Net promoter score (NPS) is a metric companies use to gauge customer satisfaction. In its most basic form, NPS measures how loyal customers are to a company by asking a single, broad-reaching question: “How likely are you to recommend [this company or product] to a friend or colleague?”
The survey then allows users to answer on an 11-point scale, from zero to 10.
While NPS looks uncomplicated, the system and its scoring have decades of best practices behind them and provide companies with a sometimes staggering amount of insight. NPS can help you to measure competitive benchmarks and gain experience feedback on specific parts of your business, depending on how and where you implement your NPS survey. It can also help you understand customer relationships and loyalty, allowing you to improve individual interactions and experiences for users.
Understanding net promotor score
Developed in 2003 by Fred Reichheld and Bain & Company, a global management consulting firm, the net promoter system was created as a way to gauge whether a single question could help indicate potential customer lifetime value. Since then, two-thirds of the Fortune 1000 and countless other companies have adopted NPS to assess customer satisfaction and test for product-market fit.
Net promoter score formula
According to Bain, the NPS score is simple. After asking, "How likely are you to recommend [this company or product] to a friend or colleague," you allow the respondent to answer on an 11-point scale, from zero to 10, with zero being the least likely and 10 being most likely.
From there, the NPS formula consists of the percentage of customers who answer with a 9 or 10 minus the percentage who respond with a zero to 6. Those who respond with a 9 or 10 are called "promoters," and those who respond with zero to 6 are called "detractors." Customers who answer with a 7 or 8 are referred to as "passives," and those responses are discarded.
In simplified terms, net promoter score looks like this:
Net promoter score scale
The net promoter score scale ranges from -100 to +100, with -100 being worst and +100 being best. Getting an accurate net promoter score requires a high number of responses, but the simplicity of the system makes it more likely you'll receive useful feedback.
Why is net promoter score important for startups?
Net promoter score matters for startups for several reasons, two of the main being:
- Measuring customer satisfaction and loyalty
- Gauging product-market fit
Net promoter score allows you to gauge how much your business is spreading by word of mouth, which is one of the primary ways small businesses and startups grow. The better your NPS, the more likely it is people are saying good things about your business. After all, if someone is willing to recommend your product to their friends or colleagues, they're not just saying you have a good product — they're putting their reputation on the line along with it.
Early in a startup's life, product-market fit is of utmost importance, too: Key performance indicators (KPI) on concepts like total addressable market, customer acquisition cost, and retention rate help inform whether your product has a healthy market and how much growth you should expect when you look to raise funds. Net promoter score allows you to collect data pertaining to these KPIs so you have a clearer picture of your product's viability.
How to measure net promoter score?
Again, calculating your net promoter score comes down to subtracting the percentage of detractors from the percentage of promoters. For example, let's say 60 percent of your respondents give you a 9 or 10, and 20 percent of your respondents give you a 0 to 6, and 20 percent give you a 7 or 8.
This means 60 percent are promoters, and 20 percent are detractors. To calculate your NPS, you’d then subtract the detractors (20) from the promoters (60) to get your final NPS score — in this case, 40.
The remaining question, then, is just how to get those responses to plug into your equation in the first place. Before you send an email blast to every one of your customers with an NPS question, stop to consider what you want to measure and why.
- Do you need feedback on your brand or a specific product?
- How will you store and analyze this data?
- Do you have the right customer segment to provide reliable data?
Once you've answered those questions, then it's time to implement a survey. That survey can take many forms: an email, a landing page following transactions, or automated messaging through an app or chatbot. Many companies offer solutions for implementing NPS surveys, including Qualtrics, SurveyMonkey, and Retently, just to name a few.
Regardless of how you implement your NPS survey, your focus should be a high number of responses — the more data points you have, the more accurate your NPS is likely to be.
How often should you measure NPS?
You should measure NPS anywhere from once a year to once a quarter to ensure you're keeping up with customer satisfaction without burning them out with constant surveys. According to Bain, many companies choose to implement software to ensure customers are surveyed at a maximum of once every three months and only on the most important experiences. This helps prevent overburdening the customer with feedback solicitation, which can add friction to the customer experience and potentially impact the quality of responses.
What is a good net promoter score?
There are several factors that can influence NPS, so it’s hard (read: impossible) to pinpoint a singular magic number that every company should aspire to. Generally, a score somewhere above 50 is a solid indicator that the different aspects of your business — sales, marketing, product, etc. — are not only meeting your users’ expectations but actually delighting them and creating meaningful value.
Still, Retently’s 2023 NPS Benchmarks do a good job of showing just how wide a range there is in average scores across the board — and this can be influenced by anything from industry and competitive landscape to business model. A B2C insurance company, for example, averages an NPS of 74, while B2C companies in software and services average a score of 9. Most B2B companies, on the other hand, sit over 30, with the highest NPS scores in consulting (67), technology & services (64), and construction (60). Looking into the benchmarks for your industry is crucial because that context allows you to see if your NPS is good, bad, or simply average in an apples-to-apples comparison with competitors in your space.
You should also expect your net promoter score to change over time. According to Joe Precopio, founder of Teaching Startup, it's common for your NPS to start high, as your most loyal customers and ardent supporters are most likely to provide feedback. After that, your NPS should level off, which doesn’t necessarily indicate negative progress — it could just be an indicator of broader adoption.
Keep in mind that customers on the extremes may skew results, too, as they're the customers most likely to share their opinions. Even so, NPS is one of the best ways to glean insights into your company — directly from the people who are in it.
Ryan Craggs