How To Calculate Net Promoter Score And Its Importance For Your Business

Did you know that based on research done in 2015, 83% of customers trust products recommended to them by others? For example, family, friends, colleagues, etc.

But, why does this matter? 

It’s notable that a significant amount of people can trust your brand or its products based on recommendations or promotions alone. As such, how customers feel about your brand is important.

If your customers feel positive about your brand, this means they’re more likely to be loyal promoters. In addition to this, it would also positively impact your business’ net promoter score (NPS).

In this article, we’ll explore net promoter score and why it’s an important metric for your business to track and measure. 

Also read, 5 Effective Ways to Build Your Online Presence

What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a measure used for understanding customer loyalty, enthusiasm or satisfaction with your company. 

NPS has helped completely transform the business world. An NPS score serves as a benchmark for businesses to measure, improve and evaluate their customer loyalty. 

Basically, your net promoter score measures how customers feel about your brand as a whole versus a single interaction.

How do you calculate Net Promoter Score (NPS)?

Calculating your net promoter score is actually quite simple. However, before you calculate your net promoter score, there are 3 categories of NPS scores you should be familiar with:

• Promoters (scores of 9 or 10) – Promoters are your loyal and most enthusiastic customers. They typically bring in new customers as well.
• Passives (scores of 7 or 8) – Passives are customers who are satisfied with your product but not eager to promote it. They can sometimes switch to your competition.
• Detractors (scores between 0 to 6) – Detractors are your unhappy customers who are unlikely to purchase from you again. Due to their negative experience, they may even persuade others against buying your product.

Now, here’s how you can calculate your NPS score in 3 easy steps:

Step 1 – Survey your customers

First, you ask your customers one question, On a scale of 0-10, how likely are you to recommend our product to a friend/ colleague?’

Step 2 – Categorize your customers

Here, you separate your customers into the three above mentioned categories – promoters, passives or detractors, based on NPS scores.  

Step 3 – Calculate your NPS score

To calculate your net promoter score (NPS), you subtract your detractors from your promoters. Divide your result by the number of total respondents. 

Lastly, multiply this answer by 100 to get your NPS score. Note: Passive responses are to be set aside.

For example, let’s say you have 150 respondents. 90 of your respondents are promoters. 30 are detractors and 30 are passives.

You would calculate your NPS score like this:

[ (90 – 30)/ 150 ] x 100

[ 60/150 ] x 100

0.4 x 100 = 40%

Thus, your final NPS score would be 40.

The Importance of measuring your Net Promoter Score

A good NPS score shows that your organization has a good image amongst your customers. Some other reasons it’s important to measure your NPS score include:

1. It measures the loyalty of your customers.
2. It helps identify changes in your NPS
3. You can identify ways to improve your current NPS score
4. It enables you to prioritize reaching out to your detractors.

A high net promoter score is preferred by any business. And the key to achieving this is having a greater percentage of promoters compared to detractors. 

What can you do with your Net Promoter Score?

Ideally, your organization should aim for a high NPS score. 

It shouldn’t just stay as a metric your product team tracks. If your NPS score is lower than you prefer, the strategic decision would be to prioritize boosting it ASAP. 

To do this, you would want to open all your communication channels. Then, set specific goals for your teams across your organization. These aligned goals ensure that all your employees are aware of your NPS. 

More importantly, this ensures they recognize the importance of improving it and figure out how to contribute towards that effort. 

Also read, Total Addressable Market (TAM): What is it and why does it matter for your business?

Conclusion

Overall, your net promoter score is an important metric that helps you understand your customers better. 

Moreover, your NPS helps identify happy customers and see if you can include them in referral programs to maintain their satisfaction. Not to mention, this would also help you gain more customers in the process.

Furthermore, your NPS score allows you a clear measure of how your business is performing through your customers’ eyes. This is quite important as taking steps to improve your NPS can clearly affect your company’s bottom line.

Remember that checking in on your customer’s feelings about your business via NPS, is an important key performance indicator (KPI). Maintaining a positive NPS score goes a long way in strengthening your customer relationships and boosting your revenue!