less effort required from the customer, the more likely they are to remain loyal.

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

Conclusion

The Net Promoter Score (NPS) is a simple yet powerful tool for understanding customer satisfaction levels and their likelihood of recommending a brand or service. However, its simplicity can sometimes be a limitation, as it does not allow for an in-depth exploration of the underlying reasons for a given score. This is why it is essential to supplement it with open-ended questions to gather richer insights.

Furthermore, to derive truly actionable insights, regular NPS measurements are essential. By proceeding in this manner, companies can track the evolution of customer satisfaction over time and identify emerging trends. When utilized effectively, NPS can become a powerful lever for refining customer loyalty and engagement strategies.