Net Promoter Score® (NPS®)

This tool identifies customers' likelihood of making recommendations.

by Alberto Scappini
Business Analytics Manager, Professor Data Analytics, AuthorFollow 101

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Description
The value of customers is generally calculated using only the variables spent and the frequency of purchases. Nevertheless, customer value can be created in many other ways. For example, if they recommend the service to other potential buyers. The "word-of-mouth" tactic is fuelled by social networks, metasearch websites or portals that provide customer feedback.

When customers give positive recommendations, this can increase sales and allow companies to save of advertising costs. The Net Promoter Score® (NPS®) is an indicator that estimates the probability of recommendation of a group of customers based on the recommendation intention of single customers. The concept was invented and trademarked by Fred Reichheld, Bain & Co, and Satmetrix.

Surveys are used to collect the data, and respondents are asked to score from 0-10 the probable of recommending the product or service. A score of 9-10 is considered a real promoter, while 6 or below are the detractors. A score of 7 to 8 are considered passive as even though they would recommend it, the reality if they do not end up recommending. The NPS® is the percentage of promoters minus the percentage of detractors.

This Best Practice includes
1 Excel Template