What is NPS and how to calculate it?

Businesses from all industries need to know how well they are satisfying needs of their customers. The obvious way to measure this is by using surveys. The problem with traditional surveys (long questionnaires) is that they take a lot of time to complete, and people don’t have time for them anymore. NPS (Net Promoter Score) combines simplicity with metrics that are the most useful to growing a business. Let’s dive into it and learn how to use NPS to grow.

What is NPS?

NPS stands for Net Promoter Score (or Net Promoter System, if you take it beyond using it as a simple metric tool).

NPS uses a single-question approach to measure customer loyalty.

Where did NPS come from?

NPS was developed by Fred Reichheld and was initially promoted in highly popular Harvard Business Review article “The one number you need to grow”. If you want to learn more about NPS’s beginnings that date back to 2003 (and beyond) and why it gained so much momentum, this is your go-to article. To make long story short, NPS took a long time to develop and refine. Its main task is to effectively measure customer loyalty. While it started out in the automotive industry, it’s now widely used in virtually any market you might think of.

Why is NPS such a big deal? It’s a simple answer to a complex problem. Or rather, it’s a simple question that gives you crucial metrics to help a business grow. Because customer loyalty has huge influence on returning customers and the growth of any business.

How does NPS work?

NPS is simple in nature, but to understand it completely, some explanation is in order. Let’s break it down.

First, let’s look at the question. An NPS starting question always takes a form similar to the following:

How likely are you to recommend XYZ to a friend or a colleague?

This question is incredible. It’s not in any way vague and the answer sums all experiences a customer had with your company. You wouldn’t recommend a solution that causes more problems than it solves. You wouldn’t recommend a solution that works well, but whenever there’s an issue, technical support ghosts you.

Next, the answer. It’s always on a scale from 0-10, where 0 is “not at all” (or rather “hell no!”) and 10 is extremely likely. The scale is natural for us, as you can translate 0 to a 0% chance of recommendation and 10 to a 100% chance.

How to calculate your NPS?

To calculate your NPS, you need to use a simple formula:

NPS = % of promoters – % of detractors

It will make sense in a second. Check out the graphic below:

• Anyone who chooses 9 or 10 as their answer is a promoter.
• A 7 and 8 point answer identifies a passive.
• Any answer in the range of 0-6 points to a detractor.

Sample NPS calulation

So, let’s say that you have 10 answers to your NPS survey:

• 3 x 10/10 answers
• 2 x 9/10 answers
• 3 x 8/10 answers
• 1 x 7/10 answer
• 1 x 1/10 answer

You have 5 promoters, 4 passives and 1 detractor.

Since NPS = % of promoters – % of detractors,

NPS = 5/10 -1/10

NPS = 50% – 10%

NPS = 40

You’ve just calculated your NPS score. Now what?

NPS is a simple metric. On its own, you can use it for benchmarking. One of the most important features of NPS is that it’s so widely used. For example, many review platforms use it as the basis for their “star values”. Often, if someone gives you a 4.5/5 ⭐ review, it simply means that their answer to “how likely are you to recommend XYZ to a friend or a colleague” was 9/10.

But you won’t always find it easy to get your hands on NPS surveys of your competitors. That’s why it’s best to measure NPS score consistently and look for trends. If, after a huge change introduced to your company, NPS steadily drops – the change might have something to do with your stats.

Another thing is the follow-up question.

If you get your customer to engage, they are much more likely to answer a follow-up question. But make sure to keep it simple: ask one simple and clear open question. If you serve your customers a traditional questionnaire after they click the NPS rating button, they probably won’t engage with any of your surveys ever again.

What is a good NPS?

You should always strive to have your NPS as high as possible, but there’s no single magical value that means “you’ve made it”. Business is a process and for each industry, it will have different values. Interpreting your NPS results needs great knowledge of your industry, your business and your target audience.

It’s possible to have an NPS score in the red and still have a legion of customers. Then, it’s your job to find out why your customers stay by your side even though they probably wouldn’t say too many kind words about you. Maybe your services are a necessity, but it’s too much hassle to migrate away from you. Or maybe your services have a long way to go, but the competition is even worse. Either way, increasing your customer loyalty should be your goal and NPS is a tool to measure how well you’re doing it.

How to ask the question?

Asking the NPS question should happen at the right time. That’s why you should take caution when and where to ask it. If someone is on your website and hasn’t started using your product or service yet, “popping” the question is not a good idea. To effectively measure your customer loyalty, you need to give your customers some time. So, what are some good practices?

A timely pop-up

If you know you’re dealing with a customer who actively uses your products or services, you can use a pop-up on your website.

The two most popular ways to do this are:

• An NPS survey on the top of your page, which is not too intrusive, but might be easily tuned-out.
• A more aggressive pop-up that covers your website or online service. If you make sure it’s not overly aggressive, it might yield more answers.

Email signatures

Email signatures are perfect for including NPS surveys. If you’re actively emailing a customer, adding the NPS survey to your signature makes the feedback collection easy and effective. Make sure to have the right rules in place, so that you don’t add those surveys to internal emails. If you’re dabbling in cold emails, NPS should not be included there, either.

And remember, NPS is not the only effective metric. For example, there are also CSAT surveys that let you dive into your customer satisfaction.

Offline surveys

If your services or products are offline, fishing for compliments (or for trouble) might be a bit trickier, but not impossible. In retail, you can easily ask a question at checkout. Just don’t do it on paper – respect the trees.