NPS (Net Promoter Score) is a special method that allows specialists to determine the degree of consumer interest in a particular product, service or a company.
NPS implies the real willingness of consumers and users to the following:
- to give recommendations about this product or service to friends and acquaintances
- to be ready for making a repeat purchase/order
- to evaluate the quality of work (or cooperation) with the company at large
That is, NPS metric helps product managers and marketing experts how their particular product is perceived by people and how to improve this perception in order to achieve the best business results.
NPS is actively used in many metrics like Product/Market Fit and others.
The principle of NPS
NPS principle is quite simple: this metric is based on a customer survey, consisting of several questions about the user’s attitude to the product.
And one of the key questions of this survey looks like 'Would you like to recommend our product your friends or colleagues?'. It is significant to note that the answer to this question is presented in the form of a ten-point scale, where 0 means 'Under no circumstances' and 10 means 'Would definitely recommend it'. Such a scale is necessary for some further manipulations with the results of this survey.
How NPS is determined
After the survey, all the obtained results are used in a specific division of all customers into three groups, as follows:
- The first group is Product Promoters - all such customers certainly like the product, and they have the highest results in their tests (9-10 points)
- The second group consists of so-called Neutral Clients - they have not any expressed opinion (positive or negative) about the product (the results are 7-8 points)
- The last group is called Detractors - such consumers have a certain negative attitude to the product (0-6 points).
Then there is a calculation of NPS index - look at the following formula below:
As it can be seen, the result of NPS is determined in percentage. And the main point is that if NPS is equal to 40% or more, it implies the effectiveness and a certain success of this product, what is really good for the entire business.
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