What is NPS and How to Calculate It? Short Guide
In today’s fast-paced business environment, understanding customer feedback is key to success. One of the most popular indicators used to measure customer loyalty is the Net Promoter Score (NPS). What exactly is NPS, how do you calculate it, and what are the most common mistakes companies make when analyzing it? Let’s find out!
What is NPS?
Net Promoter Score is a metric that measures customer loyalty to a brand, product, or service. Introduced by Fred Reichheld in 2003, NPS focuses on a single, crucial question:
“How likely are you to recommend our company/product/service to a friend or colleague?”
Responses are given on a scale from 0 to 10, with customers divided into three groups:
- Detractors (0-6) – customers who are dissatisfied and may discourage others.
- Passives (7-8) – neutral customers who are relatively satisfied but not particularly engaged.
- Promoters (9-10) – enthusiastic customers who actively recommend the company.
How to Calculate NPS?
The formula for calculating NPS is straightforward:
NPS = % Promoters − % Detractors
Example Calculation:
- A survey collected 100 responses.
- 40 respondents are Promoters (40%),
- 20 respondents are Detractors (20%),
- 40 respondents are Passives (not included in the calculation).
The NPS calculation looks like this:
NPS = 40% − 20% = 20
The NPS score ranges from -100 (all respondents are Detractors) to +100 (all respondents are Promoters).
Common Mistakes in Analyzing NPS
Despite its simplicity, companies often make mistakes when analyzing NPS, leading to inaccurate conclusions. Here are the most common ones:
- Misinterpreting the Results
The NPS score alone is not a measure of success; it indicates the direction of change. Companies often assume a single score (e.g., NPS = 20) is good, whereas observing trends over time is crucial. - Ignoring Customer Segmentation
Not all customers are equally valuable to a company. Analyzing NPS without dividing it into segments—such as regions, demographics, or product types—can lead to misleading conclusions. - Neglecting Follow-Up Questions
While the NPS question is central, follow-up questions are equally important. Without understanding why customers gave a particular score, implementing corrective actions becomes challenging. - Using a Sample That’s Too Small
A small sample size can significantly distort results. A limited number of responses can give disproportionate weight to individual opinions. - Overlooking Passives
Many assume that Passives (7-8) do not matter for NPS, ignoring their potential to be converted into Promoters with the right approach. - Failing to Take Action
Gathering data and calculating NPS is only the beginning. Companies often fail to implement corrective actions based on their results.
Why is NPS Important?
NPS is more than just a number—it’s a strategic tool for decision-making. It allows companies to:
✅ Identify dissatisfied customers and respond to their needs,
✅ Understand which areas of the business require improvement,
✅ Track changes in customer loyalty over time and assess the effectiveness of their initiatives.
By analyzing NPS regularly, businesses can focus on what matters most: building relationships with customers and delivering real value.
Conclusion
The Net Promoter Score is a simple yet powerful tool for managing customer satisfaction. Properly calculating NPS, avoiding common mistakes, and taking concrete action based on the results will help you better understand customer needs and strengthen their loyalty.
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