smartKPIs.com

sK1303 export date: 01 Oct 2020

Functional Areas

Marketing & Communications Marketing

Industries

Any

KPI record

sK1303

Sub-categories

Marketing

Tags

portfolio, customers

Name

# Net Promoter Score

Description


Definition

Measures the net difference between promoters and detractors, out of all customers that responded to the survey.
Note: Net Promoter, Net Promoter Score and NPS are registered trademarks of Fred Reichheld, Bain & Company and Satmetrix.

Variations

# Promoter Score
# NPS

Related KPIs

% Customer satisfaction with new products and services

Calculation


Subordinated measures

A = # Promoters
B = # Detractors
C = # Customers

Calculation formula    (A/C)*100-(B/C)*100

Trend is good when    Increasing

Focus


Purpose

To monitor the level of customer loyalty by evaluating the extent at which customers act as brand ambassadors.

BSC perspective

Customer

Objective measured

Increase customer loyalty

Data Profile


Data capture period

Spot

Standard reporting frequency    Quarterly

Data collection method

Customer Satisfaction Surveys

Limitations

Being based on customer surveys, results can be altered by the respondents' subjectivity or incentives given by the company to stimulate responses.

Targets


Threshold examples

  • Red: <50
  • Yellow: 50-70
  • Green: >70

Target setting notes

Targets are for exemplification purposes only.
Some argue that benchmarking might not be suitable, as companies may use different-point scales (the standard is 11, but some use 10, some 5 and so forth). Also, some companies may resort to incentives so as to increase the rate of responses. Some organizations consider that any NPS above 0 is a good score as it means that there are more promoters than detractors, however, the commonly agreed methodology states that only an NPS above 50 is considered satisfactory.

Analysis and Resources


Overall notes

NPS is used nowadays by many large companies as a customer feedback tool. It gives an unambiguous number that is easy to understand for all employees and useful as input for managers to steer the company. NPS also gives a good indication of growth potential and customer loyalty for a company or product.
To understand the motives of Promoters and Detractors, it is recommended to accompany the NPS question by one or more open questions that probe the underlying reasons behind the given score. This allows managers to make the appropriate adjustments to increase the future NPS, either by boosting the percentage of Promoters, either by reducing the proportion of Detractors (or better yet, a combination of both).

Additional resources

References

1.Rao, D. N. (2018) How net promoter score relates to organizational growth, available at: 
https://www.researchgate.net/publication/328305049_HOW_NET_PROMOTER_SCORE_RELATES_TO_ORGANIZATIONAL_GROWTH

2. Bain & Company (2012), Creating a reliable metric, available at: http://www.bain.com/publications/articles/creating-a-reliable-metric-loyalty-insights.aspx
3. Qualtrics Labs (2012), Net Promoter Score (NPS) explained, available at: https://www.qualtrics.com/net-promoter-score-nps-explained