What is the Net Promoter Score (NPS)? And what are your views regarding it?

Dear Mr. Mohammad

Thank you for inviting me to answer this question

The Net Promoter Score, is based on the fundamental perspective that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors.

By asking one simple question — How likely is it that you would recommend [your company] to a friend or colleague? — you can track these groups and get a clear measure of your company’s performance through your customers’ eyes. Customers respond on a0-to-10 point rating scale and are categorized as follows:

• Promoters (score9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
• Passives (score7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (score0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

To calculate your company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.

NPS is the difference between the percentage of customers who recommend your company (rated9 or10 in a scale of1 to10) and those who do not (rated0 to6).

The score is calculated based on just1 question that asks customers how much do they recommend you.

That said, I think NPS by itself is useless unless you ask one additional question: "Why?", because in that case is just a meaningless number.

Other than that, I think NPS may be a misleading concept. For example a NPS of0 (zero) may have2 meanings:1) you have a very high rate of both extremely happy and very unhappy customers os;2) you have no customers either extremely happy or very unhappy but100% of your customers are fairly satisfyed (rated7 or8). If you just look at the score value you get no information of which case applies to your company.

That being said, I think NPS is an incomplete concept in itself, and so is must be complemented with additional questions to the customer in order for the right conclusions to be drawn.

The Net Promoter Score, or NPS is based on the fundamental perspective that every company’s customers can be divided into three categories.

1. Promoters

2.Passives

3.Detractors

Views: To calculate your company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.

Dear Mrs. Lana

Thank you for inviting me to answer this question

The Net Promoter Score, or NPS is based on the fundamental perspective that every company’s customers can be divided into three categories.

1. Promoters

2.Passives

3.Detractors

 

 

he Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company's products or services to others. It is used as a proxy for gauging the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand.

By asking one simple question — How likely is it that you would recommend [Company X] to a friend or colleague? The Net Promoter Score (NPS) is based on the fundamental premise that customers can be divided into three groups: promoters (score9-10), passives (score7-8), & detractors (score0-6). NPS is then calculated by taking the percentage of Promoters and subtracting the percentage of Detractors: Net Promoter Score = % of promoters - % of detractors.

 

I agree that NPS is a great directional indicator and most useful when viewed over time for trending, but I am one of the group which don't think highly of this performance measure on its own. The main shortcomings of NPS are:

·         It is a very unstable indicator, as it is highly dependent on the sample sizes.

·         The used scale that is not adapted to all markets: the NPS uses a scale from0 to10, and it is the same wherever it is used. Unfortunately, markets react differently to scales, including this one.

·         It doesn't give the actionable insight that enables a business to develop and execute the most appropriate strategy for improvement. The information gathered from this process is too generic to be meaningful. Surveys should evaluate the specific interaction that took place, and not the intended behavior (the recommendation to friend or colleague) after the fact. To add value to the process you need to ask other questions such as what do you really like about our company? And what could we do better?

·         Customer profitability is not taking into consideration. An understanding of the profitability of the customer base, and keeping a track of the rate at which the business is losing its most profitable customers (Churn) must be considered.

·         The formula for the NPS (=%promoters - %detractors) does neglects passives. Does that mean the amount of passives are inconsequential to business success? Typically for a firm selling a established product in a mature industry, one can except high percent of passives. And these high numbers often brings efficiency advantages and reduced transaction costs. The NPS metric does tend to neglect this.

 

·         To get a full picture of performance it is vital to also understand the views of non-customers.