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What is Net Promoter Score? 🤔
NPS is designed to measure the likelihood of a customer recommending a company or product to others. The metric is based on a single-question survey that asks customers to rate the possibility that they would recommend your company or product to a friend or colleague on a scale from 0 to 10.
Customers who respond with a score of 9 or 10 are considered "promoters," 🫂 while those who respond with a score of 0 to 6 are considered "detractors." ☹️
How do you measure NPS? 🏁
To measure the Net Promoter Score (NPS) of your company or product, you need to start with a survey. This should start by asking customers to rate the likelihood that they would recommend your product to a friend or colleague.
The NPS survey typically consists of the following two questions 👇🏼
- On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?
- What is the primary reason for your score?
Customers are asked to rate their likelihood to recommend on a scale of 0 to 10, with 0 being "not at all likely" and 10 being "extremely likely."
Based on this response, users are categorized into three different buckets ⏬
✅ Promoters (score 9-10):
These customers are highly satisfied with the product or service and are likely to recommend it to others.
✔️ Passives (score 7-8):
These are customers who are satisfied with the product or service but are not as enthusiastic as promoters. They may be more likely to switch to a competitor.
☑️ Detractors (score 0-6):
These are customers who are not satisfied with the product or service and are likely to discourage others from using it.
To calculate the NPS score, subtract the percentage of detractors from the percentage of promoters. For example, if 30% of customers are promoters and 10% are detractors, the NPS score would be 20.
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What is a good Net Promoter Score? 🥂
A good NPS is highly contextual and depends on the industry and the competition in the market. With that said, a positive NPS is always considered good, and any score above zero is always seen as great.
NPS scores of more than 50 are excellent and indicate a high level of customer satisfaction and advocacy 🚀
Why is NPS important? 💪🏼
1. It's a predictor of business growth 📈
NPS has been shown to be a good predictor of business growth. Companies/ products with high NPS scores tend to grow faster and be more profitable than those with lower scores.
2. It's easy to understand and communicate across the org 🫂
NPS is a simple and easy-to-understand metric that can be easily communicated across an organization. This makes it a powerful tool for aligning your team around a common goal of improving customer satisfaction and loyalty.
3. It's actionable from the get-go 🏃🏼
NPS surveys can provide you with valuable feedback that can be used to improve your products. By asking customers what they like and what they don't like about a product or service, you can make targeted improvements that will increase customer satisfaction and loyalty.
4. It's a benchmark for comparison across your industry 🔮
NPS provides a benchmark to compare your product against competitors and track your progress over time. This can help you identify improvement areas and measure the direct efforts' of your impact.
What are some metrics that are closely related to NPS? 🤘🏼
Customer Satisfaction Score (CSAT) 🫂
CSAT measures the level of satisfaction customers have with a specific interaction, transaction, or experience. It is typically measured by asking customers to rate their satisfaction on a scale (e.g., 1-5 or 1-10).
While NPS focuses on the entire product, CSAT helps identify areas of improvement in specific features or micro-interactions in your product.
Customer Effort Score (CES) 🤗
Customer Effort Score (CES) focuses on the ease of doing business with your company or the ease of completing a task with your product. It’s a measure of the amount of effort customers have to exert to resolve an issue or complete a transaction.
Lower CES scores naturally lead to higher levels of customer convenience and satisfaction.
Customer Retention Rate 📈
Customer Retention Rate measures the percentage of customers who continue to stay with your company over a given period. A higher retention rate indicates that customers are satisfied and loyal to your business. A great way to measure product-specific retention rates is Daily Active Users (DAU), Monthly Active Users (MAU) & Weekly Active Users (WAU).
Repeat Purchase Rate 🛍️
This metric measures the percentage of customers who make multiple purchases from your company. It indicates the level of loyalty and engagement customers have with your brand.
Churn Rate 📉
The churn rate represents the percentage of customers who discontinue or cancel their relationship with your company over a specific timeframe. Monitoring the churn rate helps identify potential issues that may lead to customer dissatisfaction and churn.
While retention rates will help you understand why someone uses your product, while churn rate will help you understand why someone stopped using your product 🦾
Customer Lifetime Value (CLTV):
Customer Lifetime Value estimates the total value a customer brings to your business over the duration of their relationship with you. It considers factors such as purchase frequency, Average Order Value (AOV), and customer retention.
P.S: If you loved reading about this growth metric, you will find this list of 23 growth metrics incredibly helpful 💪🏼
Written by
GrowthX Editorial Team
Growth can be achieved in a profitable, scalable & sustainable way. That’s what we write here, one blog at a time 🚀
