Net promoter score (NPS)

Definition

Net Promoter Score (NPS) is a customer loyalty metric that measures how likely customers are to recommend a company's products or services to others, typically on a scale from 0 to 10. It provides valuable insights into customer satisfaction and helps organizations gauge their brand positioning in the marketplace. A high NPS indicates strong customer loyalty, which is crucial for global brand positioning and can also serve as a key performance indicator (KPI) for evaluating business success.

5 Must Know Facts For Your Next Test

1. NPS is calculated by subtracting the percentage of detractors (customers who score 0-6) from the percentage of promoters (those who score 9-10).
2. An NPS score can range from -100 to +100, with higher scores indicating better customer loyalty and satisfaction.
3. Companies often use NPS as part of their overall customer experience strategy to identify areas for improvement.
4. NPS can provide actionable insights that help organizations enhance their products, services, and overall customer experience.
5. Using NPS consistently over time allows businesses to track changes in customer sentiment and adjust their strategies accordingly.

Review Questions

• How does Net Promoter Score (NPS) reflect on a company's global brand positioning?
  • Net Promoter Score (NPS) serves as a direct reflection of how customers perceive a brand globally. A high NPS indicates that customers are not only satisfied but are also likely to recommend the brand, which enhances its reputation and market presence. When companies achieve strong NPS ratings internationally, it suggests effective global brand positioning and loyalty across diverse markets.
• Discuss the significance of using Net Promoter Score (NPS) as a key performance indicator (KPI) for organizations.
  • Using Net Promoter Score (NPS) as a KPI allows organizations to quantitatively measure customer loyalty and satisfaction. This metric provides actionable insights that can influence business decisions, such as product development and marketing strategies. Since NPS captures the likelihood of recommendations, it serves as an early warning system for potential churn, enabling companies to address issues proactively and improve overall performance.
• Evaluate the relationship between Net Promoter Score (NPS) and other customer metrics like Customer Satisfaction (CSAT) and Churn Rate.
  • Net Promoter Score (NPS), Customer Satisfaction (CSAT), and Churn Rate are interconnected metrics that together provide a comprehensive view of customer experience. While CSAT focuses on immediate satisfaction with specific interactions, NPS looks at long-term loyalty through willingness to recommend. High NPS typically correlates with lower Churn Rate, as loyal customers are less likely to leave. Analyzing these metrics collectively helps businesses understand not just how customers feel today but how those feelings translate into future loyalty and retention.

Related terms

Customer Satisfaction (CSAT): A measurement that gauges how satisfied customers are with a company's products or services, often determined through surveys.

Churn Rate: The percentage of customers who stop using a company's products or services during a specific timeframe, indicating customer retention.

Brand Equity: The value added to a product or service by having a well-known brand name, influencing customer perception and loyalty.