Net Promoter Score - Definition and Calculation

What is NPS (Net Promoter Score)? Definition and Calculation

Table of contents

The NPS (Net Promoter Score) is a widely used metric for companies whose SaaS business model is based on subscription sales. It refers to the proportion of customers likely to recommend the company's service to their friends or colleagues. Very often used by marketing departments to measure and improve customer satisfaction rate, the NPS has many advantages for a company wishing to ensure its development. Here's how it works.


NPS (Net Promoter Score): what is it?


Originally mentioned in an article published by the Wall Street Journal, NPS is a key indicator for subscription-based business models. Today, NPS is a key KPI (key performance indicator) for SaaS companies.


In concrete terms, the Net Promoter Score is a quantified indicator that measures companies’ customer satisfaction. It follows the consumption of a good or service, and takes the form of a simple customer satisfaction survey. The positive or negative feelings of customers are measured according to the answer obtained in a software program. This calculation produces a figure that gives analytical indications of consumer feedback, enabling corrective action to be taken or products to be modified where necessary.


The survey also provides data on customer loyalty and the quality of the company's offerings, as well as their predisposition to recommend the brand to colleagues, friends or acquaintances.


The NPS is very popular with marketing and business development teams, so much so that even the biggest companies publish their satisfaction scores on a regular basis. For example, Tesla Motors (which is revolutionizing the automotive industry) has a Net Promoter Score (NPS) of +97. Starbucks has a positive Net Promoter Score of 77, while Pizza Hut's NPS is +78.


NPS is therefore different from other SAAS metrics. It indicates, via survey responses, the general feeling of a customer towards a brand, and leads to the categorization of respondents into three consumer categories.


Form and content of the Net Promoter Score

Because it's so easy to handle and obtain, the NPS is used by all company departments, whether management, field technicians or even marketing departments. In fact, NPS is obtained from two simple questions. The first concerns the customer's intention: will he or she recommend the product or service? The second is a qualitative question.


For example, many NPS forms include the following elements:


- A value scale from 0 to 10, accompanied by the question: How likely are you to recommend our offer?

- Depending on the given score, the question: Why would / wouldn't you recommend our products? In order to better understand the perception of the quality of the offer.


The use of a scale ranging from 0 (not at all likely) to 10 (very likely) enables analysts to position the customer in a segment between: promoter consumers, passive customers or detractors. Consumers are classified as promoters if they give a score between 9 and 10, as passive if they give a value between 7 and 8, and as detractors if their score is 0.


When designing an NPS questionnaire, there are three main technical objectives to follow:


- It's important to propose clear, concise questions. The questionnaires that consumers respond to most readily are the shortest and simplest. Response time should be between 1 and 5 minutes, and a maximum of 20 points is recommended.


- To ensure maximum data collection, it's important to send out questionnaires regularly. Satisfaction surveys therefore need to be updated frequently, in order to obtain a constantly updated NPS rate.


- Design your satisfaction survey and the questions it includes so that you can truly highlight your development potential. The first step is to determine which actions will have the greatest impact on customer satisfaction. This is why many NPS questionnaires include an open-ended question.

The open question is very similar to the qualitative question, and enables us to take customer feedback into account and put user feedback back at the heart of our activities. It can take different forms and be formulated according to the communication time chosen by the surveyors. It is then possible to label responses according to the subjects addressed by respondents. This time-consuming manual method can be handled by customer relationship management (CRM) software.


Finally, it's important to present the satisfaction survey at a key moment in the customer relationship cycle. For this reason, NPS questionnaires are often offered at the end of the purchase process. The survey can also be sent out when an order is received, or on the occasion of a customer's hundredth purchase. Today, these surveys are mainly offered online.

Other contemporary devices have recently emerged, offering new, more up-to-date forms for satisfaction surveys. The NPS questionnaire can be used in conjunction with :

- social networks,

- web users' opinions,

- telephone calls,

- e-mail surveys,

- online exchanges,

- reviews on review platforms,

- chat conversations with customer service.


Using Net Promoter Score


To make the most of the three types of consumer categorization offered by the NPS calculation, it's important to understand what each category represents, in order to decipher what’s behind the score obtained for each major profile.


Promoters are considered true ambassadors of the company's offering. These are the most loyal and satisfied customers, who will continue to buy the company's products or SaaS subscriptions for themselves and recommend the brand to their colleagues, friends and family.


In marketing strategy and business development, everything must be done to keep promoters in their place as loyal brand customers, and to guide them in fully embracing their role as ambassadors. To achieve this, marketing teams send them sponsorship campaigns, private invitations or offer VIP status and loyalty programs. Knowing your number of promoters and supplementing this data with your Lifetime Value (LTV) provides a clear understanding of the importance of each loyal customer for the development of your business.

Respondents scoring between seven and eight are considered passive consumers. They are satisfied, but not as enthusiastic as the promoters. They are therefore unlikely to recommend the company's offers. They are also likely to respond positively to competitors' offers. For marketing teams, it is therefore crucial to develop contacts and the link between the brand and this category of passive customers. The solution is to offer them close support, personalized advice and perhaps more attention than an already-promoting customer.


Detractors belong to the category of respondents perceived as potentially dangerous, as their scores indicate disappointment with the brand and the quality of the products it offers. Marketing and customer relations teams take a proactive approach to this category, with a view to resolving the problems these customers have encountered with product use or service quality.


It's important to reduce the likelihood of detractors talking about their bad experience to their circle of friends, on social networks or online review platforms. The aim is to demonstrate to this category of customers that the company has understood their difficulties and is taking their feelings into account. It is therefore advisable to consider sending a voucher or calling directly to the consumer of an order that has been perceived as unsatisfactory. In this context, contact can be proposed both in the digital sphere and directly in the physical store.


Using the NPS score is therefore central to increasing business activity. Specialists combine it with the calculation of Annual recurring revenue (ARR) or Monthly recurring revenue (MRR) to obtain precise indicators and a global vision of their development potential.


NPS (Net Promoter Score): a value expressed in absolute terms


The Net Promoter Score is obtained by subtracting the percentage of detractors from the percentage of promoters of the same offer. The number of passives is included in the number of respondents, which has the effect of reducing the share of detractors and promoters. This is not a percentage as such, but a value between -100 and +100. A positive result (i.e. greater than zero) indicates good customer satisfaction.


A result greater than zero is considered a good score, meaning that the company has more promoters than detractors. Internationally, NPS standards indicate that scores over 50 are good, and over 70 exceptional. These scores are truly rare, which is why the best way to use your NPS is to compare your own rates with those of the competition.


Determining what constitutes a good NPS rate is difficult. Results vary from one industry to another, and from one company to another. In some sectors, companies aim for a score of between 30 and 40 and are quite happy with it. For example, specialist boutiques or department stores have an NPS of around 60, which is considerably higher than that of companies in the airline sector, which is indicated at 35.


The result of the NPS calculation must also be analyzed by real experts. Practical studies show that respondents are more likely to report a bad experience than a good one. As a result, it is not uncommon for the most loyal customers not to respond to the satisfaction questionnaire.


The numerical form of NPS makes it an interesting probability indicator for financial lenders specializing in short-term loans, such as Silvr. This method is based on algorithmic analysis of SaaS companies' performance indicators. In this context, the NPS is taken into consideration by our teams in order to obtain an overall view of our customers' potential annual sales.


What are the advantages of NPS?


An absolute number, this result is very easy to calculate and track, and offers huge benefits for a company.


- NPS score analysis enables companies to gather data and use it to modify a negative impression.


- Easy to use, satisfaction surveys can be carried out by professionals in a wide range of sectors - you don't need to be a statistician. For customers, NPS questions are easy to understand, and even fun if they're well thought-out.


- The categorization into three types of consumers made possible by NPS systems provides all company employees with a common basis for customer management.


- The NPS is a standard, international metric which, as we've seen, is regularly published by major companies. As a result, obtaining its score enables you to compare your results with those of your competitors, and get a good idea of your placement on international markets.


- NPS score analysis is also a tool for considerably boosting your company's growth by developing customer relations. Increasing NPS score also has an impact on increasing sales, as it regularly leads to recommendations, sponsorship operations or up-selling.


To improve your NPS score, you can implement a number of technical actions:


- Involve all employees. It's important that the entire SaaS company is aware of the results of satisfaction surveys. Companies that make effective use of their NPS score use it as a genuine tool for building a customer-centric culture.

- Establish empathetic contacts with customers to convey brand values and redirect the feelings of detractors. It can also be used to develop new development orientations, such as loyalty programs.


- Involve promoters in your strategy by carrying out more in-depth satisfaction surveys to understand where their sense of belonging and appreciation of the company comes from.


- Get back to detractors to obtain concrete information or suggestions for improvement.


- Encourage and develop customer referrals, for example by setting up online community spaces and attractive benefits for loyal customers.


- Structure a dynamic, active customer service that understands the impact of results.


- If necessary, review the qualitative aspect of your product and modify it to improve it.


While the NPS rate is very easy to understand and obtain, it's still important to get support in using your score. Silvr's teams provide development support to their corporate clients who benefit from a loan obtained from our organization.