Net Promoter Score (NPS) is a metric that helps you understand how your business is doing. NPS represents the willingness of consumers to recommend your product. Therefore, NPS is vital for startups, but for incumbents as well. Word-of-mouth is a very powerful marketing channel.
Low NPS translates to a lack of positive word-of-mouth. Potential customers may even have been warned against using your services.
Calculating NPS
NPS is derived from a simple question: How willing would you be to recommend the product to your friend? The answering scale is from 0 to 10.
You then subtract the percentage of detractors (answers 1-6) from the percentage of promoters (answers 9 or 10). Respondents who answered 7 or 8 are considered neutral for the calculation of NPS. For example, if 20% of your clients are not loyal and 80% are loyal, your NPS is equal to 80 - 20 = +60.
Here are a few more tips:
- Make sure your sample size is large enough.
- Run the survey often enough to track the impact of changes – but in so doing, avoid irritating your customers.
- Don’t rely only on NPS to assess your business. Look also at brand awareness or retention metrics to obtain a fuller picture.
- Check also how competitors are doing.
According to an article by the INSEAD business school, consumers have a tendency to prefer sharing negative experiences with their close friends, whom they want to protect against bad experiences.
In terms of scoring, an NPS of 0 is neutral. NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). Anything above 50 is considered excellent. Apple leads the computer industry with a score of 72. The leader in retail is Amazon with 69.
NPS does have its weaknesses. It is based on a survey question, which bears the risk of self-selection bias. It is also static and NPS data might not be relevant by the time you receive it. Even so, the result at a particular point in time may still be useful.
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