The Net Performer Score (NPS) is a valuable metric utilised by businesses to gauge the loyalty of their customer base. It is a simple and effective tool that provides a clear measure of customer satisfaction and loyalty.
NPS is considered a leading indicator of growth. If your customers are willing to recommend your products or services, it indicates that they are satisfied with what you provide and will continue to use your business. Furthermore, it suggests they will actively promote your business to others, effectively serving as a free marketing channel.
How is NPS calculated?
The NPS is calculated based on responses to a single question: “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?” Respondents are then categorised into three groups: Promoters (9-10), Passives (7-8), and Detractors (0-6).
The Net Performer Score is then calculated by subtracting the percentage of Detractors from the percentage of Promoters. It’s a number that ranges from -100 (if every customer is a Detractor) to 100 (if every customer is a Promoter).
For example:
Imagine 100 people answered the question.
- 70 people are Promoters (score 9-10).
- 20 people are Passives (score 7-8).
- 10 people are Detractors (score 0-6).
First, find the percentage of Promoters and Detractors.
- Promoters: 70100×100=70%10070×100=70%
- Detractors: 10100×100=10%10010×100=10%
Then, subtract the percentage of Detractors from the percentage of Promoters.
- NPS = 70% – 10% = 60
So, the NPS is 60.