Product Management 101: Net Promoter Score (NPS)
How do you know if your customers are truly happy with your product? How can you identify your biggest fans and advocates, and/or your most unhappy and dissatisfied customers? The Net Promoter Score (or NPS) aims to answer these questions in a quantitative, measurable way.
What is Net Promoter Score?
Net Promoter Score, or NPS, is a metric companies use to measure their customers’ propensity to advocate for the brand. This score, in turn, serves as a proxy for customer happiness and, eventually, business growth.
Because NPS reduces such a large question to a single-question (“How likely is it that you’d recommend this brand to a friend or colleague?”) survey with an answer limited to an 11-point (0-10) scale, many business leaders debate its merits. Despite grievances around oversimplification, NPS has emerged as one of the most pervasive KPIs for customer satisfaction in business today.
Are there other measures of customer sentiment?
While NPS is likely the most commonly used and well-known measure of customer sentiment, it certainly isn’t the only one. Two other such metrics you’re likely to come across include CSAT (Customer Satisfaction Score) and CES (Customer Effort Score). Each of these KPIs has its own pros, cons, and use cases.
How is a Net Promoter Score calculated?
The calculation is predictably simple. A company conducts an NPS survey among its customers. It marks scores of 9 or 10 as “Promotors,” 7 or 8 as “Passives,” and 0 through 6 as “Detractors.” Then it subtracts the percentage of Detractors from the percentage of Promoters to produce its Net Promoter Score.
Here’s a simple formula:
[(# Promoters / # Respondents) – (# Detractors / # Respondents)] * 100
If a company has more Detractors than Promoters, they’ll quickly find that NPS can dip into negative territory. While not ideal, of course, it’s not uncommon to see a negative NPS. Because NPS scores vary greatly by vertical market, it’s important for companies to benchmark themselves against the most similar cohorts for which they can find data. It’s also important for companies to benchmark themselves against themselves, tracking NPS movement over time. Mapping changes in score to business events, like product changes and marketing campaigns, can help companies understand what developments impact customer satisfaction.
What factors impact a company’s Net Promoter Score?
It’s important, particularly for software companies, to understand the distinction between account-level NPS and user-level NPS. User NPS captures the score of the person who uses the software regularly. Because that individual is closest to the product, their score is likely higher than the account score, because the latter will be mitigated by less-informed perspectives of those who may be more distant from the product.
NPS tracking can get sophisticated quickly. The medium over which the score is captured can also bias results. An NPS survey conducted within the product itself is likely to produce a higher score than an emailed survey, because the former is capturing a higher concentration of active, engaged users.
None of this context is intended to suggest that user NPS or in-app NPS is more or less valuable than their counterparts. Only that it’s helpful to be aware of biases and to be consistent when benchmarking over time.
The method of collecting survey data isn’t the only factor that impacts an NPS score. The buying experience, onboarding process, and, of course, the product itself all have the potential to create Detractors and Promoters alike. To this end, understanding which pages or features in the product increase customer satisfaction and guiding users to those features is one of the most reliable ways to improve NPS over time.
How do I get started gathering Net Promoter Scores?
The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld
This is the book that started it all and gave us the one question (“How likely is it that you’d recommend this brand to a friend or colleague?”) that NPS is based on. A definite must-read.
How important is NPS in product? This is a polarizing question, but ultimately, NPS is a measure of product love. It helps you understand the extent to which your users are raving fans.
“NPS Jiu-Jitsu to Combat Product Bias” by Dan Larsen
NPS can be a powerful tool for shedding light on how users’ biases are affecting their experience in the product.
“Can’t We Do Better Than NPS?” by Kyle Poyar
This article from the OpenView Venture Partners blog takes a critical look at the limitations of NPS, particularly when teams try to use it as a measure of retention.
“One Year Into NPS” by Louis Grenier
The journey to a formal NPS strategy can be full of ups and downs. The team at Hotjar shares their experiences one year into implementing NPS for gathering customer feedback.