What is the Net Promoter Score (NPS)?
The Net Promoter Score (NPS) serves as a key metric to gauge customer satisfaction and loyalty. Its widespread use can be attributed to its simplicity and effectiveness in capturing customer sentiment.
How is it measured?
NPS measurement begins with a straightforward survey question: "How likely are you to recommend [company] to a friend or colleague?" Customers are asked to provide a rating between 0-10, with 10 indicating the highest likelihood to recommend the product and 0, the least.
Based on their responses, customers are grouped into one of three categories:
0-6 – Detractors: These are customers who are dissatisfied with your product and are at a high risk of discontinuing its use.
7-8 – Passives: These customers are generally content with your product, although they may feel there are areas for improvement.
9-10 – Promoters: These are customers who are advocates for your product and would readily recommend it to others.
The calculation of the NPS doesn't merely involve averaging the scores from the total user responses. Rather, the percentage of detractors is subtracted from the percentage of promoters, resulting in an NPS score that can range from -100 to 100.
Why is it crucial to measure NPS?
NPS is not only an easy-to-compare benchmark among industry peers, but it also provides a comprehensive view of how customers perceive your company and product.
How should you utilize this KPI?
Like all metrics, NPS can be used to monitor customer sentiment about your product's direction over time, i.e., are customers becoming more or less satisfied? Furthermore, NPS allows for performance comparison. According to Delighted, the average NPS score among software companies is 41, with wide variations seen among companies such as Adobe, which reports an NPS of 60.
As per Ramin Shokrizadeh, a Senior Product Manager at Zendesk, NPS is also beneficial when analyzed within different customer cohorts. He states, "For web-based products, I primarily focus on the Net Promoter Score (NPS) and its trend over time, broken down by customer segment and persona type."
For more metrics that a product manager should track, check out: SaaS metrics for B2B products.