Net promoter score (NPS)

Customer satisfaction drives business. So, it goes without saying that most business owners would want to know what percentage of their customers are satisfied with their products to the point that they become promoters.

On the other side of the coin, most owners would also want to know what percentage are dissatisfied, leading to their becoming detractors and spreading negative messages about their company.

There’s a tool to measure those competing customer stances: the net promoter score (NPS).

NPS, a registered trademark that was developed by Fred Reichheld of the Bain Company, calculates a company’s customer satisfaction rate by subtracting the percentage of detractors from the percentage of promoters.

It uses surveys that ask customers how likely they would be to recommend the company’s product or services and then categorizes them as promoters, detractors or passives.

What is net promoter score and why is it important?

“Net promoter score is a way of measuring the quality of the experience that your customers have with your organization,” says Chris Palin, Manager, Voice of Client at BDC.

Palin, whose job is to both understand how the Bank’s clients are perceiving their experience and to help improve that experience, says the importance of the score lies in its ability to link customer approval with a business’s future earning power.

“Companies want to measure satisfaction from their customers because it is a predictor of future business results,” he says. “Happier customers come back; unhappy customers say bad things about you and may never come back.”

What does net promoter score measure?

NPS measures customer satisfaction.

While Palin believes it’s a good way to measure customer experience, he offers a caveat: “All it measures is whether they would recommend you or not.”

He says there are many other factors that lead a promoter to recommending your business and suggests as an owner you dig deeper to find out what the business can do or has done to create this loyalty.

How is the net promoter score calculated?

Calculating the NPS begins by asking clients whether they would recommend you or not. You then need to categorize the recommendation scores by how likely they would recommend your business, from a 0 (not at all likely) to a 10 (extremely likely), and then split them up into the following three types of customers: 

• Promoters—loyal, enthusiastic and ready to recommend (9 or 10)
• Passives—happy with you but not likely to recommend (7 or 8)
• Detractors—unhappy with you and may discourage others (0 to 6)

Then, take the total number of answers and substract the percentage of detractors from the percentage of promoters.  You can then calculate your NPS using the following formula:

For example, if you had 100 customers answering your survey, with 60% categorized as promoters, 25% as passives and 15% as detractors the calculation would look at follows

In this situation you would have an NPS of +45.

On the other hand, if you had some unfavourable feedback, with promoters making up only 20% of customers, passives at 40% and detractors at 40%, you would end up with an NPS of –20.

How to calculate the net promoter score 

What is a good net promoter score?

A perfect NPS is +100. That would require 100% of your customers being promoters, having given you a 9 or 10 after being asked how likely it is that they would recommend you.

The worst NPS you could receive is a –100. That would require 100% of your customers being detractors, having given you a 0 to 6 after being asked how likely they would be to recommend you.

Palin says achieving +20 is a favourable score, with +50 being excellent and anything above 80 being “world class.”

But sometimes the scores are deceiving. “Your score of zero could be that you have 100% passives, or it could be that you have 50% detractors and 50% promoters. You have to look into it, because there’s a big difference between those two. Detractors are going out and saying bad things about you, whereas passives aren’t. In fact, if you had 100% passives, it means you’re delivering on needs and expectations all the time,” says Palin, who calls that a “lovely problem.”

“So, if I had a situation where I had 50% detractors, I’d need to find a way to stop ticking those people off. Because, for them, we haven’t met their needs and expectations.”

What are the two types of NPS?

The net promoter score relies on surveys that assess client satisfaction.

There are two types of net promoter scores:

• Transactional NPS: These scores are measured following online or in-store purchase transactions.
• Relationship NPS: These are done as a check-in with the client at a later date once the transaction has passed.

Palin explains the difference between the two types of surveys.

“You’ve probably had this happen to you at a retail outlet, where the salesclerk points out a QR code on your receipt and a link to fill out a survey and lets you know that you could win something. That’s transactional. Whereas your streaming company might just send you a random survey asking if you would recommend them. That’s a relationship NPS.”

How to create a net promoter score survey

Many entrepreneurs will use free survey software for their initial and follow-up questions.

The survey begins with the standard question, “On a scale of 0 to 10, how likely are you to recommend our product/company to a friend or colleague?”

For the follow-up question, Palin suggests you hew closely to your business goals.

“You’ve got to decide which measure is the right one for your organization. You want to pick the one that is most closely correlated to the business results you’re trying to achieve. It might be something like repeat sales.”

He suggests you use the NPS as an aid for predicting your business outcomes.

NPS follow-up questions

Whether it’s relationship or transactional, Palin says NPS is the most frequently used tool to measure customer satisfaction. “That’s mainly because there is no perfect measurement.”

He says it’s all in the way you use NPS and you can’t just ask one question about recommending your product or service. It’s necessary to follow up with other questions.

“So, if I’m an entrepreneur, I will use NPS on a 1-10 scale, asking how likely it is that the customer will recommend my services. But I have to ask a follow up question like ‘What could we do to improve?’ or ‘Why did you give us this score?’”

“You need to have that second question.”

He says it’s not enough to have a 9 or 10 recommendation—you need to know why they would recommend you. Likewise for a 4 or 5. You’ll want to know why they are giving you such a weak recommendation.

What is a good net promoter score question?

The fundamental question to ask customers is the following:

“On a scale of 0 to 10, how likely are you to recommend our product/company to a friend or colleague?”

As for follow-up questions, you’ll want to phrase it in such a way that it finds out why you are or are not receiving this this recommendation.

Here are some examples of follow-up questions and how they might help you better understand your customers:

What was your main reason for giving us this score?

Helps you understand the logic behind a respondent’s answer and provides insights into what specifically influenced their NPS rating.

Why would you not recommend us?

While it may sound uncomfortably direct, it can yield valuable feedback and help you understand the reasons behind negative sentiments. Most importantly, it helps identify areas for improvement.

What could we have done differently to provide a better experience?

Encourages respondents to reflect on their experience and suggest improvements. It helps pinpoint specific pain points or missed opportunities.

What should we improve? 

Invites customers to share their thoughts on areas where your organization can enhance its offerings or services.

What are the limits of the net promoter score? Understand why promoters are recommending you

Palin was explaining NPS at a conference where he used the example of a nationally recognized sandwich shop.

He began the story describing what an office worker looks for in a lunchtime spot.

“They expect it to be fast, to cost 10 to 15 dollars and they want something fresh,” he tells the crowd.

But, he said, right beside that shop, is another stall that sells Lebanese food, which satisfies all those same needs. With this competition, the sandwich shop will have a difficult time attracting office workers to come more than once a week.

“I told the story and at one of the tables there were people bent over laughing, with one woman all red and hiding her face. And I asked, ‘What’s so funny?’ They answered, pointing to the woman, ‘She eats there every day.’”

This woman, he found out, had very particular needs. She could not have pickles touch one another and the mayo needed to be squeezed out into a straight line.

“So, the shop had learned exactly how to make her sub. She never had to ask for it and never had to explain it. They know her and they know her preferences and that’s why she comes back,” he explains. “And that’s why she’s a promoter.”

The story, he says, points to how the sandwich-maker stands out from competitors by adapting to someone’s specific needs and, in this case, offers her the predictability she craves.

That’s what’s behind one person’s answer of yes to recommending the services. And that, says Palin, is an example of a company that can successfully pinpoint what they’re doing to win the hearts of their customers.

How to improve your net promoter score

Here are eight things you can do to boost your NPS:

1. Understand your customers

Gain deep insights into your customers’ needs, preferences and pain points. Regularly collect feedback through surveys, interviews and other channels. Use this information to tailor your offerings and services.

2. Act on feedback

NPS feedback is valuable only if you act on it. Prioritize areas for improvement based on customer feedback. Address specific pain points promptly and transparently.

3. Deliver consistent experiences

Ensure consistency across touchpoints (e.g., website, customer service, product quality). Consistency builds trust and positively impacts NPS.

4. Empower employees

Engaged employees lead to satisfied customers. Invest in employee training, motivation, and empowerment. Happy employees are more likely to create positive customer experiences.

5. Personalize interactions

Tailor interactions based on individual preferences. Use data to personalize communication, offers and recommendations. Customers appreciate feeling understood.

6. Resolve issues swiftly

When customers encounter problems, resolve them promptly. Efficient issue resolution can turn a detractor into a promoter.

7. Celebrate promoters

Acknowledge and appreciate loyal customers. Consider loyalty programs, exclusive offers or personalized thank-you messages.

8. Benchmark and set goals

Compare your NPS with industry benchmarks. Set realistic improvement goals and track progress over time.

Next step

Discover how to boost your revenues in 12 months with a solid growth plan and digital marketing strategy centred on your customers by downloading our free guide for entrepreneurs: How to Grow Your Revenues.