How to Calculate Net Promoter Score (NPS): The Complete Guide

Would your customers recommend you to a friend? That‘s the ultimate question at the heart of Net Promoter Score, or NPS. In today‘s hyper-competitive market, customer loyalty is everything. NPS gives you a straightforward way to measure and track it.

Consistently delivering positive customer experiences is the key to fostering loyalty, driving referrals, and growing your business. But you can‘t improve what you don‘t measure. That‘s where NPS comes in.

In this guide, we‘ll cover everything you need to know about NPS, including:

• What NPS is and why it matters
• How to calculate NPS step-by-step
• NPS benchmarks by industry
• NPS survey best practices
• How to analyze and act on NPS data
• Real-world NPS success stories
• NPS trends and predictions for 2024

By the end, you‘ll be armed with actionable insights to start leveraging this powerful metric in your own business. Let‘s dive in!

What is Net Promoter Score (NPS)?

NPS is a customer loyalty metric that measures how likely your customers are to recommend your company/product/service to others. It was introduced in 2003 by Bain & Company and has since been widely adopted by more than two thirds of Fortune 1000 companies.

NPS is based on responses to a single question: "On a scale of 0 to 10, how likely are you to recommend [company/product/service] to a friend or colleague?"

Responses are categorized into three groups:

• Promoters (score 9-10): Loyal enthusiasts who will keep buying and referring others, fueling growth.
• Passives (score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (score 0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

To calculate your NPS, subtract the percentage of Detractors from the percentage of Promoters.

The magic of NPS lies in its simplicity. It‘s an intuitive, straightforward metric that can be shared across an organization – from the C-suite to the front lines. But don‘t be fooled by its simplicity. Tracking NPS over time can provide powerful insights to help you optimize the customer experience, predict growth, and increase customer lifetime value.

Why NPS Matters

Maintaining a healthy NPS is vital to any company‘s long-term success. Here‘s why:

1. NPS is a leading indicator of growth. Customers who are willing to go out on a limb and recommend your company are your most valuable asset. They become an extension of your marketing team, bringing in profitable new business at little to no cost. According to Bain & Company data, a 12-point increase in NPS correlates on average with a 2x higher growth rate compared to competitors.

2. NPS helps you benchmark performance. Tracking NPS helps you understand how you stack up against industry benchmarks and competitors. It‘s a standardized metric that allows for apples-to-apples comparisons. Knowing where you stand can help inform strategic priorities and investment decisions.

3. NPS uncovers roadblocks and opportunities. The qualitative feedback you collect alongside your NPS survey is a treasure trove of insights. It highlights what customers love about your brand – so you can do more of it. And it flags frustrations that could be damaging loyalty and holding back growth. Many companies are surprised to find that a single overlooked issue or unmet need is preventing scores of customers from becoming Promoters.

4. NPS aligns your organization around the customer. From executives to frontline employees, giving everyone visibility into your NPS cultivates a sense of shared responsibility for the end-to-end customer experience. Many companies go a step further and tie a portion of variable compensation directly to NPS performance, underscoring just how important it is to the bottom line.

To sum up, NPS packs a big punch for such a simple metric. It helps you quantify the health of your customer relationships, pinpoint areas for improvement, and predict future growth. According to CustomerGauge, companies that sustain high NPS scores (+70) for 3+ years grow 2.5x faster than the market.

NPS Fun Fact:

Apple, famous for their cult-like customer loyalty, has an NPS of 47 according to customer service platform Nice Reply. While 47 may not sound impressive, it‘s nearly 2x higher than the average NPS for consumer brands!

NPS Benchmarks by Industry

A ‘good‘ NPS is relative to your industry, your region, and your company‘s stage of growth. Always benchmark against similar firms for an apples-to-apples comparison.

Here are the average NPS scores by industry according to the 2022 NPS Benchmarks Report:

Industry	Average NPS
Department/Specialty Stores	58
Tablet Computers	52
Brokerage/Investments	50
Auto Insurance	49
Laptop Computers	49
Home/Contents Insurance	48
Grocery/Supermarkets	40
Hotels	40
Life Insurance	38
Banks	37
Credit Cards	36
Drug Stores/Pharmacies	33
Travel Websites	33
Airlines	30
Cellular Phone Service	27
Cable/Satellite TV Service	-1

As you can see, there‘s a wide range. Retailers tend to score high, while subscription services like cable and cellular providers often struggle to earn their customers‘ enthusiastic endorsement.

The most successful companies aim to exceed their industry‘s benchmark and then work continuously to maintain that lead over time. However, it‘s important not to get too caught up in comparisons. Every company is unique. The most important benchmark will always be your own past performance.

How to Calculate Your NPS in 4 Steps

Now let‘s get into the nitty-gritty of how to calculate your company‘s NPS:

Step 1: Conduct an NPS survey

Start by identifying which customers you want to survey. You may choose to survey your entire customer base or focus on a specific segment, like recent purchasers or long-term subscribers. Just be sure to select a large enough sample (ideally n>100) to get a representative mix of responses.

Next, create your NPS survey question:

"On a scale of 0 to 10, how likely are you to recommend [company/product/service] to a friend or colleague?"

Follow this with an open-ended question asking respondents to explain their rating in their own words. Something like:

"What‘s the primary reason for the score you gave us today?"

This is optional but highly recommended. The unstructured feedback you collect here is pure gold for understanding the ‘why‘ behind your score and identifying tangible ways to improve it.

Finally, choose your survey distribution channels. Common options include:

• An email survey
• SMS survey
• In-app or website pop-up
• Phone surveys (IVR)
• Physical mailer

Consider which channels are likely to generate the highest response rates with your customers. You may need to experiment with different formats and timings to find what works best.

Step 2: Categorize the responses

Once you‘ve collected responses, tally how many fall into each of the three NPS categories:

• Promoters (9-10)
• Passives (7-8)
• Detractors (0-6)

For example, say you receive 100 survey responses, with this breakdown:

• 50 Promoters
• 30 Passives
• 20 Detractors

Step 3: Calculate the score

Here‘s the magic Net Promoter Score formula:

NPS = % of Promoters – % of Detractors

Calculating percentages is an extra step that is sometimes overlooked. You can‘t just subtract the number of Detractors from the number of Promoters. You need to calculate the percentages first.

Using the example from Step 2, we have:

• 50% Promoters (50 Promoters / 100 total responses)
• 20% Detractors (20 Detractors / 100 total responses)

NPS = 50% – 20% = +30

An NPS of +30 would be considered ‘good‘ in most industries. Anything positive means you have more Promoters than Detractors. But you don‘t want to settle for good! The most successful, beloved companies achieve NPS scores of +70 or even +80. That should be the long term goal.

Step 4: Analyze the qualitative feedback

Finally, review the qualitative feedback you collected alongside the NPS rating question. This is where the real insights lie!

Read through each comment and assign topical tags like "customer service", "product quality", "price", etc. so you can quantify the most common themes.

For Promoter comments, what do they love most about your offering? How can you amplify those aspects to turn more Passives into Promoters? And for Detractors, what nearly caused them to churn? These are the gaps you need to close to maximize loyalty and retention.

Failing to dig into the qualitative feedback is a huge missed opportunity. There‘s a reason why you‘re asking for open-ended comments, after all. The insights gleaned here should serve as a direct roadmap for prioritizing improvements.

Follow these four steps on a consistent basis (monthly or quarterly) to track your NPS over time and quantify the impact of the changes you implement. Before you know it, you‘ll have an army of enthusiastic Promoters fueling your growth!

NPS Survey Best Practices

To get the most actionable results, be sure to follow these NPS survey best practices:

1. Use the standard NPS question and 0-10 scale. This ensures your results are comparable to industry benchmarks. ‘Likelihood to recommend‘ has also proven to be the most reliable indicator of growth compared to other loyalty questions.

2. Make it easy and quick for customers to respond. Limit yourself to 1-2 questions and aim to keep the survey under 60 seconds. The more frictionless the experience, the better your completion rate will be.

3. Customize the open-ended feedback question as needed. While you want to keep the NPS question itself consistent, you can tailor the follow-up to probe on specific aspects of the experience. For instance, after a support interaction, you might ask, "What did you love and what could we have done better?"

4. Choose your timing wisely. With relationship surveys, be mindful of other company communications, holidays, and external events that could influence scores. For transactional surveys, strive to follow-up within 24 hours of the interaction while it‘s still fresh.

5. Commit to closing the loop. Develop a process to ensure you follow-up with every Detractor (and as many Promoters as possible) within 48 hours of a survey response. This demonstrates that you value their feedback and are committed to making things right.

Remember, your survey is only as good as the insights you glean and the actions you take. Choose your questions wisely, review feedback promptly, and continue iterating over time.

NPS Success Stories

Lots of companies collect NPS data. But the best companies consistently take action on that data to drive meaningful improvements. Here‘s how one company does it.

Case Study: How Airbnb Uses NPS to Improve the Host & Guest Experience

Airbnb is a master at using NPS data to optimize the end-to-end experience for both hosts and guests. The company sends NPS surveys after every single stay.

Airbnb‘s Insights team analyzes the NPS feedback to identify the key drivers of great (and not-so-great) stays. For instance, they found that Detractor scores spiked when guests encountered an inaccurate listing, an unresponsive host, or an unclean space upon arrival.

In response, Airbnb instituted a number of initiatives to help hosts improve in these areas, such as:

• Enhanced photography services to help hosts showcase their listings more accurately
• More robust host profiles to set clearer guest expectations upfront
• Tools and checklists to help hosts communicate promptly and deliver a consistent cleaning experience
• A premium Superhost program to reward and recognize top-performing hosts

The insights team also zooms out and analyzes NPS feedback across dimensions like geography, price point, and property type. This helps them spot bigger opportunities for the business. For instance, NPS data helped quantify the opportunity to expand Airbnb‘s offerings to include boutique hotels and guided local experiences (not just spare bedrooms). Both are now multi-million dollar lines of business.

Since instituting its guest feedback program, Airbnb‘s NPS has steadily climbed and now stands at a whopping 74 (the highest in the hospitality industry).

The takeaway? NPS insights are only as powerful as what you do with them. Successful companies like Airbnb religiously collect and analyze the data, share it widely across the organization, and use it to drive tangible improvements in the customer experience. And clearly, it pays off.

NPS Trends & Predictions for 2024

As we look ahead, I predict NPS will only become more vital to business success. Here are some key trends I‘m watching:

1. More predictive NPS: The most cutting-edge companies will leverage AI to predict individual customer NPS scores and churn risk in real-time based on behavioral and demographic data. This will allow for proactive intervention before Detractors take their business elsewhere.

2. Greater focus on employee NPS (eNPS): Companies are realizing that employee experience is inextricably linked to customer experience. More firms will measure and work to improve eNPS alongside customer NPS.

3. Deeper NPS analytics: Customer experience (CX) teams will invest in more sophisticated text analytics tools to mine NPS feedback for richer insights. Forward-thinking leaders will push for these insights to be shared more widely across the organization to drive cross-functional collaboration and alignment.

4. NPS across the journey: NPS programs will expand beyond relational surveys to track scores at key customer journey milestones. The goal will be to understand loyalty drivers across all touchpoints – from initial consideration to purchase, onboarding, support, renewal and beyond.

5. More holistic CX metrics: NPS will remain a critical metric, but it won‘t stand alone. Firms will triangulate NPS with other CX measures like customer satisfaction (CSAT), customer effort score (CES), churn rate, and customer lifetime value (CLTV) to get a complete picture of the health of customer relationships.

The future of NPS is bright. But to truly benefit, companies need to weave the voice of the customer into every aspect of their operations and rally every employee around improving those scores. It requires unwavering commitment from the top-down to make customer centricity a keystone of the culture.

Conclusion

In a world where customer expectations are sky-high and switching costs are low, delivering consistently stellar customer experiences is the only way to rise above the fray. Net Promoter Score is a deceptively simple but incredibly powerful way to gauge how well you‘re meeting those expectations and where you can improve.

By tracking NPS over time, closing the loop with detractors, and mining feedback for actionable insights, you can create more promoters, drive more referrals, and ultimately, grow your business.

Bain & Company‘s own research found that NPS leaders in a given industry grow 2x faster than the competition. Why? Because promoters have been found to buy more, stay longer, and refer friends. All of which leads to higher customer lifetime value and a healthier bottom line.

But a high NPS doesn‘t happen by chance. You need to build the right systems, processes and culture to collect, analyze and act on customer feedback continuously. It requires investment and long-term thinking. But for companies that get it right, the pay-off is immense.

So, what are you waiting for? Send out that first survey and start harnessing the power of NPS to take your customer experience to new heights!