What is the Net Promoter Score Formula?

You have a savvy business mind. When it comes to your company, you take every measure possible to understand your internal processes.

Metrics for your revenue, profit margin, and overhead are a part of your daily life. But are you missing something vital?

What key performance indicators do you have in place to measure your customer experience satisfaction?

When it comes to understanding your customers, the facts are scary. Here’s the harsh truth about the how little information you’ll gather from them if you don’t ask:

These numbers mean the majority of negative feedback goes completely unheard. Obviously, measuring your customer service experience is key to success: your customer retention rate relies on it. But, how do you collect data on customer satisfaction?

Let’s discuss one of the easiest, most useful, proven effective ways to do it. Your Net Promoter Score.

in the shoes of you customer - customer experience consulting

What is a Net Promoter Score ®?

Simply put, Net Promoter Score ® places a value on your existing customer’s likeliness to refer you. It’s also a great measurement of their satisfaction.

The Net Promoter Score ® index ranges from -100 to 100. The closer you are to a score of 100, the better of an overall impression you’re making on your customers. This means higher customer retention and more referrals.

It basically answers this: Was your customer so satisfied they became a loyal fan of your business and spread the word about your product or services?

Only the happiest customers will pass on the decision to work with you to their friends or colleagues.

Measuring your score is a proactive approach to giving this a quantifiable metric. The number can provide you with insight, which can then guide you to create actionable plans for improvement.

There’s more to having a good NPS score than getting referrals. In the end, it can help you increase growth and get more profits.

Read on to find out how.

How do you measure and stay up-to-date on your Net Promoter Score?

So how do you find out your score? Your Net Promoter Score ® is calculated by asking customer’s one simple question:

“On a scale from 0 to 10, how likely are you to recommend this business to a friend or colleague?”

thinking about net promoter score formula

 

Based on their answer, the customer is then placed in one of three categories:

  1. Detractors

This group gives a rating equal to or lower than 6. They’re not really satisfied with the products or services. They will, without a doubt, consider competitors for similar solutions in the future. And they wouldn’t recommend your company.

  1. Passives

These customers provide a rating of 7 or 8. They’re not really unimpressed… but they’re not enthusiastic, either. While they might come back to you again in the future, they’re not going to recommend you to others.

  1. Promoters

These ecstatic customers rate their desire to share your company’s name as 9 or 10. Not only are they completely satisfied with your products or services, they’ll go out and shout your name to the world. They’re going to come back, and they’re going to bring friends.

The Net Promoter Score formula is simple. It’s your percentage of Promoters minus your percentage of Detractors. Here’s what it looks like:

NPS graphic 1

A negative score happens when you have more Detractors than Promoters. A positive score happens when more customers are recommending you than not. The latter is, of course, where you want to be.

The simplicity of calculating and interpreting the score makes it easy to explain to management and front-line employees alike. It gives them a digestible explanation of how your services and products are doing from a consumer’s perspective.

Savage Consulting likes to call this point-of-view in the shoes of the customer. It’s one of the most beneficial ways you can look at your business. For more information on how to evaluate your business from this angle, check this page out. Or, hop on the phone with a consultant.

 

This score matters. Let’s use a tree analogy to explain why.

Everything your company is built on is the trunk, constantly feeding nutrients to every department, the branches. Your customers are the leaves.

A low promoter score can be an early warning sign that your company is doing something wrong at the roots, and it’s ultimately spreading to your branches. The branches then begin to fail at providing to all the leaves, your customers.

The more leaves that walk away as Passives, the more yellow leaves your tree has. When they become Detractors, they turn brown and fall off. Promoters are your green, healthy leaves.

And profits are your sunshine. Green leaves help you gather the sun… your Promoters are the key to more profits. Check out our Net Promoter Score Infographic for a visual of this idea.

The average Net Promoter Score varies greatly by industry. The question “What should my Net Promoter Score be?” has a complex answer. But let’s try and break it down a little bit.

net promoter score formula industry chart

[source] NetPromoterNetwork.com

To truly understand where your success on the scale lies for Net Promoter Score, you have to compare yourself to others in your industry. This is how you get the truest rating.

But it’s always a good goal to shoot higher than the industry average. For example, the overall NPS rating across industries is only 16… and as a company that values customer service satisfaction, you can aim higher than the overall average.

Departments stores, on the other hand, have an average NPS of 58. They’ve set the bar high, but if that’s your industry, it still needs to be beat to remain competitive.

Why should you run your business through the Net Promoter Score Formula?

You may still be asking why this matters. It’s nice for people to like you and talk about your company in a positive way, but what can it really do for your business?

Hint: it’s about more than repeat customers.

The fact is, companies who have a higher Net Promoter Score® enjoy more success and faster growth rates than similar companies. So your standing does have a direct impact on sales and development.

Here’s a real-world example.

Net Promoter Score Case Study: The Macquarie Telecom Group

Here’s a case study from the 2016 general annual meeting for the Macquarie Telecom Group. They shifted their customer experience focus using NPS as the rating for measurement. This chart shows some of the benefits they experienced shortly after.

net promoter score formula case study

[source] MacquerieTelecomGroup.com

As you can see from the data, their renewed focus on increasing NPS had a direct correlation with their customer retention rate and cross selling.

Why would you work excruciatingly hard to constantly gain new customers… when you can foster your relationship with the existing ones? And then sell them more products!

The benefits are obvious. Less money spent on marketing, more clients coming to you. Net Promoter Score is an easy investment in inbound marketing and upselling.

And when it comes to selling, here are some more stats. Net Promoter Score has a direct correlation to your existing customer’s future purchase intentions. Here’s a chart depicting this based on a report by Temkin Group this year (get the full report here).

net promoter score formula and purchase intention correlations chart

Just calculating your Net Promoter Score, however, isn’t enough to get all these benefits. Yes, there needs to be a company-wide approach taken to regularly and accurately measure your score. But insights must also be interpreted and turned into actionable plans for improvement.

Final Thoughts on How to Use NPS

Senior leadership must be the ones to incorporate NPS as a company standard. One department alone, from marketing to customer service, isn’t enough to meet the requirements for NPS accountability.

However, when the company’s top management does take an organization-wide approach to implementing Net Promoter Score as a standard, it can be effective.

But there needs to be more than just number collection. The feedback has to be properly analyzed and turned into actionable insights for all employees in order to truly benefit the business. Information and feedback on the company’s NPS must also be understood by all levels of the organization.

Without this action, the NPS is simply a number.

So how do you do this? We can help. Using the tactics of the best boutique consulting firms, Savage Consulting does an in-depth Net Promoter Score Analysis to identify your score, create actionable plans, and improve the customer experience.

Contact us today to book a free consultation and learn how.

We offer a customer experience evaluation from in the shoes of the customer. Check it out here.



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