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What is NPS? Pros, cons, when to use, and how to calculate

Nina Godlewski
6
minute read

Customer surveys can offer you a wealth of information about your brand and your customers. But choosing the right one is imperative to how beneficial these surveys will be. You have several options when it comes to customer surveys like the customer satisfaction score, the customer effort score, and the net promoter score.

If you’re looking for a customer survey to help you gauge the feelings your customers have about your business, brand, and customer support, a net promoter score is the way to go. The net promoter score, also called NPS, is a simple question used frequently by businesses. A company’s NPS score is closely related to the likelihood that a customer will be a repeat customer. In fact, customers who are considered promoters are five times more likely to repurchase from a company. So let’s look into whether you should be using NPS and what exactly it is.

What is NPS?

Net promoter score surveys, or NPS surveys, are set on a scale of 0 to 10. The survey asks the customer how likely they are to refer or recommend a friend to the company or product. Most companies will send these surveys after a purchase or interaction is completed.

Text message example of an NPS survey

These surveys can appear after a chat is finished, as a pop-up in an app, or sent through email or text afterward. They’re also accompanied by an open-ended question asking why the customer gave the rating they did. In the example below, that open-ended question appears after the initial rating is selected.

Target NPS survey
Source: Target

Before you can calculate your NPS you need to break down the ratings you collect. This means segmenting the responses. Your promoters are those customers most likely to promote your business to other people. They answered they’d be very likely to recommend your business with a 9 or 10 rating. The promoters are also your happiest customers, the ones you don’t need to worry about losing or churning. The detractors, on the other hand, are any respondents who gave a rating between 0 and 6. Your detractors are those who said they are neutral or unlikely to recommend your business; these customers are at a higher risk of churn. Everyone else is considered passive, these are the people who gave scores of 7 or 8.

How to calculate NPS

While NPS is on a scale of 0 to 10, there are some calculations that go along with all of the scores you collect. Any positive number might be considered a “good” NPS score. The average NPS varies by industry but Survey Monkey looked at 150,000 organizations and found they have an average NPS of +32.

Step-by-step guide to calculate NPS:

  1. Segment the responses to your survey into three groups: Promoters who gave you a 9 or 10 rating, Passives who gave you a 7 or 8, and Detractors who gave 0 to 6.
  2. Find the percentage of promoters by dividing the number of promoter scores by total respondents, multiply by 100
  3. Find the percentage of detractors by dividing the number of detractor scores by total respondents, multiply by 100
  4. Subtract the detractor percentage from the promoter percentage

Let’s use some concrete numbers to calculate a hypothetical NPS. Imagine that you’ve surveyed 100 customers, and they’ve all given you a score from 0 to 10 on the customer satisfaction scale. First, you’d have to segment those responses. Let’s say that that you had 48 promoters and 13 detractors, the other 39 are passives. 

First, you would find the percentage of promoters, by doing the calculation 48/100  = .48 x 100 = 48 percent. Then you woulddo the same for the detractors, 13/100 =.13 x 100 = 13 percent. Then you would do 48 -13 = 35 to finally come to your NPS.

Graphic showing how to calculate your NPS
How to calculate NPS

NPS pros and cons

Now that you know how to calculate NPS and you have an idea of what it’s used for, let’s take a look at the pros and cons. This will help you decide whether it’s the best option for you to use in a given situation. 

NPS pros:

  • Standardized
  • Simple structure
  • Not sent at a specific time
  • Can be used to help prevent churn
  • Can be sent via text, email, in web app or chat

NPS cons:

  • Interpretation of “satisfaction” can vary from person to person
  • Not specific about reasons for loyalty

When to use NPS and examples

There might be a few different reasons you’re considering using NPS. Maybe you want to know how likely a customer is to be a repeat customer, or maybe you want a benchmark metric to use for company goal setting. We’ll cover some reasons to use NPS below.

To determine the risk of churn

Knowing how many customers are at risk of churning can help you prevent that churn from happening. If you have low scores, you can look into why that might be the case. This can lead to you potentially fixing the problem and keeping those customers.

You’ll likely learn what you can fix from the open-ended question following the rating scale. That open-ended question can be seen in the example below.

NPS survey example at Gametime
Source: Gametime

You might get a number of responses that are from passive or detractor customers and decide to look into them. If they also respond to the open-ended question, you might see a common theme. Maybe customers are unhappy with the processing time for orders, or the way taxes and fees are presented upon purchase. 

Once you know why you’re getting low scores you can take action to resolve them. This could then help you prevent churn for some of those customers and others in the future.

When you want to determine customer loyalty

These NPS surveys are also used to help determine the level of loyalty your customers have to your business. Think about a company like Starbucks, customers don’t just like Starbucks they love it. The NPS score for Starbucks reflects that, they have a score of 77. Apple has an even higher score of 89. Most people who shop with Apple, are highly loyal and would recommend the company to their friends as well.

NPS survey example at Abercrombie & Fitch
Source: Abercrombie & Fitch

Discovering the level of loyalty your customers have to your business can inform what you’re doing right. It can also help you determine whether there is a viable referral funnel for gaining new customers. After all, 83 percent of people say they trust the recommendations they get from their friends and family, according to research from Nielsen. A higher NPS might indicate that you might want to start a referral program to tap into that potential. 

At a customer milestone

If a customer has been with your company or has done business with you for a certain amount of time, say six months or a year, you might want to use NPS to check in. This way, it’s not directly related to an event like a purchase or a customer service interaction but can still inspire your customer to reflect. 

You could send congratulations or a thank you email to your customer expressing gratitude for their business and add the survey. The question, “how likely are you to recommend *company*?” would remain the same. See the example below. 

Sending an NPS survey at a customer milestone

NPS: The bottom line

If you’re looking to measure the loyalty of your customers, then the net promoter score is the right option for you. Additionally, it can be convenient because you can send it at any time. It doesn’t necessarily need to be tied to one specific event. But that doesn’t mean it can’t be. This survey is highly flexible and offers valuable insight for any business. 

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