Today however, we’re going to get back to the basics and dissect the NPS score itself — how it’s calculated, why passives customers are excluded, the meaning behind the score and the value that it represents.
How to calculate your Net Promoter Score
Once the responses from your survey start to roll in, the results get aggregated together in order to arrive at your NPS score. This score is calculated by subtracting the percentage of Promoters from the percentage of Detractors. (We ignore the Passives. More on this below.)
What you’ll end up with is a single number that can range from -100 (for all Detractors) to +100 (for all Promoters). This numerical score gives you a benchmark that provides an overall sense of how you’re doing. Over time it lets you to know whether you’re moving in the right direction or the wrong one.
Here’s an example:
Let’s say that you’ve sent out 400 surveys and have received 200 responses in return.
50 gave you a detractor score (0 – 6)
80 gave you a passive score (7 – 8)
70 gave you a promoter score (9 – 10)
Now that you’ve tallied up the number of scores for each range, you’ll want to figure out the total percentage of both your promoters and detractors.
For your promoters, you’ll want to divide 70 by the total number of responses, 200. You’ll arrive at .35, or 35% when converted into a percentage.
Using the same formula for your detractors, you’ll arrive at 25%.
Next, you’ll simply subtract your percent of promoters (35%) by your percentage of detractors (25%) to arrive at your total Net Promoter Score of 10.
Note: If you’re using a spreadsheet to calculate your score, the formula you’ll want to use is as follows:
(Total number of Promoters – Total number of Detractors) / (Total number of responses) * 100
Why are Passives not included in the NPS equation?
If you’ve asked yourself this question before, you’re not alone. It’s a mystery to many, but very logical when you understand the reasoning.
Simply put, passives are not factored into your score because they don’t influence a potential new customer’s decisions one way or the other.
Promoters are your most loyal of customers. They are the ones most willing to refer new customers your way as well as stake their reputation to protect your brand. As such, your promoters’ positive influence can (and will) play a major impact on the growth of your business.
Your detractors are also passionate and vocal customers, but for one reason or another, they are displeased with the product or service you’re providing. Like promoters, detractors often share their experiences publicly, which in their case, you want to avoid, especially since negative word-of-mouth is even more influential with potential new customers.
On the other hand, your passive customers are relatively quiet and content (for the most part). While passives still provide you extremely worthwhile feedback, their lack of enthusiasm often prevents them for sharing their experiences with others (good or bad). As a result, their overall impact on your company’s growth is often negligible.
For these reasons, passives are not factored into the NPS equation.
What does your NPS score mean?
Nearly everyone who measures NPS wonders whether their score is good or not. I mean, there’s a reason why it’s one of the top NPS-related search queries on Google. I’m not going to deep-dive on this topic here, but if you’d like a more in-depth analysis, please take a look at our recent post, What’s a Good NPS Score.
To keep things at a high-level, I can tell you that any score above 0 is considered a “good” score. This simply indicates that you have more customers willing to refer new customers your way than you have customers wanting to turn them away.
With that said, there are more “official” guidelines that you can also measure yourself against.
Danger Zone: -100 to 0
If you’re in this so-called Danger Zone it’s because you have more Detractors than Promoters. Companies in this position tend to see very high customer churn, low public opinion, few customer referrals, and basically every negative you would associate with low customer loyalty.
Good: 0 to 50
The average NPS score is in the high 20s, which we call “Good.” Most companies fall in the range of high 20s and low 40s, which generally means that they’ve met the threshold for customer satisfaction. If you’re in the Good zone, you don’t have an army of Detractors bad mouthing your brand.
Excellent: 50 to 75
The Excellent zone is where you’ll find companies that consistently exceed customer expectations. We’re talking good service, where the staff is always attentive, everything’s in order, and there are no major issues with things like customer service. These are the companies that under-promise and over-deliver.
World Class: 75 to 100
Companies that are World Class are in a whole other dimension. They are fanatical about customer experience, and as a result have off-the-charts levels of customer loyalty. We’re talking about the Four Seasons or the Ritz-Carlton. Other companies in this category include Apple, USAA, Costco, Amazon.com, etc.
It’s important to keep in mind that average NPS scores can often vary tremendously based on which industry you operate in. Since most of your competitors will never publicly display their NPS score, your best bet is to really measure your score against yourself — a KPI for understanding whether you’re moving in the right direction.
The value of your NPS score
You’ll often hear me saying that while NPS does give you a score, it’s really not about the score. At least not the overall one.
It’s much more important to focus on the individual customer scores, matched alongside with their feedback and other supporting data points.
Imagine that you have a current day NPS score of 50, which has been consistently increasing by 2 points each quarter. Pretty awesome, right? It’s seems like you’re on the right path.
Without looking further, most people might consider their work done at this point.
This is would be a terrible mistake and a huge missed opportunity.
When you dig deeper into your data, you’re able to identify individual trends that may be holding you back from even better results.
When you’re able to combine individual customer scores along with feedback and attributes (i.e. location, plan type, etc.), NPS turns from a measurable KPI into actionable customer insights.
The real value of your NPS score is only realized when you’re able to align it with feedback and data to identify opportunities to build a base of loyal customers — customers who are enthusiastic about your brand.
A Bonus NPS Calculation
Your Net Promoter Score can provide you even more than customer insights. Believe it or not, you can actually statistically predict churn via detractors and passives and predict new revenue via promoters.
Based on your current NPS score along with your average revenue per customer, you can calculate and predict your short-term and long-term revenue at risk as well as new potential revenue.
Because this isn’t a standard NPS calculation, you won’t find this available as a free tool online. You will find it however within the dashboard of your promoter account. So sign up for a free account on Promoter.io and see how much revenue you can add to your bottom line today.