Net Promoter Score (NPS) is a score that is used to gauge a business’s current customer loyalty and customer satisfaction. It is calculated by asking a sample of customers how likely they would be to recommend a business to others.
As a small business owner, it is important to track your NPS to understand how enthusiastic your customers are about your brand. We explain the basics of NPS and how you can calculate it below.
What does NPS measure and why is it important?
NPS measures not only how likely it is that a customer will recommend your brand, but it also measures customer loyalty. As such, it can then be used to help predict the future revenue growth of a business. It is important to track your NPS to understand how enthusiastic your customers are about your brand. Although your business may not experience a regular flow of customer complaints, by no means does this translate to high levels of customer satisfaction or that you have created raving fans.
How do you calculate NPS?
The method could not be simpler – ask a sample of customers this one question:
“How likely is it that you would recommend [your brand] to a friend or colleague?”
The customer responds on an 11-point scale from 0 (not at all likely) to 10 (extremely likely) depending on how positive they feel about the brand in question. Customers are then categorised:
To calculate the NPS, you subtract the proportion of those who are unlikely to recommend a brand (Detractors) from the proportion that is likely to recommend it (Promoters). This produces a single number known as Net Promoter Score.
%Promoters – %Detractors = NPS
What is the different between detractors, passives and promoters?
Detractors are customers who have generated sales in the past but will impact the business negatively in the long term. They are less likely to repurchase from the business and more likely to be spreading ambivalent or negative feedback about your business.
Passives are customers who are somewhat positive about your business but are not raving fans like your Promoters. They are satisfied customers but that’s about it. If you could sum up the response of this group up, it would be ‘meh’. This group may be likely to buy from you again, but if a better alternative comes along, they’ll take it!
Promoters are customers who drive business growth. Your business has gone above and beyond in satisfying this group. These people are your raving fans. They will not only buy more from your business in the future, they will rave about your business to many others.
What is a good NPS?
As a rough guide, global NPS standards specify that any score above 0 would be considered ‘good’, any score between 50 and 69 is ‘excellent’ and a score of 70 and above is considered ‘world-class’.
Ask the question
If you are a small business wanting to calculate your NPS, all you need to do is ask a sample of your customers “How likely is it that you would recommend [your brand] to a friend or colleague?” and follow the steps to calculate the NPS. Alternatively, you can use simple online survey tools such as Survey Monkey which calculates it for you.
Dragonfly Marketing is an award-winning marketing agency for small regional businesses. If you need help with speaking to your customers, contact us. You can also sign up to our newsletter for regular marketing tips.