The Net Promoter Score is a way to define loyalty as a metric and leverage it to drive revenue growth. It was made popular through Fred Reichheld’s book The ultimate Question and is used by best-in-class companies to measure customer loyalty.
NPS is based on the idea that a company’s customers can be divided into three groups; Promoters, Passives and Detractors. The measurement is based on one simple question, “how likely are you to recommend [your company] to a friend or colleague?”
Customers are asked on a scale of 0 to 10 how likely they are to recommend you, and the three customer groups are defined like this:
Promoters - they will always score you on the high end, either 9 or 10. These are loyal customers, who are enthusiastic about the brand, will keep buying and evangelize for you, constantly fueling revenue growth.
Passives - these people are satisfied, not enthusiastic, they may be vulnerable to competitive products or services. They will score you between a 7 and 8.
Detractors - this is the group you want to focus on, and have the greatest room for improvement. These are unhappy customers who may damage your brand growth through negative word-of-mouth. They score on the low end, between 6 and 0.
To calculate your score, subtract the percentage of detractors from the percentage of promoters. Your goal is to make all of your customers Promoters. The Net Promoter Score speaks to the new Sales Funnel which puts just as much emphasis on nurturing and enabling after they become customers as you did before they became customers.