Net Promoter Score

Another approach to measuring customer satisfaction and engagement that is widely used is the net promoter score (NPS). Described by the Harvard Business Review as “the one number you need to grow,” NPS is associated with a single, one question survey based on customer engagement that has shown over time to be a great predictor of firm success.

To calculate the NPS, a firm first asks the following question to its customers: “How likely is it that you would recommend our company/product/service to a friend or colleague?” (Note: NPS has also been used in the past with other types of respondents, such as employees or resellers, depending on which population a company wants to measure). Respondents are asked to answer using a 0 to 10 scale, with 10 being “extremely likely” and 0 being “not at all likely.” The NPS is then calculated by subtracting the percentage of detractors from the percentage of promoters. The result ranges from −100% (all detractors) to 100% (all promoters) (Figure 9.1).

Figure 9.1 Net Promoter Score

Promoters are those who answer 9 and 10. They are satisfied, loyal customers that will definitely recommend a brand to others. They are considered to exhibit value-creating behaviors, such as repeat buying, higher average basket, and longer retention time. They account for most referrals for a brand. Firms are advised to learn from promoters: What makes them so satisfied and engaged? Do they belong to a specific persona? How were they acquired? Promoters can be used to identify a winning formula that can potentially be replicated with other customers.

Passives are those who answer 7 and 8. They are satisfied customers who mostly neutral about their experience with a brand. Firms are advised to work toward converting passives to promoters.

Detractors are those who answer 6 or less. They are generally unhappy customers that will not recommend a brand to others. They might engage in value destructive behaviors, such as negative word of mouth. They have a high churn rate. Firms are advised to recover detractors. They can also ask themselves questions similar to those for promoters: What makes them unsatisfied with the brand? Do they belong to a specific persona? How were they acquired? For example, if a firm learned that specific a persona was responsible for most detractors, that should affect its future strategy in terms of where to dedicate customer acquisition efforts.