Understanding NPS (Net Promoter Score)
In today’s hyper-competitive world, customer loyalty isn’t just a “nice to have”—it’s a business necessity. One of the most popular tools to measure loyalty is the Net Promoter Score (NPS).
But what is NPS, really?
NPS is a simple yet powerful customer experience metric that measures how likely your customers are to recommend your product or service to others. Created by Bain & Company in 2003, NPS is now used by companies of all sizes to track customer satisfaction and predict business growth.
How is NPS Calculated?
The calculation is straightforward. You ask your customers one key question:
“On a scale of 0 to 10, how likely are you to recommend [Your Company/Product] to a friend or colleague?”
Based on their responses, customers are categorized into three groups:
- – Promoters (9-10): Loyal enthusiasts who will keep buying and refer others.
- – Passives (7-8): Satisfied but unenthusiastic customers vulnerable to competitors.
- – Detractors (0-6): Unhappy customers who can damage your brand through negative word-of-mouth.
The NPS formula is:
NPS = % of Promoters − % of Detractors
This gives you a score ranging from -100 to +100.
Why Does NPS Matter?
A high NPS is a strong indicator of customer loyalty, positive brand perception, and the potential for business growth. Companies with higher NPS scores often experience:
- – Higher customer retention
- – Increased referral business
- – Stronger lifetime customer value
- – Reduced customer acquisition costs
In contrast, a low NPS signals a need for immediate improvement in the customer experience.
What is a Good NPS Score?
While NPS can technically range from –100 to +100, in practice:
- Above 0 is considered good (more promoters than detractors).
- Above 30 is great.
- Above 70 is world-class.
However, “good” can vary by industry. For example, banks and insurance companies may have lower average scores compared to tech or retail brands.
Best Practices for Using NPS
- – Follow up on feedback: Especially with Detractors to close the feedback loop.
- – Track over time: Watch trends rather than one-off scores.
- – Segment your audience: Analyze NPS by customer type, location, or product.
- – Combine with other metrics: Use NPS alongside CSAT (Customer Satisfaction Score) and CES (Customer Effort Score) for a 360-degree view.
Real-World Example
For instance, a leading Indian fintech company tracked its NPS and noticed a dip among millennial users. Digging deeper, they found friction in the mobile app experience. Addressing it resulted in a 15-point NPS boost within six months.
How Zykrr Helps You Leverage NPS
Experience Management (CXM) platform:
- – Automates survey distribution
- – Provides real-time NPS dashboards
- – Helps you close the loop with detractors
- – Benchmarks your NPS against industry peers
Ready to turn customer feedback into growth? Talk to a CX expert at Zykrr
Frequently
Asked Questions
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What is a Net Promoter Score (NPS)?
NPS is a customer loyalty metric that measures how likely your customers are to recommend your company, product, or service to others.
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How do I calculate NPS?
NPS = % of Promoters − % of Detractors. Survey your customers, categorize their responses, and apply the formula.
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What is considered a good NPS score?
A score above 0 is good, above 30 is great, and above 70 is world-class. Industry benchmarks can vary.
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Why is NPS important for businesses?
NPS helps businesses understand customer loyalty, predict growth, and identify areas for improvement.
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How often should I measure NPS?
It depends on your business, but typically, measuring NPS quarterly or after key interactions (like product purchases) is recommended.
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Can NPS be used across industries?
Yes, although benchmarks vary. Sectors like banking, telecom, and retail often use NPS to gauge customer satisfaction.
