Net Promoter or Net Promoter Score (NPS) is essentially a metric that measures customer loyalty.
It was first developed in 1993 by Fred Reichheld of the management consultancy company Bain & Company. Widely praised for its corporate culture, Bain & Company has been ranked #1 in Glassdoor’s Best Places to Work awards four times – in 2012, 2014, 2017, and 2019 – setting a new record.
The Net Promoter Score is calculated based on responses to this one single question:
“How likely is it that you would recommend our company/product/service to a friend or colleague?”
The scoring for this answer is most often based on a 0 to 10 scale.
People who respond with a score of 9 to 10 are considered loyal customers and are most likely to make positive referrals to other clients. These are the Promoters.
Responses of 7 and 8 are labeled Passives, whereas those who respond with a score of 0 to 6 are labeled Detractors.
The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters.
Promoters (%) – Detractors (%) = NPS
There is however criticism regarding NPS, with arguments stating that the Net Promoter Score uses a scale that may not increase predictive validity and that it fails to predict loyalty behaviours.
In a recent article, Forbes magazine calls for companies to retire the NPS methodology for the following reasons:
- It doesn’t explain why a customer would recommend the firm
- It doesn’t take into account consumer demographics
- It can incentivize undesirable behaviour
Whether you are a fan or not, it is definitely a useful tool and it is used by many companies. Some of the most relevant NPS software tools in 2019 are: ZenDesk, HotJar, LiveChat and Promoter.io
Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc. and Fred Reichheld.