What does NPS (net promoter score) mean in sales?

What is NPS (Net Promoter Score) in Sales?

NPS, short for Net Promoter Score, is a key metric used in sales and marketing to measure customer loyalty and satisfaction. It provides valuable insights into how likely customers are to recommend a company's product or service to others. The NPS is calculated based on responses to a simple survey question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?"

Key Takeaways

• NPS is a single-number metric that quantifies customer satisfaction and loyalty.
• It classifies customers into three groups: Promoters (score 9-10), Passives (score 7-8), and Detractors (score 0-6).
• NPS helps businesses identify areas for improvement and drive customer-centric strategies.

How NPS is Calculated

To calculate the NPS, follow these steps:

1. Conduct a customer survey using the NPS question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?"
2. Based on the responses, categorize customers into three groups:
   • Promoters (score 9-10): Customers who are highly satisfied and likely to recommend the product/service.
   • Passives (score 7-8): Customers who are somewhat satisfied but may not actively promote the product/service.
   • Detractors (score 0-6): Customers who are dissatisfied and could potentially harm the company's reputation by negative word-of-mouth.
3. Calculate the NPS by subtracting the percentage of Detractors from the percentage of Promoters. The formula is: NPS = % Promoters - % Detractors.

Real-Life Example: Implementing NPS in an E-commerce Business

Let's consider a real-life example of how an e-commerce business, "GadgetsPlus," implemented NPS to gauge customer satisfaction and make improvements.

"GadgetsPlus" sent out NPS surveys to customers after each purchase, asking them to rate their likelihood of recommending the store to others. The results were as follows:

• Promoters (score 9-10): 70% of respondents
• Passives (score 7-8): 20% of respondents
• Detractors (score 0-6): 10% of respondents

To calculate the NPS, we use the formula:

NPS = 70 (Promoters) - 10 (Detractors) = 60

"GadgetsPlus" obtained an NPS of 60, which is considered a strong score. However, they noticed room for improvement in converting Passives into Promoters, and they analyzed the feedback provided by Detractors to address specific pain points.

FAQs

Q1: What is a good NPS score?

A good NPS score varies by industry, but generally, an NPS above 50 is considered excellent, while an NPS above 70 is exceptional.

Q2: Can NPS be used for B2B (business-to-business) companies?

Yes, NPS is commonly used in B2B companies to measure customer satisfaction and loyalty. It helps identify areas of improvement and strengthens customer relationships.

Q3: Is NPS the only metric to measure customer satisfaction?

While NPS is a popular metric, businesses often use other metrics like Customer Satisfaction Score (CSAT) and Customer Effort Score (CES) to gain a comprehensive understanding of customer satisfaction.

In conclusion, NPS is a powerful tool for measuring customer loyalty and satisfaction in sales and marketing. By understanding customer sentiment and addressing feedback, businesses can strengthen customer relationships, drive growth, and improve overall performance.