NPS - Net Promoter Score: Definition & Calculation

How likely are you to recommend us to a friend? This question has surely been asked to you after online shopping or when signing a contract. Most companies use the so-called Net Promoter Score (NPS) to determine your satisfaction with their performance.

General Definition of Net Promoter Score

First published in Harvard Business Review in 2003, the Net Promoter Score of American business expert Fred Reichheld measures the degree of customer satisfaction. In his research, Reichheld considers the recommendation as the highest measure of a good customer relationship when calculating the NPS. Moreover, the NPS is not only simple to calculate, but also takes into account both rational and emotional bonds between the customer and a company.

Practical Application of Net Promoter Score

To determine the NPS score, surveyed customers must indicate on a scale from 0 (= "absolutely unlikely") to 10 (= "extremely likely") whether they would recommend the company's performance to a friend. Based on their answer, participants are divided into three categories:

• Promoters or extremely satisfied customers who selected 9 or 10.
• Passives or passively satisfied customers who selected 7 or 8.
• Detractors or critics who selected 6 points or less.

How is the NPS Calculated? An Example:

In the evaluation, all customers are considered as 100 percent and from this the percentage of promoters (e.g. 60 percent) and detractors (e.g. 25 percent) is derived. For the final calculation of the NPS, simply subtract the detractors, i.e. dissatisfied customers, from the promoters, i.e. extremely satisfied customers. Passive customers (e.g. 15 percent) are not taken into account.

The Net Promoter Score in our example is +35 (= 60 percent promoters – 25 percent detractors). However, the NPS can also be negative if there are more critics than extremely satisfied customers.

An integral part of an NPS survey is to give the customer an optional feedback opportunity. Only in this way can the Net Promoter Score be better interpreted and contribute to actual customer dialogue.