Measuring Customer Loyalty: What to Know About Net Promoter Scores

The Net Promoter Score (NPS) is a management tool that is used to gauge the loyalty of a brand’s customers. Over two-thirds of Fortune 1000 companies today are using the metric to measure their customer loyalty, and many use it as a benchmark for measuring company performance and comparing it with industry competitors’. 

NPS is measured on a scale from 0 to 10, in which respondents select a number that fits their likelihood “to recommend this company to a friend or colleague.” Respondents are grouped into three categories: Detractors (0–6), Passives (7–8) and Promoters (9–10). The final response score is calculated by subtracting the percentage of detractors from the percentage of promoters and then multiplying by 100 to get a non-percentage number scaled between -100 to 100. 

What do the scores mean? If the final score is below 0, then more of the responders were detractors than promoters, which places the company in a “red flag zone” with its customers. Even if a company receives a poor NPS score (one that falls below 0), this can still prove to be an important insight into its customers’ perceptions and spur proactive problem-solving to see what’s causing the disconnect in customer loyalty. To receive a score of 0 is considered fair since it means a company has the same number of promoters as detractors. The real gold score is 50+, meaning a company’s proportion of promoters is at least 50 points higher than its proportion of detractors. 

The reason promoters are such a vital customer segment is that they are brand advocates and are associated with revenue growth. On average, a promoter will recommend a company to about 3.5 people and is more than 5 times as likely to make a repurchase. These customers are also much more forgiving of company errors or mishaps than are passives or detractors. Brands can increase their NPS score by focusing on the number of promoters and implementing responsive strategies to convert passives and detractors. 

Net Promoter Score, although seemingly very simple, is a quick and efficient resource to gauge the level of loyalty among customers through the likelihood of recommendations. For the metric to have a lasting effect on business, companies need to regularly survey their customers and communicate throughout the customer journey; keep track of customer responses, be they negative, positive or indifferent; and proactively address them. 

Written by Julia Gundlach

Keep reading in Insights