Net Promoter Score (NPS) is a widely used metric that gauges customer loyalty and the likelihood that customers will recommend a company’s products or services to others. Developed by Fred Reichheld and introduced by Bain & Company and Satmetrix Systems in 2003, NPS is based on a single question: “On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?” Based on their responses, customers are categorized as Promoters (9-10 score), Passives (7-8 score), or Detractors (0-6 score).
Key aspects of NPS include:
- Simplicity and clarity: NPS is straightforward to implement and interpret, making it a popular choice among businesses of all sizes.
- Predictive power: Research has shown that NPS can be an indicator of growth and customer loyalty, as Promoters are more likely to make repeat purchases, remain customers for longer, and generate positive word-of-mouth.
- Actionable insights: NPS helps companies identify the reasons behind customer sentiment, enabling them to address concerns of Detractors and harness the enthusiasm of Promoters.
- Benchmarking: Companies can compare their NPS with industry benchmarks to assess where they stand in terms of customer loyalty.
NPS is particularly powerful because it cuts across different aspects of the customer experience to provide a single, understandable metric. However, while NPS offers valuable insights into customer loyalty, it is often used in conjunction with other metrics for a more comprehensive view of customer satisfaction and behavior.