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Net Promoter Score (NPS)

Net Promoter Score (NPS) Definition

Net Promoter Score (NPS) is a customer loyalty metric that measures the likelihood of customers recommending a company, product, or service to others. It is a widely used method to assess customer satisfaction and loyalty.

What is a Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a management tool that helps organizations gauge the loyalty of their customer base. It is based on the simple question, “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?” Respondents are then categorized into three groups: Promoters (score 9-10), Passives (score 7-8), and Detractors (score 0-6).

Net Promoter Score (NPS) Examples

To calculate the Net Promoter Score, the percentage of Detractors is subtracted from the percentage of Promoters. The resulting score can range from -100 to +100. A positive score indicates that a company has more Promoters than Detractors, while a negative score suggests the opposite.

For example, if a company has 60% Promoters, 20% Passives, and 20% Detractors, the NPS would be 40 (60% – 20%). This means that the company has a relatively high number of satisfied customers who are likely to recommend their products or services.

Net Promoter Score is often used as a benchmark to compare performance across industries. According to the Net Promoter Network, the average NPS for the banking industry is around 30, while the average for the software industry is approximately 45. These scores can vary significantly depending on the specific company and its customer base.

Is the NPS scale 1-10 or 0-10?

The NPS scale ranges from 0 to 10, with 0 being the lowest and 10 being the highest score. Respondents are asked to rate their likelihood of recommending on this scale, with 0 representing “not at all likely” and 10 indicating “extremely likely.”

What is a good NPS?

A good Net Promoter Score varies by industry and company. Generally, a positive NPS is considered good, with scores above 50 being excellent. However, it is essential to compare NPS within the same industry to gain meaningful insights. A score of 30 might be considered good in one industry but below average in another.

How do you calculate Net Promoter Score?

To calculate the Net Promoter Score, you need to follow these steps:

  1. Survey your customers: Ask them the NPS question, “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?”
  2. Categorize respondents: Group respondents into Promoters (score 9-10), Passives (score 7-8), and Detractors (score 0-6).
  3. Calculate percentages: Determine the percentage of respondents in each category.
  4. Subtract the percentage of Detractors from the percentage of Promoters.

For example, if you have 60% Promoters, 20% Passives, and 20% Detractors, the calculation would be: 60% – 20% = 40.

Wrap Up

Net Promoter Score (NPS) is a valuable metric that helps organizations understand customer loyalty and identify areas for improvement. By measuring the likelihood of customers recommending a company, product, or service, NPS provides insights into customer satisfaction and can guide strategic decision-making.

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