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What is NPS?
NPS was developed by Fred Reichheld, Bain & Company, and Satmetrix Systems as a means of measuring customer loyalty. The net promoter score (NPS) measures the loyalty that exists between the provider and customer. Reichheld et al. studied which questions were the most accurate predictors of customer loyalty, and finally settled on one.
The NPS survey consists of a simple question:
“How likely is it that you would recommend our company to a friend?”
The customer then chooses a number between zero (0) and ten (10), with zero being the worst score possible and ten being the best you can get. Customers are then grouped into three categories:
Promoters - These are the customers who answered 9-10. These are the customers who are very satisfied with the company's products and services. They are likely to stay for a long time and likely to recommend your business to a friend and bring in new customers.
Passives - These are the customers who answered 7-8. These are the customers who are satisfied with the company's products and services but not happy enough to recommend your business to their friends. They are likely to stay and could become a promoter, or they could cancel and switch to your competition.
Detractors - These are the customers who answered 0-6. These are unhappy customers and will likely cancel.
Once you’ve categorized your customers, you can calculate your net promoter score. First, determine what percent of your responders are promoters, and what percent are detractors. Then, subtract the %detractors from the %promoters, like this:
Once you’ve done the subtraction, you can drop the percent sign. This is your raw NPS. Since you can’t have more than 100% promoters or fewer than 100% detractors, your score range lies between -100 and 100. A slightly negative score is common at first, but with work, most companies can maintain a positive NPS. The chart below shows some benchmark NPS information arranged by industry. You can use these industry benchmarks to see how you’re doing relative to your competition.