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• thomasdowson

# What Is A Net Promoter Score And How Do You Calculate It?

## What Is It?

The Net Promoter Score (NPS) is a metric used in market research. What it gives you is an overall score of how likely your customers would be to recommend your services to a friend or colleague.

## What Can It Be Used For?

The Net Promoter Score which ranges from -100 to 100, gives an indication of overall customer loyalty. Seeing changes in the Net Promoter Score over time can give a good indication as to whether or not your services are being perceived as getting better, or worse.

## How Is A Net Promoter Score Calculated?

Good question! The Net Promoter Score is calculated using a relatively simple equation.

First a single-question-survey (SQS) is posed to a cohort of customers. The question is usually something like "On a scale from 0 to 10 how likely would you be to recommend us to a colleague or friend?"

From this, customers are separated into three categories as follows:

• 0-6 The Disenchanted/Detractors (D)

• 7-8 The Satisfied (S)

• 9-10 The Promoters (P)

The promoters would strongly recommend your service, and actively seek out new services you offer. The satisfied are in the middle, they think you're doing an okay job but if a better offer came along they may move elsewhere. The detractors, they would happily criticize your services if they didn't think you were doing things right, and are the group of people you are most likely to lose.

Now a bit of maths. Lets denote the total number of people surveyed N, the total disenchanted D', the total satisfied S', and finally the total number of promoters P'. The Net Promoter Score is calculated by the below formula, and is in the form of a percentage:

As you can see this is taking the percentage of promoters, and subtracting the percentage of detractors. A simpler version of the formula is given below:

Typically this will then be rounded up to the nearest whole number, and that's it. That's the Net Promoter Score.

## Lets Do An Example

You have seen the formula, but lets do an example with some real numbers to get a good feel for it.

A car hire company want to find out how loyal their customers are, so they decide to calculate a Net Promoter Score. They call up each of their clients on their database and ask them "On a scale from 0 to 10 how likely would you be to recommend us to a colleague or friend?". Out of the 140 clients on their database, 80 pick up and give an answer to the question. The results are:

• D' = 11

• S' = 50

• P' = 19

And N = 80. From this data and using the previous equation, we see that (100/80)x(18-12) = 10%.

So their Net Promoter Score is 10.

## Some Things To Consider

Although the Net Promoter Score is useful in determining trends in customer loyalty, and comparing businesses with each other it does have some issues.

The Net Promoter Score should be compared to another businesses NPS in a similar industry. It wouldn't be very useful for a Telecommunications company to compare their NPS with that of a barber (who will likely only cut hair for previously satisfied customers).

Also, looking back at our example, in the real world not everyone picks up the phone, or fills out the survey sent by email, or posts back the letter by mail. You have to assume also that the answer given is a true reflection of how the customer would behave in the real world.

But aside from these points, the NPS is a useful metric that all businesses should be aiming to increase, if they want to keep customer satisfaction high, and ultimately increase profitability.

To paraphrase Jeff Bezos, who hasn't done too bad for himself: the interests of the customers and the stakeholders are aligned.