Define and explain the NPS formula and how it applies to customer satisfaction.

Question

Quizplus · Accepted Answer

The Answer is Net Promoter Score (NPS) is a metric used to measure customer satisfaction and loyalty. It is based on the simple question, "On a scale of 0-10, how likely is it that you would recommend our company/product/service to a friend or colleague?"

The NPS formula is calculated by categorizing respondents into three groups based on their rating:
- Promoters (score 9-10): These are customers who are highly satisfied and loyal, and are likely to recommend the company to others.
- Passives (score 7-8): These customers are satisfied, but not necessarily loyal or enthusiastic. They may be easily swayed by competitors.
- Detractors (score 0-6): These customers are unhappy and unlikely to recommend the company. They may even discourage others from using the company's products or services.

To calculate the NPS, the percentage of detractors is subtracted from the percentage of promoters. The formula is: NPS = % Promoters - % Detractors.

The NPS can range from -100 to +100, with a higher score indicating higher customer satisfaction and loyalty. It provides businesses with a clear measure of how their customers perceive their company, and can be used to identify areas for improvement and track changes in customer sentiment over time.

Overall, the NPS formula provides a simple yet effective way to gauge customer satisfaction and loyalty, and it can be a valuable tool for businesses to improve their offerings and customer experience.

Define and Explain the NPS Formula and How It Applies