Net Promoter Score

What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is a customer loyalty metric that measures how likely customers are to recommend a product or service to others. NPS is calculated by asking customers a single question: "On a scale from 0 to 10, how likely are you to recommend this product to a friend or colleague?" Based on their answers, respondents are categorized into three groups:

• Promoters (score of 9-10): Loyal enthusiasts likely to recommend the product.
• Passives (score of 7-8): Satisfied but unenthusiastic customers.
• Detractors (score of 0-6): Unhappy customers who are unlikely to recommend the product and may even discourage others from using it.

The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

When is Net Promoter Score Used?

NPS is typically used:

• Customer Experience Evaluation: To measure customer satisfaction and loyalty over time.
• Post-Purchase or Service Interaction: Sent to customers after they interact with a product or service.
• Strategic Decisions: To assess how product changes or new features are affecting customer sentiment.
• Benchmarking: Companies use NPS to compare their customer loyalty with that of competitors.

Pros of Net Promoter Score

1. Simple and Easy to Use: It requires only one question, making it simple for customers to complete.
2. Industry Standard: NPS is widely used, allowing for comparisons across industries.
3. Predictive of Growth: High NPS scores are often correlated with organic growth, as promoters are more likely to bring in new customers.
4. Actionable Feedback: NPS often includes follow-up questions, providing insight into why customers gave certain ratings, which can guide product improvements.

Cons of Net Promoter Score

1. Lacks Depth: A single score may not fully capture the nuances of customer satisfaction.
2. Not Diagnostic: NPS identifies how customers feel but doesn’t explain why they feel that way unless follow-up questions are added.
3. Can Be Manipulated: Companies may focus solely on improving NPS rather than addressing underlying product issues, leading to inflated scores without real improvements.
4. Delayed Action: Since NPS is often collected after the fact, it may take time before actionable insights can be gathered.

How is Net Promoter Score Useful for Product Managers?

For product managers, NPS is valuable because it provides a straightforward, quantifiable measure of customer sentiment:

1. Measuring Product Satisfaction: PMs can use NPS to assess how well the product is meeting customer needs.
2. Tracking Loyalty Over Time: It serves as a key indicator for customer retention and long-term loyalty.
3. Guiding Product Improvements: The feedback from detractors can be used to identify pain points, while insights from promoters can highlight areas of success.
4. Benchmarking: It helps PMs understand how their product is performing relative to competitors, giving context to customer loyalty trends.

When Should Net Promoter Score Not Be Used?

1. As the Only Metric: NPS should not be the sole measure of customer satisfaction. Relying too heavily on NPS can obscure other important product performance metrics.
2. Without Context: NPS doesn’t provide detailed insights unless paired with follow-up questions that explore why customers gave certain scores.
3. For Short-Term Assessment: NPS measures long-term loyalty, so it might not be the best metric to track short-term user reactions to specific features or changes.

Additional Questions for Product Managers

1. How do we act on NPS feedback? PMs should have a strategy in place for addressing issues highlighted by detractors and amplifying the strengths noted by promoters.
2. Is NPS consistent across customer segments? Analyzing NPS by different cohorts (e.g., new vs. long-time users) can provide deeper insights.
3. What’s the trend over time? Monitoring NPS regularly allows PMs to track customer loyalty trends and respond proactively to declines.

By combining NPS with other customer experience metrics and using it strategically, product managers can make more informed decisions that drive customer satisfaction and product success.