NPS Meaning: What It Measures and How You Can Use It
By Indeed Editorial Team
Published May 14, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
A primary role of the marketing department is to assess customers' experience with a product or service. One way to assess the customer experience is by using a Net Promoter Score (NPS) that incorporates a numbering system customers can use to rate their experience. Learning its meaning can help you use this effective strategy to gain further customer insight into a business's performance and how you can increase customer loyalty. In this article, we describe the meaning of the net promotor score, outline what it measures, list its benefits, and answer some frequently asked questions.
What is the meaning of NPS?
The meaning of NPS is a measurement survey framework that marketing professionals use to assess customer satisfaction and loyalty. This survey framework uses a scale from zero to ten to determine how satisfied a customer is with a business's product or service. The higher the score a customer rates a business, the more favourable they are rating their experience. The marketing team then uses the results from the survey to help improve products, services, customer support, and other business activities. Survey results may also help quantify the level of customer loyalty by evaluating the scores.
What does NPS measure?
General survey questions measure various aspects of a business, while an NPS survey focuses primarily on customer satisfaction to measure customer loyalty. A customer's rating represents their willingness to recommend a service or product. NPS can measure how likely a customer is to recommend a business's product, service, website, loyalty program or other business offerings, based on a scale of zero to ten. A business can then compare these scores with its other previous survey results to establish strategies for improvement and compare the results with other competing businesses.
For example, a business may want to measure how customers perceive their new shopping assistant widget on its website. After a customer uses the widget, the business then sends a quick survey asking them how likely they are to recommend the widget to a friend on a scale of zero to ten. After receiving 100 surveys with an average score of five, the business can then decide to interview some of the customers to find out how they can further improve the widget.
The benefits of NPS
Since NPS surveys are short and easy to answer, they are a simple and effective way for businesses to receive feedback. Some of the major benefits of NPS include:
Helps to measure loyalty
Customer loyalty is important to measure, as most businesses rely on repeat customers for a significant portion of their earnings. Since NPS uses a scale to rate customer satisfaction, a higher score shows a higher likelihood of repeat purchase intention. NPS then helps businesses focus their resources on business activities that promote repeat purchase intention and help to grow sales and customer satisfaction.
Allows customers to answer the survey easily
With only one key question, the NPS survey is easy to implement for any business size. A business can administer the survey through email, in person, on the phone, or online. The survey results are also easy to analyze. For the customers, an NPS survey is easy to answer, ensuring more customers engage with it, creating a larger data set.
Helps to track progress
When a business regularly administers NPS surveys, the survey results can show the business's progress over time. This data can help identify trends on a monthly or yearly basis, depending on the frequency of the survey intervals. The data can also help show how recent changes in the business or strategies have affected customer experience.
Allows for benchmarking
NPS is a widely used system for tracking customer experiences, making it a useful tool for benchmarking with competitors. Businesses use NPS globally so they can benchmark their NPS scores both nationally and internationally. This helps them determine whether they are reaching or exceeding industry standards. A business can also internally benchmark its NPS performance over time and evaluate its scores periodically.
How to use NPS
NPS measures the likelihood of a customer recommending a product or service to a friend on an 11-point scale system. This is a useful way to discover how a customer views a business and helps influence future strategies. Steps for how to use NPS are as follows:
1. Decide what to evaluate
Decide which aspect of the business you want to evaluate. For example, you may have a new customer service feature that you would like feedback on. This feedback can help explore the effectiveness of this new feature.
2. Create your question
Your question depends on the topic you're evaluating; you usually phrase it as: "On a scale of 0 to 10, how likely are you to recommend our product or service to a friend or colleague?". For example, if your focus is on the new customer service feature, you can create the following question: "On a scale of 0 to 10, how likely are you to recommend our new customer service tool to a friend or colleague?"
3. Administer the survey
Once you complete your NPS question, you can decide how you want to administer the survey. A best practice is to administer the survey to customers directly after they've interacted with the business. You can easily create NPS surveys through free online survey software. There are then several ways you can administer the survey:
Email survey: Email surveys are an effective way of evaluating responses from a large number of customers. You can create automatic triggers on the business's website to send out a survey each time a customer purchases an item from the website or joins the mailing list.
Website pop-up survey: When customers interact with a certain section of the website, pop-up surveys are a great way to gather their feedback at the precise moment they're interacting with the business. This ensures the customer remembers the topic of the survey question.
Physical in-store survey: Depending on customer demographics and how you usually interact with customers, you may find it more useful to reach them with a physical survey than a digital alternative. Informing a customer that a completed survey enters them into a contest can help encourage more responses.
Visit a link survey: It's common for customers to receive a purchase receipt from a store that includes a link at the bottom to complete a survey. Since this survey type takes the most effort for a customer to complete, it's advisable to include an incentive, like a contest, to encourage their participation.
4. Gather the results
If you're using an online tool for administering the survey, you can easily find the survey results from the account page. From there, you can view how many customers responded to the survey and what the average score is. For physical surveys, you can gather the results and enter them into a spreadsheet to analyze.
Frequently asked questions on NPS
Some frequently asked questions about NPS include:
How do you calculate NPS results?
You can calculate the NPS results by subtracting the percentage of customers who answer the survey with a score of six or below from the percentage of customers who answer the survey with a score of nine or ten. For example, if you had 100 respondents to the survey and 30 of them responded with a score of six or below, and 55 of them answered with a score of nine or ten, then the equation is NPS = 55 ‒ 30. The final NPS value is 25.
What is a good NPS result?
The final NPS result ranges from ‒100 to 100. The lowest score, ‒100, represents the result of every customer rating the business with a score of six or less. If every customer rated the business with a score of nine or ten, then the final NPS result is 100. You can consider any result above zero to be average and any score above 50 to be above average. The exact averages may differ across each industry and across regions.
What do NPS results tell us about the customer?
The result from each NPS survey can help represent customer types. NPS results can help reflect which customers are likely to be more loyal and which are less enthusiastic about the business. The three main types of customers that NPS surveys illustrate are as follows:
Detractors: This customer type leaves a rating of six or lower on NPS surveys. These customers may represent a challenge for the business.
Passives: A passive customer gives a score of seven or eight. These customers are reasonably satisfied but may not be loyal yet and may easily switch to competitors.
Promoters: Customers who score the business as a nine or ten are the promoters. They are loyal customers and likely to share their positive experiences with friends and colleagues.
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