THE BLOG
01/24/2014 02:49 pm ET Updated Dec 06, 2017

The Value of Measuring Net Promoter Score

It amazes me when I hear that a CEO or marketer has never heard of Net Promoter Score (NPS). I'm also shocked when folks tell me that they know all about NPS but aren't measuring it at their company. Really? NPS, along with other measures of social sentiment, is one of the best ways to grade your overall customer experience and to garner deeper insights on why customers may, or may not, be recommending your to others.

So what's NPS? It's basically a metric, from -100 to +100, that allows you to measure how likely your customers will recommend your product or service to others. The higher the NPS, the better. (check out this great definition on Wikipedia for more insights). NPS is typically measured via a 3 question survey to your customers and the calculation if straightforward:

NPS = [(# of promoters) - (# of detractors)] / # of Survey Respondents

An example: Let's say you send an NPS survey to 1000 of your customers. You get responses from 100 of those customers (10% response rate). Out of those 100, 50 say that they would be willing to recommend you to a friend (promoters), 10 say that you absolutely sucked (detractors) and they'd tell their friends to stay away from you, and the remaining 40 were indifferent. You're NPS score is 40.

40 = [(50) - (10)] / 100

I've been measuring NPS is some form or another over the past 7 years and I've learned a few things about measuring, analyzing and utilizing this metric.

NPS is theoretical. It doesn't tell if your customers recommended you. It tells you if they'd be willing to. Huge, huge difference. Measuring actual WOM is like finding the holy grail to a marketer.
Build NPS into your business process. The NPS survey is typically 3 questions. Find a way of automatically sending this survey out everyday to a new set of customers (or week/month depending on customer volume).
Educate. Make sure employees understand the value of NPS, why you're measuring it and what actions you can take from the metric. It can serve as a rallying cry.
Report out NPS weekly. By looking at scores on a weekly basis, you can address potential issues much faster. You can also review valuable feedback responses from customers, helping you understand what customers love, what they hate and where they'd like to see you improve.
Measure over time. A single weekly metric point doesn't tell you much about how you're performing overall. Measure your overall score over a period of time (i.e. every quarter)
Build a tag cloud out of customer comments. Not totally necessary, but kind of a fun and easy way to visualize what customers are saying about you.

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Rivet & Sway's NPS is 85, which is absolutely ridiculous. Measuring NPS and reviewing customer feedback weekly has driven the company's biggest decisions, including packaging and pricing decisions. In fact, our NPS has become a rallying cry of sorts...galvanizing employee to do whatever they can to ensure that we're delivering the best possible customer experience.

Is it an exact metric? No. Will NPS predict the future growth of your company? Not even. But it's a directionally correct, and actionable metric that gives you a general sense of how you're perceived by customers.

Comments, Questions or other examples of measuring NPS? Please feel free to comment below.

This post originally appeared on John Lusk's Blog here.