Net Promoter Score (NPS), or NetPromoter, is a discipline by which companies achieve profitable organic growth by focusing on their customers and earning their loyalty.
Loyalty
Net Promoter is concerned with helping managers gauge and take actions to maximize customer loyalty in order to help their organizations grow. Thus, the concept of loyalty is fundamental to understanding Net Promoter:
"Loyalty is the
willingness of someone - a customer, an
employee, a friend - to make an investment or
personal sacrifice in order to strengthen a
relationship." - "The One Number You Need to Grow"
Harvard Business Review, December 2003
The Ultimate Question
Net
Promoter Score is based on the fundamental
perspective that every company's customers can be
divided into three categories. Promoters are loyal
enthusiasts who keep buying from a company and
urge their friends to do the same. Passives are
satisfied but unenthusiastic customers who can be
easily wooed by the competition. And detractors
are unhappy customers trapped in a bad
relationship.
Customers can be categorized according to their answer to the "Ultimate Question":
On a scale from
zero to ten, how likely is it that you would
recommend this company to a friend or a
colleague?
Those who answer nine or ten on a zero-to-ten scale are promoters, those who answer seven or eight are passives, and those who answer zero to six are detractors.
The Net Promoter Framework
NetPromoter Score (NPS) Calculation
To calculate a company's Net Promoter Score (NPS), survey its customers asking the Ultimate Question, above, using the zero-to-ten scale, and take the percentage of customers who are promoters and subtract the percentage who are detractors. The equation below defines the calculation of NPS.
Net Promoter Score =
% of Promoters - % of Detractors
Source: The Ultimate Question, Frederick F. Reichheld, 2006
The Zero-to-Ten Scale
NPS utilizes a zero-to-ten
point scale. This scale affords customers the
opportunity to pinpoint their responses to the
Ultimate Question. It offers a rich granularity by
giving respondents more options from which to
choose. By including "zero" as an option, and by
using the labels illustrated below, this scale
also avoids any possibility of confusion regarding
which end of the scale represents the "best" or
"highest" possible response.
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