NPS - an indicator that may be useful to you

In short

• What is the NPS indicator?: Attracting a new customer is usually much more expensive than retaining an existing one, which is why conscious companies constantly monitor the loyalty of their customers.
• What does the NPS survey look like?: The basis of the study is one question: „How likely is it that you would recommend [name of company/product/service] to a friend?”.
• Why is it worth using NPS surveys?: The NPS is a simple yet effective research method – to determine a metric, one question is enough, and the collected responses are a valuable source of knowledge about quality and…
• Relative and transactional NPS – two ways of measuring: In practice, companies use two variants of the NPS survey.

The NPS (Net Promoter Score) is a customer loyalty indicator based on a single question: „How likely is it that you would recommend our company to a friend?”. Responses on a scale of 0–10 divide customers into detractors, passive, and promoters, and the NPS score is the percentage difference between promoters and detractors – a number from –100% to +100% that can be tracked over time and compared with competitors.

What is the NPS indicator?

Attracting a new customer is usually much more expensive than retaining an existing one, which is why conscious companies constantly monitor the loyalty of their customers. One of the simplest tools for measuring this is the NPS indicator – an abbreviation for the English Net Promoter Score, sometimes translated as „net recommendation indicator”.

Fred Reichheld described the NPS concept in the article „The One Number You Need to Grow”, published in December 2003 in the Harvard Business Review. In it, Reichheld argued that one question – „would you recommend this company to a friend?” – is a better predictor of a company’s revenue growth than elaborate satisfaction surveys, basing this conclusion on long-term studies of the correlation between customers’ inclination to recommend a company and its actual growth. The concept was popularized by the consulting firm Bain & Company, with which Reichheld was associated, and the research firm Satmetrix – today NPS is used worldwide, regardless of industry.

The NPS is used to assess customer loyalty towards a brand, company, product or service – it estimates how likely it is that a customer will use the offer again and recommend it to others. It is applicable wherever business is based on the sale of products or services, regardless of the size of the company and the industry in which it operates.

The NPS indicator can be calculated according to a simple formula:

NPS (%) = (number of promoters - number of critics) x 100% / number of respondents

The NPS value ranges from -100% to + 100%. If the indicator is positive, it means that there are more people positively assessing the brand than the critics. On the other hand, a value below 0 indicates that dissatisfied people predominate in the group of respondents. Such a result is an indication for the implementation of appropriate measures aimed at increasing customer satisfaction.

What does the NPS test look like?

The basis of the study is one question: „How likely is it that you would recommend [name of the company/product/service] to a friend?”. The survey is sent to customers via email or as a notification in the app. Respondents rate the question on a scale from 0 to 10, where 0 means „definitely not going to recommend”, and 10 – „definitely going to recommend”.

Group	Evaluation	Characteristics
Critics (detractors)	0–6	Bad or mediocre experiences with the company; they are happy to share a negative opinion and discourage others from working with them again.
Passive (passives)	7–8	They recognize both the advantages and disadvantages of cooperation; they are not loyal and are easily tempted to switch to a competitor if the latter offers something better.
Promoters	9–10	Satisfied with the services or products; they are happy to share their positive opinion and become natural ambassadors of the brand

Special attention should be paid to the group of critics – their negative opinions pose a real threat to the company’s reputation and effectively deter new customers, especially in an era when online reviews are easily accessible to anyone who checks a company before making a purchase.

How to calculate the NPS index?

The formula is simple: NPS(%) = (percentage of promoters – percentage of critics) × 100. The NPS value ranges from -100% to +100%. A positive result means that among respondents there are more people willing to recommend the company. A negative result means that among the surveyed group there are more dissatisfied customers – this is a signal that the company should implement measures aimed at increasing satisfaction. It is worth noting that the passive group (7–8) does not directly enter the formula – it influences the result indirectly, reducing the denominator of the percentage from which promoters and critics are counted.

Example of calculation: If 110 of the 200 respondents are promoters (55%), 60 are passive (30%), and 30 are critics (15%), the NPS ratio is 55% – 15% = 40%. This is a clearly positive result, although its interpretation always depends on how the average in the given industry looks and how it has changed over time within the same company.

Why is it worth using NPS research?

The NPS is a simple yet effective research method – to determine the indicator, one question is enough, and the collected responses are a valuable source of knowledge about the company’s quality and position in the eyes of customers. The NPS indicator:

• it is understandable for customers – one simple question, without an elaborate form,
• allows you to get a general picture of the company’s image in the eyes of customers in a single, comparable number,
• it is the basis for further analysis of consumer behavior, if it is supplemented with open-ended questions,
• helps identify critical points and weaknesses that affect customer dissatisfaction,
• It is used for benchmarking – the result can be compared with the results of competitors or with the previous period in your own company.

Retesting your target audience may also be helpful. Find out what your customers expect, what values they live by in their lives, what their problems are, how they live, what they like, how they use your products or services.

Relative and transactional NPS – two ways of measuring

In practice, companies use two variants of the NPS survey. Relative NPS they ask about the overall impression of their entire cooperation with the company and it is usually conducted on a cyclical basis – for example, once a quarter, regardless of whether the customer has actually purchased anything at that time. Transactional NPS They ask about specific, fresh experiences – for example, immediately after the implementation is completed, handling complaints, or speaking with the support department. Both approaches complement each other: the relational approach shows the overall loyalty trend, while the transactional approach allows you to quickly identify which specific moment of contact with the company is ruining the customer’s impression.

A company that only uses the relational NPS knows that something is wrong, but it doesn’t always know what exactly. A company that also measures transactional NPS at key touchpoints quickly connects the drop in performance to a specific cause—for example, the longer response times for requests in a given month.

How to interpret the NPS result?

The number alone does not tell much without a reference point. It is worth comparing the NPS result with two things: your own history (whether the indicator is increasing or decreasing in subsequent surveys) and – if possible – the results of your competitors in the same industry, because the level of a „good” NPS varies greatly between sectors. A company that compares its result only to the overall, averaged number from the internet, without taking into account the specifics of its own industry, may draw the wrong conclusion – both too optimistic and too pessimistic.

More important than a single measurement is the trend. An increase in NPS of a few points after implementing a specific change (e.g., shortening the time for handling complaints) only makes sense when we compare it with the period before the change – and not with a single, random month when other factors could have also been at work, e.g., seasonality.

Closing the loop – what to do with the criticism’s response?

Just collecting reviews without any response to them does not improve customer loyalty – on the contrary, the customer who took the time to provide a critical but constructive response and then sees no response from the company feels ignored for the second time. Good practice, sometimes called „closing the loop” (closing the loop), it consists in ensuring that every critic (and preferably every passive one) receives a personal response from the company within a few days of completing the survey – not with a ready-made, universal apology template, but with a specific question about what went wrong and a real proposal to fix the situation.

This approach has two benefits. First, after a discussion and fixing the problem, some of the critics change their opinion about the company – sometimes they even become the next promoter. Second, in this way the company collects much more detailed information about the causes of dissatisfaction than from the number of respondents in the survey alone.

How to increase the NPS index?

The analysis of the received responses is crucial, not the number itself. The NPS survey is worth supplementing with auxiliary questions, e.g.:

• What influenced your assessment?
• Have you encountered any difficulties in contacting our company?
• What do you like the most about our service?
• What would you change?

When analyzing the results, it is worth looking for recurring problems – fixing them usually has a greater impact on the satisfaction and loyalty of a larger group of customers than a single, individual complaint. It is also helpful to re-evaluate the target group in a deeper way: what do the customers expect, what problems do they have, how do they actually use the product or service on a daily basis, and have these needs changed since the previous survey?.

The most common mistakes in conducting NPS surveys

• One-time measurement without repetition. A single study shows the current situation, but it says nothing about the trend – and this trend is the most valuable information here.
• No reaction to the critics' responses. Just collecting feedback without interacting with dissatisfied customers wastes the most valuable part of the survey – the opportunity to fix a specific problem.
• Comparing NPS between completely different industries. The natural level of a „good” result varies depending on the sector – comparing your own NPS to another industry can be misleading.
• An anonymous survey without open-ended questions. The number itself, from 0 to 10, does not tell us why the customer rated the company that way – without a follow-up question, it is difficult to know what exactly needs to be improved.
• Treating NPS as the only measure of success. It is a valuable indicator, but it is only one of several – it is worth combining it with other data, such as the actual number of returning customers.

NPS, customer satisfaction surveys and other KPI indicators

The NPS measures loyalty and the tendency to recommend the company – this is a slightly different phenomenon than the current one. customer satisfaction from a specific transaction. A client may be satisfied with one last interaction, yet not recommend the company if previous experiences were worse – therefore, it is worth conducting both measurements in parallel, rather than replacing one with the other. NPS complements each other well, providing a more complete picture. a customer satisfaction survey, Which asks about specific elements of cooperation – the time of implementation, the quality of service, and communication. It is also worth remembering that NPS is one of many possible indicators – more about how to select and track various measures of the effectiveness of activities can be found in the article about examples of KPIs in company.

In practice, a good set is an NPS calculated once per quarter or once per half-year (to see the trend), supplemented by a short satisfaction survey after each important interaction with the customer – e.g., after the completion of a project or the handling of complaints.

How does Commplace help measure and increase customer loyalty?

Designing the NPS survey, repeating it regularly, and – most importantly – extracting from it conclusions that actually make it into the company’s strategy are part of the work we perform as part of the marketing strategies for companies. The results of the next NPS surveys, along with other satisfaction indicators, are being compiled in a dashboard. Commwork®AI – thanks to this, it is possible to see at one place whether the actions taken actually translate into an increase in customer loyalty, or only a temporary improvement in mood.

Sources: Frederick F. Reichheld, „The One Number You Need to Grow”, Harvard Business Review, December 2003.