What is a Net Promoter Score?

A net promoter score results from customer surveys or brief questionnaires that rate your services or product on a scale of 0 to 10. When you approach your customers after a successful transaction or after an encounter with your sales team, you gain access to honest and valuable feedback about your brand and its employees. You can also use these results to provide further employee training and reward those who went above and beyond to enhance customer experience.

What is NPS?

Many organizations use NPS as part of their customer relationship management strategy. As an easy and common metric used to determine customer perception and experience, NPS helps businesses measure customer loyalty and identify areas for improvement.

NPS traces its roots back to a 2003 Harvard Business Review article by Fred Reichheld titled “The One Number You Need to Grow.” Reichheld identified the “Would you recommend?” question as the strongest predictor of customer retention and word-of-mouth marketing, compared to other questions like “How satisfied are you with your business?”, “Does this company deserve your loyalty?” or “Do you intend to return?”.

Research shows that a 5% increase in customer retention can boost revenue by 25% to 95%. As businesses prioritize customer loyalty, understanding genuine customer sentiment through NPS becomes a powerful tool for driving long-term growth and profitability.

When customer support management budgets fall short, the consequences can be costly. Ineffective service can lead to customer dissatisfaction, which in turn can result in significant financial losses for companies. According to a study, customers switching companies due to poor service costs U.S. companies a total of $1.6 trillion. This highlights the importance of understanding and improving customer satisfaction, which is where the net promoter score comes into play.

NPS is crucial because it provides a clear, quantifiable measure of customer loyalty and satisfaction. Asking customers how likely they are to recommend a company to others gives businesses direct insight into how people truly feel about their brand.

Here are a few key reasons to track NPS: 

Increased customer satisfaction

A good customer service experience heavily impacts recommendations and increases satisfaction. NPS helps businesses track and improve this by gathering direct feedback on customer experiences. Research suggests that consumers who rate a company’s service as “good” are 38% more likely to recommend that company. By using NPS to identify and enhance positive touchpoints, businesses can boost satisfaction, leading to stronger customer loyalty and more word-of-mouth referrals.

Lower customer churn rate and increase retention

According to the Harvard Business Review, acquiring a new customer can cost five to seven times more than retaining an existing one. This makes reducing churn and boosting retention crucial for business growth. NPS acts as an early warning system for organizations to identify dissatisfied customers early and allow companies to address their issues before they lead to churn and financial loss.

Related: How to transform customer experience

Identifies brand advocates

90% of CEOs believe that the customer has the greatest impact on their business, and NPS helps pinpoint the loyal customers who are most likely to promote the brand. These brand advocates are crucial in spreading positive word-of-mouth, driving new customer acquisition, and strengthening brand credibility—all without any extra marketing spending.

By understanding who your promoters are, you can engage them in referral programs or incentivize them to share their positive experiences with others.

Better employee engagement

When customers are happy, employees feel more motivated and connected to their work. Research shows that companies that excel at customer experience have 1.5 times more engaged employees than less customer-focused companies.

A key metric that reflects this engagement is the employee net promoter score (eNPS), which measures employees’ likelihood to recommend their employer to a friend or a colleague. High eNPS indicates positive employee experience, further driving employee satisfaction and commitment.

How to calculate your NPS?

Calculating NPS is a straightforward process. Its effectiveness lies in its simplicity: a simple 0-10 scale of a customer’s likelihood to recommend your business, which lets organizations see customer sentiment and rank them into categories such as: 

Detractors (score of 0 to 6)

Unhappy customers who can damage your brand reputation through negative word of mouth. They may also churn quickly and share their poor experiences on public platforms, impacting customer trust and loyalty.

Passives (score of 7 or 8)

Satisfied but not enthusiastic enough to be considered loyal customers. While they aren’t likely to spread negative feedback, they also won’t actively promote your brand and may seek alternatives.

Promoters (score of 9 and 10)

Highly satisfied and loyal, often acting as brand advocates. Exhibit behaviors that benefit the company, such as making repeat purchases, referring new customers and referring others to the business.

NPS formula

To calculate your net promoter score, subtract the percentage of detractors from the promoters. 

NPS score = Detractors (%) – Promoters (%) 

Interpreting net promoter scores

Let’s say the categorization based on customer sentiment is 10% are detractors, 20% are passives and 70% are promoters. 

Your NPS is the percentage of promoters minus the percentage of detractors. In this case, 10% minus 70% will give you an NPS score of 60. However, is that a good NPS? Let’s find out. 

According to Bains & Company, who created the NPS formula, scores rank as follows:

• Above 0 is good. You can end up with a negative score, so 0 is still a good start. 
• Above 20 is favorable 
• Above 50 is excellent 
• Above 80 is fantastic

Net promoter score example

Now that we know how net promoter scores are calculated and interpreted, let’s take an example of how Nutanix — a global leader in cloud software achieved an internal NPS of 90+ every quarter for internal employee requests with the help of Simpplr intranet. 

Nutanix team led several tests to assess the capabilities and benefits of Simpplr intranet.

Check out what Amit Bhatnagar, Sr. Director of IT at Nutanix on how he led quantitative tests to prove ROI and demonstrated how a higher NPS drove meaningful change.

Related: Discover how Nutanix powers engagement with intranet innovation

How to run surveys to collect NPS and eNPS feedback?

A well-structured customer survey can reveal valuable insights into how customers view your brand, product, service, and overall experience. But as customer expectations evolve, traditional NPS simply can’t keep pace with increasing demands.

Therefore, extending NPS internally through eNPS (employee net promoter score) offers a deeper view into employee engagement and satisfaction, which directly impacts the customer experience. Just as a satisfied customer is likely to recommend your organization, a happy and engaged employee is likely to do the same. Conversely, a customer who has a poor customer experience will feel negatively toward your brand, just like a former employee who did not have a positive workplace experience.  

Leveraging an AI-powered employee experience platform with robust survey features can bridge this gap.

Introducing AI-powered Simpplr surveys

Investing in AI can help HR and IC leaders foster stronger connections with their teams, get better insights into how customers and employees feel, and take action based on these learnings. 
Simpplr Surveys capture rich feedback with built-in pulse, engagement, and ad hoc surveys and prompt action on the insights to improve the employee experience. Surveys help leaders understand employees’ needs through passive listening that continuously gathers millions of data points across the platform to detect emotions, sentiment and platform usage patterns.

These insights are then surfaced into dashboards, allowing organizations to proactively address potential issues, opportunities and trends — ultimately leading to reduced employee turnover and increased business growth.

Get a live demo to see how Simpplr surveys enhance eNPS scores.