Modified on: Thu, 20 Oct, 2016 at 3:45 AM
NPS stands for "Net Promoter Score" and it is a measurement of customer loyalty.
Fred Reichheld first introduced the method in his article "One number you need to grow" (Harvard Business Review 2003) and further developed the theory in his books The Ultimate Question: Driving Good Profits and True Growth (2006) and The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World (2011).
A company's Net Promoter Score is measured by asking its customers one simple question: "Would you recommend us to a friend or colleague?" There are of course some slight variations on the exact phrasing of the question - but the key is the 'recommend' aspect. The customer is asked to indicate their likelihood to recommend on a 0-10 scale and is divided into one of three categories based on their score:
Score 0-6: Detractor
Score 7-8: Passive (also referred to as 'Neutral')
Score 9-10: Promoter
Based on all responses, the Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters. The percentage of detractors and promoters respectively is calculated based on the total number of responses, including the Passives:
%Detractors = Detractors / (Detractors+Passives+Promoters) x 100
%Promoters = Promoters / (Detractors+Passives+Promoters) x 100
NPS = %Promoters - %Detractors
The NPS can range from -100 (only Detractors) to +100 (only Promoters) although of course it would be extremely rare to reach those extremes.
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