In an ideal world, every single buyer that interacts with your business would be an instant superfan, so enamored with your product and their purchase experience that they’d be singing your praises from the rooftops.
Unfortunately, we don’t live in a fantasy world (otherwise, you’d probably be off on some beach somewhere sipping cocktails, not researching how to calculate NPS).
Some buyers will happily convert and stay loyal; others will, unfortunately, be less than thrilled with their experience, and a fair chunk will sit firmly in the “meh” category.
NPS is the method for discovering which of these three boxes each of your buyers fits into and putting a numeric measurement to overall buyer sentiment.
In this guide, we’ll discuss how to calculate Net Promoter Score, why NPS is important, and how you can use these findings to inform business changes and drive customer satisfaction.
What is NPS?
NPS (Net Promoter Score) is a customer success KPI that measures customer loyalty based on their response to the question, “How likely would you be to recommend [company/product] to friends, family, or colleagues?”
NPS is widely considered the gold standard in customer experience metrics. It’s easy to measure (buyers only need to answer a single question) and provides a quick snapshot into overall customer perception.
This question can be asked of both buyers and non-buyers, which can provide insight into how customer experience impacts the likelihood of purchase.
In response, buyers are asked to choose a number between 1 and 10, with 1 signifying “Not at all likely” and 10 signifying “Extremely likely.”
Happy customers who give you a 9 or a 10 are considered promoters. These are your most loyal and committed buyers and are the group that can help fuel growth through customer referrals and word of mouth (we want more of these).
If a buyer rates you from 0-6, they’re considered a detractor, and the opposite is true. They had a bad time shopping with your company and present a risk in that they may spread negative opinions about your product.
Anywhere between (7 or 8) is what we call a passive buyer. They’re not particularly enthusiastic about your company or product, but they didn’t necessarily have a negative experience.
These people might continue to buy, but they aren’t going to be giving rave reviews to friends and family, and they’re likely to be swayed by a competitor with a more convincing offer or experience.
Calculating Net Promoter Score
The formula for calculating NPS is incredibly simple: NPS = % of promoters – % of detractors.
Note that in this calculation, the actual score your buyers give you doesn’t matter so much. If two buyers rate you 1 and 5, respectively, they’re still both considered detractors. This may have implications for how you handle and respond to these buyers, but for the sake of this calculation, they’re the same thing.
Let’s illustrate with an example.
Your company performs its first NPS survey, and you receive the following results from a total of 2739 respondents.
- Promoters – 1340
- Passives – 967
- Detractors – 432
First, we need to calculate our percentages. The NPS formula doesn’t include passive respondents, so we don’t need to calculate that cohort:
- Percentage of promoters: 1340/2739 = 48.92%
- Percentage of detractors: 432/2739 = 15.77%
Applying the formula, then: 48.92% – 15.77% = 33.15%
While 33.15% might seem low, it’s actually a pretty good result.
30% is widely considered the benchmark to beat (0–30 is good, 30+ is great, and anything below 0 means you’ve got a problem). For SaaS, 36 is the average NPS score.
Why is Net Promoter Score important?
NPS is a pretty simple, high-level metric to answer a complicated question (How do our customers feel about the customer experience?).
So, why should you even bother?
Your top-line NPS score is helpful for tracking changes in customer sentiment over time, helping you understand whether any changes you’re making are having an impact on the customer experience.
But the real value in the NPS system comes when you dig deeper.
Breaking your NPS score down into percentages for detractors, passives, and promoters informs the initiatives you need to put in place to improve your score.
Take, for example, two companies with the same NPS score but with vastly different makeups:
- Company 1: 35% promoters, 60% passives, 5% detractors. (NPS = 30%)
- Company 2: 60% promoters, 10% passives, 30% detractors. (NPS = 30%)
In this case, Company 1 is doing a great job of avoiding negative buyer experiences, but they aren’t wowing buyers. They need to dig into why that is and decide whether additional investment to create a stellar customer experience is worth it.
Company 2’s efforts need to be focused on the experiences that lead to detractor scores. These two companies have the same NPS score, but will need to implement very different strategies to improve.
The NPS system is also super valuable for gathering qualitative data if you also include an open text box below your NPS survey for buyers to provide written feedback.
Detractors are an obvious starting point. If a buyer gives you a score of 6 or below, something has gone wrong during the sales process, and you have an opportunity to investigate and solve it.
You can do this at the individual level (i.e., contacting the buyer to discuss their experience and suggesting a remedy if appropriate), but it’s also critical to analyze trends across NPS detractor comments.
For example, if a large chunk of your detractors cites “pushy salesperson” as the reason for giving such a low score, this might indicate that your sales team (or perhaps just one rep) needs additional training.
For subscription businesses, detractor scores can be used as a churn signal, allowing account managers to jump in ahead of time and salvage the relationship before the customer churns.
Promoter scores are equally valuable in figuring out what drives customer satisfaction. The long-form answers these respondents give can be used to:
- Inform marketing messaging
- Provide sales coaching opportunities
- Create buyer testimonials to use as social proof in sales and marketing initiatives
Who is NPS used by? Transactional NPS vs. relationship NPS
Net Promoter Score is used broadly by the full gamut of businesses, from consumer-facing ecommerce stores to enterprise-focused B2B organizations.
There is, however, an important distinction to be made between two styles of NPS surveys: transactional and relationship-based.
Transactional NPS is all about gaining insights into immediate buyer experiences, and these surveys are sent out directly after a specific customer touchpoint (e.g., a purchase).
Relationship NPS, as you may have already guessed, is used to understand buyer opinions about the relationship your company fosters with its buyers, and gives you a look into their overall level of satisfaction. These surveys are triggered at predefined intervals (for example, three months into the relationship).
By the way, relationship NPS surveys can be used by companies whose buyers are largely transactional and vice versa.
For example, a B2B SaaS company could trigger a transactional survey immediately after the contract is signed (giving an insight into the purchase experience) and then use a relationship NPS survey to measure overall customer satisfaction at specific time intervals (six months into the contract, for instance).
Net Promoter Score: how to calculate it
We briefly covered how Net Promoter Score is calculated earlier, but here’s a quick refresher:
NPS = % of promoters – % of detractors.
Of course, there are a couple of steps to knock out before you’re able to whip out the old calculator.
Let’s take a look.
1. Survey your buyers
The first step in conducting an NPS study is always the survey.
The great thing about the NPS system is that it’s simple; you’re only asking one question (meaning buyers are much more likely to participate than if you sent out a huge questionnaire):
“How likely is it that you would recommend this company to a friend or colleague?”
You can play with the wording a little if you like (e.g., you might switch out the phrase “this company” for your actual company name), but for the sake of simplicity, it’s a good idea to stick largely to the script.
There’s an important reason we use this question in particular in NPS.
Broad questions like, “How would you rate your experience with us?” can be difficult to answer. Unless we had a particularly good or bad shopping experience, it’s unlikely we’ll remember very much about it at all.
But when we reframe that question as an action (Would I recommend this company to someone I know?), it’s easier for us to consider and then provide an accurate answer.
Plus, it’s considered a good proxy for loyalty (loyal customers are more likely to refer).
So, how do you actually go about running a survey?
While it’s entirely possible to send out NPS surveys manually (using your email marketing platform, for example), most companies will choose to use a dedicated NPS survey tool. Qualtrics, SurveySparrow, and AskNicely are common options.
These tools make the survey process simple. Respondents will receive something that looks like this:
All they need to do, then, is select the number that best represents their experience, and they’re done!
If you like, you can include an open text box below so buyers can provide an explanation for their answers (ideal for capturing qualitative feedback).
2. Collect, analyze, and categorize data
Next, we need to gather all the responses from our survey and categorize them as promoters, detractors, and passives.
If you’re using an NPS survey tool, this process will be automatic (win!).
If you’ve decided to take the manual route, here’s what you need to know:
- Detractors are those who rate you from 0–6
- Passives are those who rate you from 7–8
- Promoters are those who rate you from 9–10
For now, simply categorize your data. We’re going to do the math in the next step.
3. Get that calculator out
To calculate our NPS score, we need to know the percentage of respondents who are promoters and the percentage who are detractors.
To calculate this, we divide the number of responses in that group by the number of total responses, then multiply by 100.
So, for example, if we have a total of 1000 respondents, which includes 400 promoters and 200 detractors, our calculations are as follows:
- Promoters: 400/1000 x 100 = 40%
- Detractors: 200/1000 x 100 = 20%
Now that we have these values, we can run the NPS calculation: NPS = % of promoters – % of detractors.
So: 40% – 20% = 20% NPS.
Pretty simple stuff, huh?
How do you calculate NPS in Excel?
If you really want to take the manual route, it’s possible to use Excel to calculate NPS.
Here are the steps to follow:
- Add all of your survey responses to a single column (Column A)
- Sort the column from low to high (makes it easier to categorize respondents)
- Add up the number of promoters (those who rated you 9 or 10) and type this value in cell B1
- Add up the number of detractors (those who rated you 0–6) and type this value in cell B2
- Add up the total number of respondents and type this value in Cell B3
- In cells C1 and C2, use the following formulas to calculate promoter and detractor percentages: =(B1/B3)x100, and =(B2/B3)x100
- In cell D1, add this formula to calculate your NPS score: =C1-C2
Driving customer experience beyond NPS
Your overall NPS score is a helpful indicator, but it is, by nature, limited.
When a buyer gives you a score of five, say, you know they had a negative experience, but you don’t know why.
For this reason, it’s usually a good idea to include at least one additional follow-up question where buyers can provide a long-form answer that gives you an understanding of why they gave you that score.
Quality NPS tools will allow you to trigger these questions based on the rating the buyer gives you. For example, you could trigger open-ended questions based on the category of response:
- Detractors: Please tell us what you didn’t enjoy about your experience today
- Passives: What feature can we add to improve?
- Promoters: What aspect of the purchase experience were you most impressed by?
Alternatively, you can ask specific questions to understand the impact of the changes you’ve made.
Let’s say, for example, in your initial NPS survey; you received a lot of detractor responses that said it was difficult to find what they were looking for in-store.
After implementing initiatives to fix this (e.g., better signage), you can change your NPS survey to include the question, “How easy was it to find what you were looking for?”
NPS is a powerful tool for distinguishing between happy and unhappy customers, understanding what drives customer retention and identifying important areas to improve the buyer experience.
But don’t think these changes are going to happen all on their own. A fair chunk of a buyer’s experience comes down to the way your sales reps engage with buyers, so if you’re going to make an impact there, you’ll need to invest in a lot of coaching.
Download our free sales coaching template here, and build a coaching plan to take your reps from zero to hero.