Developed in 2003 by Fred Reichheld from Bain & Company, Inc, with data from Satmetrix Systems, Inc., Net Promoter Score (NPS) is a leading metric for measuring the effectiveness of customer experience programs. It is derived by asking customers of your product how likely they are to recommend you to a friend or colleague.
Net Promoter Score is a measure of your customer’s satisfaction with your company. It is a long-term indication of customer loyalty and brand sentiment. Another metric, Customer Satisfaction Score (CSAT), measures short-term customer satisfaction.
NPS consists of the aforementioned single question that indicates the likelihood of your customers referring you to others. NPS is used by all industries, although the scores are not created equally for all.
The Net Promoter system categorizes respondents into promoters, detractors, and passives based on their responses to the question on a scale of 0-10.
Promoters (9-10) are extremely likely to recommend your product. They represent your loyal customers and brand ambassadors.
Passives (7-8) are happy customers but unlikely to bring referrals your way or help you acquire new customers through positive word of mouth. They may also jump ship quite easily.
Detractors (0-6) are unhappy customers who won’t refer your company, and worse, could harm your brand reputation and company growth through negative word of mouth.
Net Promoter Score is valuable as a survey tool to gain insights into the customer experience. On its own, the NPS score does not provide enough information about customer satisfaction. It is a reliable starting point to investigate how well you’re serving your customers.
A poor NPS score is a worrying indication of future churn. To understand customers’ motivation for giving you a particular score, you should ask follow-up questions through surveys and use the NPS data from survey respondents to:
NPS = Percentage of promoters - Percentage of detractors
If 50% of your respondents give you a 9 or 10 while 30% have answered 6 or below, your Net Promoter Score is 66-32 = 34%.
There are free NPS calculators that save you effort on manual calculations. For example, SurveyMonkey offers templates to create customizable NPS surveys and tabulates scores when you send your online poll to customers. But on their own, NPS results are insufficient. Using NPS software with advanced analytics functionality, calculate NPS scores by demographics and identify root causes.
Going by Satmetrix’s NPS 2021 benchmarks, a good NPS score for SaaS businesses is 41. AppDynamics has an overall NPS score of 87, Zoom’s is 72, Netflix’s is 67, and Slack’s is 55. Note that the average NPS benchmarks across industries change yearly due to evolving customer expectations and service standards and the emergence of new competitors.