A good way to measure the likability of your product is to determine whether your current users are likely to recommend the product to other potential users in their network.
The Net Promoter System is an efficient way to do exactly this. Its flagship metric, Net Promoter Score (NPS), is a key KPI for this system.
Table of contents
- What is a Net Promoter Score (NPS)?
- How is Net Promoter Score calculated?
- What is considered a good Net Promoter Score?
- How to measure Net Promoter Score
- What is a good NPS score depends on the industry
- Other factors that impact Net Promoter Score
- How to improve your Net Promoter Score
What is a Net Promoter Score (NPS)?
Net Promoter Score (NPS) is a metric that measures customers’ satisfaction and loyalty toward your product or company. It’s a function of how likely your customer is to recommend your product or company to other customers.
How is Net Promoter Score calculated?
To calculate the NPS, start by asking your customers to participate in a survey.
A typical NPS survey prompts customers to rank how likely they are to recommend your product on a scale of 0 to 10 (both inclusive). A score of 0 indicates that the user is extremely unlikely to recommend your product; 10 indicates that the user is very likely to do so.
Customers are categorized into three groups based on the scores they give:
- Detractors (not likely to recommend) — Customers who give a rating of 0–6
- Passive — Customers who give a rating of 7 or 8
- Promoters (extremely likely to recommend) — Customers who give a rating of 9 or 10
Once you have this feedback from your customers, the NPS is calculated using the following formula:
NPS = % of Promoters – % of Detractors
For example, let’s say we surveyed 100 customers. Of those 100, 60 customers were promoters, 30 were passive, and 10 were detractors.
NPS would be calculated as follows:
60 – 10 = 50
What is considered a good Net Promoter Score?
As you might be able to tell from the formula above, Net Promoter Score ranges from -100 to 100.
An NPS of -100 would suggest your user base is composed solely of detractors and no promoters — which would be the worst-case scenario. An NPS of 100, meanwhile, would indicate the best-case scenario: all promoters and no detractors.
While there is no one-size-fits-all scale to gauge what constitutes a “good” NPS, here’s a general rule of thumb:
| NPS score | What it means |
| NPS = 70+ | Excellent |
| NPS = 50–69 | Strong |
| NPS = <49 | Good, but with room for improvement |
| NPS = <0 | Poor; needs major improvement |
Leading companies and products generally have an NPS of 70 or above, but that’s not always the case.
For example, the following companies had sub-70 NPS scores in 2018:
- Paypal — 63
- Amazon — 54
- Netflix — 64
- Google — 53
- Apple — 49
How to measure Net Promoter Score?
One of the most common ways to measure Net Promoter Score is through user feedback and surveys. However, there are a few platforms out there that can help you collect survey data to calculate NPS.
SurveyMonkey is one of the most well-known platforms that enables you to quickly create and send out an NPS survey to your users. You can share the survey easily by sending a link via email or SMS or posting it on social media.
Retently is another tool that can be useful for collecting NPS data, distinguished for its wide range of customization features. Retently enables you to manipulate your survey to target specific customer segments and create powerful workflows based on conditions.
Over 10,000 top businesses rely on AskNicely, another outstanding platform, to get vital customer experience (CX) data. For companies looking to combine their NPS data collecting with SalesForce, AskNicely is a fantastic alternative.
What is a good NPS score depends on the industry
Net Promoter Score does not travel well between industries. A certain Net Promoter Score might be considered “good” for one industry but not for another.
For example, companies that work in the consultation sector usually see a higher average NPS because the industry runs on networking and referrals.
The same cannot be said for the gig-work industry. For example, Uber drivers might be disinclined to recommend Uber to fellow drivers because they don’t want to increase their competition for available rides.
As of June 2022, Tesla had the highest NPS of 96, followed by Starbucks at 77. Netflix came in fourth place with an NPS of 68.
Now, Netflix shouldn’t compare itself to Tesla or Starbucks because it does not compete in the same market. Netflix can, however, compare itself to Amazon, which has a NPS of 62.
NPS for B2C vs. B2B industries
B2C businesses generally have a faster sales process along with a comparatively larger audience base. These factors make them good candidates for NPS surveys, but they have a relatively lower average NPS.
NPS benchmarks for the B2C industry (2021):
| Industry | Net Promoter Score |
| Grocery | 33.3 |
| Streaming Media | 32.2 |
| Parcel Delivery | 27.7 |
| Social Media | 25.3 |
| Automobile | 24.3 |
| Food Delivery | 22.9 |
| Software | 19.5 |
| Hotel | 17.2 |
| Utilities | 15.9 |
| TV/ ISP | 12.3 |
| Car rental | 4.8 |
B2B businesses tend to have a tight network of customers. Even if the customer base is small, because of the tightness of the group, the NPS tends to be relatively higher.
NPS benchmarks for the B2B industry (2021):
- Architecture – 64
- Manufacturing – 51
- Commercial Construction – 50
- Design Services – 49
- Engineering – 47
- Banking – 46
- Software development – 44
- Commercial real estate – 43
- HR services – 42
- IT services – 42
- B2B software – 42
- Building Services – 41
- Management Consultancy – 36
- Insurance – 34
- Digital Marketing Agency – 30
Other factors that impact Net Promoter Score
As noted above, what constitutes a good Net Promoter Score varies widely across industries. Other factors that can affect the Net Promoter Score include:
Competition
When it comes to NPS, the competitive landscape plays an important role.
If your industry is a fairly closed market with fewer players, the bigger players can easily control the market.
Fewer players would mean that users have a limited number of choices, so it’s natural for them to have relatively lower expectations. This could lead to higher user satisfaction and hence, higher NPS.
For example, Tesla is one of the biggest players in the self-driving car market and it doesn’t have many serious competitors. So Tesla can essentially control customers’ expectations and be in a good position to earn a higher NPS.
Customer tolerance
Some markets have customers with higher tolerance than others. Levels of customer tolerance play a major role in deciding the NPS.
If customers are tolerant about the product performance, they are more likely to be satisfied with it and, hence, give a higher score in NPS surveys.
Pricing
If products are available at a relatively low price in the market, customers are much more likely to recommend the product to others, which will lead to a good NPS.
However, it is important to note that products with higher prices can also have a good NPS, as long as their performance meets the customers’ expectations.
A good example of this is Apple – its products are usually more expensive than its competitors, but the high quality of Apple products keeps its NPS in good shape.
Brand reputation
Some brands in the market may have a good NPS even if their current products do not meet the standards. This could be because they’ve built a strong presence in the market and gained customers’ trust and loyalty through previous products.
Additional factors
Some other factors that influence NPS include:
- Customers’ dependence on the product
- Security
- Location
- Personalization
- Usability
- Global events
How to improve your Net Promoter Score
If you’re looking to improve your Net Promoter Score, there are a few obvious (and particularly impactful) places to start:
Collect feedback from detractors
Customers are the end users of the product, so it’s important to make sure that you get constant feedback from them about what they like and dislike about the product.
Improving your communication and relationship with detractors, especially, can help you understand why they are giving your product a lower score. If you can provide an actionable resolution to their pain points or implement changes to address pain points, it can potentially convert them from detractors to either passive users or promoters.
Either way, it certainly couldn’t hurt your Net Promoter Score to better understand what compels your detractors to detract.
Leverage your promoters
Leveraging your promoters to, well, promote your product is one of the easiest ways to improve your NPS.
Promoters already like your product and understand the positive sides of the experience. So talking to them can help you understand what is working in the current version of the product. Once you determine that, you can potentially double down on the good aspects and continue to satisfy your customers’ expectations.
Understanding what your customers like about your product is also crucial because user retention (especially happy users) is critical to maintaining a high NPS.
Improve product performance
At the end of the day, your product needs to be able to sell itself. That can only happen if it’s performing at the same level and achieving similar rates of customer satisfaction as the competition.
It may seem obvious, but it’s also extremely effective: endeavoring to improve the performance of your product is a great way to boost your NPS score.
The post What is a good Net Promoter Score (NPS)? appeared first on LogRocket Blog.
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