What is NPS? Everything You Need to Know About Net Promoter Score

Before we get to the shortcomings of Net Promoter Score® – and there are indeed a few shortcomings, like being required to include this ® symbol – let’s first dish out some props.

After all, Net Promoter Score, or NPS®, was hatched way back in 2003, and it’s still going strong.

NPS has been around so long, in fact, that the article first introducing it makes multiple references to AOL, including this one: AOL’s “customer service lapsed, to the point where customers couldn’t even find a phone number to contact company representatives to answer questions or resolve problems.”

In other words, NPS is from an era when AOL was a big player, and when customers’ primary way to contact companies was telephone.

NPS has been around longer than Facebook, longer than Gmail, and quite a bit longer than the iPhone. So good on Net Promoter Score for still plugging along despite being relatively ancient. 

But as with most things from 2003, the last 15 years have introduced some better options, especially for scrappy online store owners. (Scrappy online store owners, of course, are another thing that popped up largely after NPS.)

Today we’ll go over everything you need to know about Net Promoter Score — including some alternatives that are a little more this decade.

What is NPS?

Net Promoter Score, also known as NPS, is a gauge of customer satisfaction and loyalty. A business’ NPS hinges on answers to a single, specifically worded question asked to customers: How likely are you to recommend our product or service to your friends or family? Responses range from 0 (very unlikely) to 10 (very likely). 

Customers are lumped into three groups based on their responses:

  • Promoters, who answer 9 or 10
  • Passives, who answer 7 or 8
  • Detractors, who answer anything from 0 to 6

Once a company has a healthy number of responses — there is no minimum requirement, but the more the better – they can be dropped into the Net Promoter Score formula. The formula subtracts the percentage of Detractors from the percentage of Promoters. Passives, those who answered 7 or 8, are not directly incorporated into the formula, but they do impact the overall score.

If you have 60 Promoters and 40 Detractors, then your NPS is 20: 60 – 40 = 20.

However, if you have 60 Promoters, 40 Detractors, and 50 Passives, then your NPS would be a bit lower. Now you have 150 total responses instead of 100, so even with the same number of Promoters and Detractors, your final score isn’t as good.

Sixty out of 150 is 40 percent, and 40 out of 150 is 27 percent. Now the NPS formula looks like this: 40 – 27 = 13.

The higher a company’s NPS, the better. The max score is 100 — that would be 100 percent Promoters without a single Passive or Detractor.

Why Net Promoter Score is Still Relevant

You might cringe a little bit when you read stuff like this from Frederick Reichheld, who helped create NPS: “This number is the one number you need to grow. It’s that simple and that profound.” Riiiiight.

Net Promoter Score is definitely a little stuffy compared to other goodies in the ecommerce store toolkit. Even so, NPS does have some strengths. Let’s look at three biggies.

It makes you focus on customer satisfaction

There are a few reasons that the Shopify app makes that beautiful ka-ching sound every time you make a sale but is dead silent every time you have a happy customer.

First off, sales are the main goal or your store and every store. They should be celebrated. Second, sales are quantifiable in a way that customer happiness isn’t: A purchase is recorded with the click of a button. Happiness isn’t quite as cut and dry.

That said, customer satisfaction, customer retention, and customer loyalty are vitally important. And Net Promoter Score reminds us that customers are still relevant after the ka-ching. They can choose whether or not they buy again, for one thing, and keeping existing customers is cheaper than going out there and finding new ones.

In addition, past customers can have a big impact, good or bad, on how your brand is perceived. Maybe an unhappy customer’s nasty tweet is the second thing that pops up when someone searches for your account on Twitter.

Net Promoter Score is helpful in forcing us to remember there is a world after the purchase.

Identify trends

The real world is not as cut-and-dry as the NPS world. Here, for example, is how NetPromoter.com describes “Promoters” versus “Passives”:

Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.

Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.

It’s not like NPS respondents are thinking in these terms when they answer. An 8 could be just as satisfied as a 9, yet one is considered unenthusiastic while the other is fueling growth.

But even if we admit NPS isn’t science — and it’s not — it’s still valuable for identifying trends. If you get enough responses over a long enough period of time, then patterns emerge. So if a Net Promoter Score of 27 is, for all practical purposes, identical to a Net Promoter Score of 28, these numbers gain meaning when compared to scores from last quarter, or last year.

Sure, 29 by itself doesn’t mean anything. But 29 definitely means something if that number used to be 15.

You can do something with it

A weakness of NPS is that it’s too simplistic — treating treating 6s the same as 1s, for example. But we can twist this weakness into a strength, as well.

By lumping people into three groups, oversimplified as they may be, NPS responses become actionable.

You know that anyone who answers 0 to 6 isn’t super excited. This single NPS group includes “totally furious and talking trash on social media” and “not mad but also not that happy.” Those are very different attitudes. But either way, we know that there is room for improvement.

NPS lets us create messaging, emails, and discounts tailored for certain groups of customers who share at least roughly the same opinion of your business.

Detractors require some nurturing (or maybe even some apologizing). Passives require a little nudge to turn them into true fans. And Promoters, meanwhile, require maintaining the status quo. And thanks to NPS, there are clearly defined groups to work with.

Once you figure out how you want to address different NPS groups, you can cook up campaigns to do exactly that. And there are tools to help you.

For example, Customer.guru is an app in the Shopify app store that you can use to ask that magically worded NPS question on your website. It then automates what happens next based on the responses you get.

Someone who answers “7” can be directed to a landing page for Passives — where maybe they find a discount code — while your Promoters get directed to a different landing page — where maybe they’re asked to write a review. You can also push your NPS data from Customer.guru to Facebook and AdWords to customize your ads and bids for different NPS groups.

MailChimp also has some simple ways for you to leverage NPS answers. You can use the small business-friendly email tool to ask the NPS question — just embed it directly in an email — and then use the responses to create segments. Then tailor your next round of messages based on those NPS segments. Send one campaign to your Detractors, another to your Passives, and then roll out the red carpet for your Promoters.

And so this is where we can quote Reichheld again — not to roll our eyes, but to highlight something that is spot-on: “In short, a customer feedback program should be viewed not as ‘market research’ but as an operating management tool.”

NPS can be a valuable management tool to push the right buttons with your different groups.

Why NPS is Far From Perfect

Okay, so that’s the good. NPS is popular for lots of reasons.

There are limits to NPS, however. Now for the not-as-good.

The whole idea of “recommending” has changed

Let’s revisit that NPS question again: How likely are you to recommend our product or service to your friends or family?

NPS hinges entirely on the verb recommend. And just think about how much the meaning of that word has changed.

What did it mean to recommend something in 2003? No, seriously, I don’t remember.

NPS predates today’s biggest recommendation platforms like Facebook, Twitter, Instagram. The rest of our recommendations these days seem to come from algorithms. Shows on Netflix, songs on Spotify, products on Google Search.

The NPS meaning of recommend is from an era when “word of mouth” literally meant speaking aloud to someone about a recommendation.

“How likely are you to recommend” is 2003 speak for How likely are you to click a Like button? How likely are you to post a picture? How likely are you to click the smiley emoji? 

It’s not designed for small ecommerce businesses

NPSBenchmarks.com held an “Ask me anything” session with Jørgen Bo Christensen, author of the book Next Generation Net Promoter. In the session, Christensen was asked how frequently a company should give NPS surveys to its customers.

He replied, “First my short answer: We recommend to survey customers four times a year or more.”

What?!

This answer shows the disconnect between the aims of NPS and the realities of your online business. Most online store owners would be pleased if someone makes four purchases over the course of a year. And even if you hit that ambitious mark, a 1-to-1 ratio between purchases and NPS surveys seems a bit out of whack.

Whoever this four-times-a-year advice is intended for, it’s not merchants running small ecommerce stores.

There are better uses of your time

Which brings us to this: If you want to accomplish what NPS sets out to accomplish — increase customer loyalty and leverage happy customers to spread the word about your brand — then there are more impactful ways you can spend your time.

Store owners know better than anyone that there are opportunity costs to every campaign, improvement, and channel that gets launched. So use your time and energy to get customers to do stuff that will be more impactful than answering the NPS question.

What’s more impactful than answering the NPS question? Take your pick:

  • Ask customers to write product reviews, and hook them up with discounts when they do
  • Engage with customers on social media
  • Optimize the notifications that customers get at different stages of the sales funnel — cart abandonment, order confirmation, shipping update, follow-up thank you after delivery, etc.
  • Make your website better, whether that means creating more content, writing fresh product descriptions, or doing some SEO homework

This list could go on for awhile before we get to “Ask your customers the NPS question, compare your score to last quarter, and launch marketing campaigns for your three NPS groups.”

Net Promoter Score Recap (tl;dr Version)

Alright, let’s quickly go over what we’ve learned about NPS. That way, when we ask, “How likely are you to recommend this post to your family or friends,” you’ll answer 10.

What’s NPS again?

NPS is a system used to quantify customer satisfaction and loyalty. Answers, given on an 11-point scale from 0 to 10, are plugged into a formula that gives businesses their Net Promoter Score. Respondents are lumped into three groups — Promoters, Passives, and Detractors — based on how they answer.

What’s cool about NPS?

NPS can be a valuable tool. It forces businesses to consider satisfaction, not just sales and revenue. It also helps identify in which direction your customer satisfaction is trending so you know whether you should double down on what’s working or trying something new. And finally, even though the different NPS groups aren’t scientific, they give you something to work with as you craft your campaigns.

What’s less cool about NPS?

The biggest thing here is that there are better ways to cultivate customer satisfaction and loyalty. These days — 15 years after NPS was created — you can use social media, apps, email, and lots more to make your customers so happy that they recommend your product or service to friends and family.

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