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How do you calculate a Net Promoter Score?

Posted by Nikky Lee - 03 December, 2018


person-calculating-NPS-on-laptop.jpgIf you want to get a complete picture of your business, incorporating your Net Promoter Score℠ (NPS) into your reporting is essential. Calculating your NPS does more than measure customer loyalty. It indicates how well your business is performing—and your potential to grow. This is how you calculate it.

Related content: Net Promoter Score benchmarks for New Zealand and Australia.

 


 

How do you calculate a Net Promoter Score?

 

It all starts with one question to your customers: “How likely are you to recommend this company, product or service to a friend or colleague?”.

This question is answered with a scale from 0 (highly unlikely) to 10 (highly likely), usually presented like the below:

CM-NPS-example02.jpg

From here, responses are grouped into the following:

  • Promoters: responses from 9-10.
  • Passives: responses from 7-8.
  • Detractors: responses from 0-6.

 

The NPS formula

To get your overall NPS score, subtract the percentage of detractors from the percentage of promoters.

 

Promoter % – Detractor % = NPS

 

 For example, if you had 100 responses with 60 Promoters (Promoters = 60 per cent) and 20 Detractors (Detractors = 20 per cent) this formula would become:

 

60 – 20 = A Net Promoter Score of +40

 

You can calculate your own NPS with our interactive calculator available below:

 

 

What is a good NPS score?

NPS varies between industries, but Bain & Co considers a good score as something between +30 to +40. Anything between +50 and +80 is usually seen as outstanding. 

 

Related content: What is a good Net Promoter Score?

 


 

The benefit of calculating your NPS

 

NPS is used around the world to measure customer loyalty. It lets you see what customers think of you. Moreover, it establishes the likelihood of a customer recommending your product or service to another person. In other words, it gauges your chances of gaining new and – most importantly – returning business.

 

Returning business equals profit

It’s well known that it costs more to acquire a new customer than to retain one. Research from Bain & Co has shown the strong correlation between customer retention and company profit. In financial services, they report, improving customer retention by 5 per cent can lead to a 25 per cent profit increase.

Knowing your NPS and seeking to improve it—by implementing customer feedback for instance—increases your chances of gain new and repeat business. The higher the score, the more stable and sustainable your company is. And the research agrees. Companies with top NPS scores in their industries perform two times better than their competitors.

 

Better understanding of customers

Top performing companies often include strategic questions in their surveys to identify where they could improve. In some cases, they’ll even follow up with their detractors to better understand where they went wrong.

All up, it leads to better customer experiences, higher satisfaction, improved customer loyalty and, ultimately, greater business outcomes.

 

Related content: 3 simple ways financial services can win at best practice customer experience

 


 

A tool for better business

 

NPS can be a bit of a reality check for businesses. However, it’s one of the best ways to learn what customers really think, and to gauge how your business is performing as a whole. Without it, you could end up really steering off the road. With it, you—and your customers—are undoubtedly in for a smoother ride.

 


 

Your NPS is only relevant in comparison to your peers in your industry. If you're wondering how you rank, you can access our free benchmarks below:

Download NPS Benchmarks  

Topics: Customer Research


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