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Net Promoter Score: Definition & Examples

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  • 0:03 Net Promoter Score
  • 0:56 Respondents
  • 1:56 Calculating the NPS
  • 2:49 Purpose of NPS
  • 3:15 Lesson Summary
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Lesson Transcript
Instructor: William Pace
Net Promoter Score (NPS) is a mathematical equation that seeks to quantify customer loyalty and satisfaction. This lesson will walk through the basic definition of NPS and how it is calculated.

Net Promoter Score

Widgets, Inc., the world leader in widget manufacture and distribution, is looking for a quick way to measure if customers would recommend their widgets to their friends and family. How can the company do this? The answer is net promoter score (or NPS), a tool that quantifies the level of customer loyalty. Specifically, it measures how likely customers are to recommend the company, product, or service. Developed by management consulting and data analytics experts, it serves as an alternative to more traditional measures of customer satisfaction.

The NPS asks the question: 'How likely are you to recommend a product, service, or company?' It uses a scale of 0 through 10, where 0 is 'not at all likely to recommend' and 10 is 'extremely likely to recommend'.

Respondents

To utilize the net promoter score, Widgets, Inc. decides to send out a customer survey asking, 'On a scale of 1-10, how likely are you to refer our products or services to others?' They received 100 surveys back from respondents, which are the people who respond to a survey. Once Widgets, Inc. has all its respondents' surveys, it's time to divide them into the 3 categories of the NPS scale: promoters, passives, and detractors.

  • Promoters are respondents who respond with a 9 or 10 on the scale. They are likely to refer others and are likely to be loyal customers.

  • Passives are respondents who respond with a 7 or 8 on the scale. These respondents can be influenced to switch to a different brand/product through competitive offerings.

  • Detractors are respondents who respond with a 6 or lower on the scale. They can damage the brand or impede growth through negative referrals.

Calculating the NPS

So, how do you calculate the NPS? Well, the NPS is calculated as the percentage of promoters minus the percentage of detractors. Note that the scores of 7 or 8 are considered passives and are not factored in - that's why these respondents are called passives. To calculate the NPS, Widgets, Inc. starts by adding up all the 9s and 10s and finding the percentage of promoters. Then the next step is adding up all the scores of 6 or less and finding the percentage of detractors.

Let's say that Widgets, Inc.'s survey reveals that 40% are promoters and 30% of respondents are detractors. When we plug these numbers into our formula, we get:

NPS = 40% - 30%

Which gives us an NPS of 10 out of a possible score of 100.

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