Net Promoter Score (NPS)
The Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s or brand’s products or services to peers. It is used as a proxy for gauging the customer’s overall satisfaction and the customer’s loyalty to the brand. The Net Promoter Score is closely connected to the Customer Referral Value.
Frederick F. Reichheld introduced the NPS in a seminal article in the Harvard Business Review, using the term Net Promoter Score (hereafter referred to as NPS) to represent the difference between the percentage of customers who are promoters and the percentage who are detractors. He showed that the companies with the highest NPS experienced the largest share of industry growth, concluding that this figure is “the one number you need to grow.”
The first step to applying this insight is identifying the most satisfied customers using a simple survey that asks customers to rate the likelihood that they would recommend a certain product, service, or company to a friend or colleague on a rising scale of one to ten. Promoters are those who give a rating of 9 or 10, while detractors are those whose ratings come in at 6 or below.
The resulting NPS can, then, serve as a powerful operational management tool. Comparing NPS scores between different segments, markets, etc. is a way to discern the root causes of problems, as well as identify best practices. By providing an easily interpreted measurement of a company’s potential to grow based on customer satisfaction, the NPS gives employees direction as they work toward affecting further growth.