NPS or Net Promoter Score is used by many companies to gauge customer satisfaction. Who hasn’t come across a question like -
“On a scale of 0 to 10, how likely are you to recommend our product / service to others?”
I guess no one.
While almost every product (tech or otherwise) has added this question to their feedback form, the pressing problem here is how many of them are using the responses appropriately? Before I jump into how to use NPS, let me explain NPS briefly.
Well, NPS was developed by Fred Reichheld as an alternative to traditional customer surveys. It is simple, easy to use and quick on follow ups. Simple because it is based around one ultimate question i.e how likely are going to refer the product to someone. Easy to use because it can be built into emails, messages, phone calls, app popups, etc. Finally quick on follow ups because it helps product managers and leaders quickly identify the problems and respond.
Now how to calculate your NPS? A lot of PMs get this wrong. You do not simply average the scores from customer responses. If you have been doing this, sorry my friend, you have been doing it wrong so far. To calculate NPS, you first need to understand what each option in the likert scale means. Well NPS helps you classify your customers into 3 different groups. And the options the customers pick are representative of the group they fall into.
To calculate NPS, you dismiss the passives and then subtract the % of detractors from the % of promoters. Let’s suppose you received 100 responses. 35 were between 0-6 (detractors). 20 were either 7 or 8 (passives) and 45 were either 9 or 10 (promoters). In that case -
NPS = (promoters - detractors)/(total respondents) * 100
= (45 -35)/100 * 100
The NPS score can vary between -100 and 100. And having NPS > 0 is a good sign.
But do you stop there? A smart product manager will not. You need to understand what does the NPS, and each of the three groups (Promoters, Passives and Detractors) mean for your product.
I have tried to list them down as follows.
This brings us to a point where you might be thinking if you should consider NPS as a KPI for your product. My suggestion is NO. Then, what is it good for? Well, NPS opens the door for further actions. Actions like incentivising Promoters for word of mouth marketing, or identifying gaps through follow-up conversations with Detractors.
Until Next Time.