What is the Net Promoter Score (NPS)?

Origin and context

In an increasingly fierce competitive environment for businesses, understanding what customers think is crucial today. This is where the Net Promoter Score (NPS) comes into play, a simple yet powerful metric for measuring satisfaction and deducing customer loyalty.

This metric allows for the assessment of the likelihood that a customer will recommend a product and/or brand to others. By asking them a single question, companies can gain valuable insights into their level of satisfaction and thus track 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 carefully 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 friends and family?”

The structure of the question may vary depending on the context, but the goal remains the same: to measure customer engagement and satisfaction in a single number. But why is it so powerful? Because it forces the respondent to synthesize their experience in a quantitative and not qualitative way. Recommending a brand, product, or service is an act of trust and satisfaction. Through this question, the NPS captures the attachment and feelings of customers.

The principle of promoters, passives, and detractors

The score obtained in response to this simple question then allows for the classification of customers into three categories:

• ‍Promoters‍

These are customers who have given a rating between 9 and 10. They are very satisfied and loyal customers, who transmit a positive experience to those around them and participate in the development of the brand. They not only generate positive recommendations but are also more likely to repeat their purchases and remain customers over the long term.

• ‍Passives

Passives are satisfied customers, but not excited about the experience. They give ratings between 7 and 8, indicating that they are not dissatisfied but not convinced enough to recommend the brand. They remain neutral, allowing free access to competition if a better offer arises.

• ‍Detractors

Detractors are the most unhappy customers, having given a rating of 0 to 6. These customers have likely had a bad customer experience or have been disappointed by the product or service. They can harm the company’s reputation through negative or unfavorable reviews. Detractors pose a direct risk to business growth, customer retention, and the brand’s image.

The magic formula of NPS

Calculating the NPS is simple; first, you need to convert the number of responses by categories into rates, then simply subtract the percentage of detractors (NPS score of 0 to 6) from that of the promoters (NPS score of 9 to 10).

For example, let’s say a DIY store wants to calculate its NPS. If 70% of customers are promoters, 20% are passives, and 10% are 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 typically ranges from 0 to 50, and a score below 0 indicates that there are more dissatisfied customers than satisfied ones, necessitating improvement.

What are the benefits of NPS?

Ease of implementation

NPS is easily deployed and does not require complex technical resources. Additionally, automated tools allow for real-time score tracking, facilitating quick adjustments in customer satisfaction improvement strategies.

It is important to note that the sending methods play a crucial role in the interpretation of the results. For example, sending the NPS survey shortly after a purchase or a specific interaction captures the immediate feelings, while a later send may provide a more holistic perception. Regardless, maintaining a consistent sending timing is essential to make this KPI comparable over time.

A value that serves as a 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 to easily compare against competitors. By measuring customer satisfaction in a standardized way, the NPS allows for the identification of the company's strengths and weaknesses.

The limitations of the NPS

Although the NPS is extremely convenient and useful for quickly obtaining an overview of customer satisfaction, a lack of depth is felt. Indeed, quantitative data does not allow for an in-depth exploration of the motivations behind a rating. It is difficult to understand the true reasons for dissatisfaction or moderate enthusiasm. On its own, the NPS score cannot provide a comprehensive view of the customer experience.

At Episto, when we conduct NPS for our clients, we enrich the famous scoring question with open-ended questions to allow respondents to express their feelings. This approach helps to better understand the specifics of satisfaction or dissatisfaction. This type of study can also be combined with other analytical tools, such as detailed post-purchase satisfaction surveys or qualitative ad-hoc feedback, and this in multiple waves. It is the variations and evolutions over time that provide a meaningful overview of overall satisfaction and allow for strategy adjustments accordingly.

Let’s take the example of our DIY store, which surveys its customers after an online purchase by asking them to rate their experience via an NPS. A customer gives a 6/10. Without additional questions, it is impossible to know if this moderate score is due to a navigation issue on the site, the quality of the product, or a poor delivery. By integrating 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 conducting NPS surveys at regular intervals, the store will be able to observe variations and developments in scores over time, thus providing a meaningful overview of overall satisfaction.

The NPS and its "competitors"

Although the Net Promoter Score is the most widely used CX (Customer Experience) metric, other indicators also allow for measuring customer satisfaction.

This is the case with CSAT (Customer Satisfaction), this metric measures the overall satisfaction of customers regarding a product or service. It follows a customer purchase to gather buyer's feedback. To obtain the CSAT, it is quite simple, just ask the following question:

"Are you satisfied with [X]?"

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

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

"What degree of effort did you put in for your request to be processed?"

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

A third relevant indicator is the repurchase rate, better 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 loyalty among customers 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 and the likelihood of customers recommending a brand or service. However, its simplicity can sometimes be a limitation, as it does not allow for in-depth exploration of the reasons behind a score. That is why it is essential to complement it with open-ended questions to gather richer insights.

Furthermore, to derive truly useful information, it is necessary to conduct regular NPS measurements. By doing this, companies can track the evolution of customer satisfaction over time and identify trends. When used well, the NPS can become a powerful lever to adjust customer retention and engagement strategies.