What is NPS and How to Calculate It?

Net Promoter Score (NPS) is a customer loyalty metric that measures how likely your customers are to recommend your business to others.

Developed by Fred Reichheld and Bain & Company in 2003, NPS has become the most widely used customer experience metric globally. It's used by companies of all sizes—from startups to Fortune 500 companies.

The power of NPS lies in its simplicity: a single question that predicts business growth. Research shows that companies with higher NPS scores tend to grow faster than their competitors.

Why NPS Matters

• Predicts growth: High NPS correlates with revenue growth and customer retention
• Easy to understand: One number that everyone in your organization can rally around
• Benchmarkable: Compare your score against industry standards
• Actionable: Identifies promoters to leverage and detractors to win back

NPS is based on a single, powerful question:

"On a scale of 0 to 10, how likely are you to recommend [company/product/service] to a friend or colleague?"

This question works because:

• It's about action: Asking about recommendation intent is more predictive than asking about satisfaction
• It's personal: People don't recommend things to friends unless they truly believe in them
• It's forward-looking: It measures future behavior, not just past experience

The Follow-Up Question

While the score is important, the real gold is in the follow-up question:

"What is the primary reason for your score?"

This open-ended question reveals the "why" behind the number and gives you actionable insights.

When to Ask

• Relationship NPS: Quarterly or bi-annually to measure overall loyalty
• Transactional NPS: After specific interactions (purchase, support call, etc.)
• Post-experience: Shortly after the customer experience while it's fresh

Calculating NPS is straightforward once you understand the three customer groups.

What does your NPS score actually mean? Here's how to interpret it:

General Score Ranges

• Below 0: Critical—you have more detractors than promoters. Immediate action needed.
• 0-30: Good—room for improvement, but you're on the right track
• 30-70: Great—you have significantly more promoters than detractors
• 70-100: World-class—exceptional customer loyalty (rare to achieve)

Context Matters

Don't obsess over the absolute number. What matters more:

• Trend over time: Is your NPS improving or declining?
• Comparison to competitors: How do you stack up in your industry?
• Segment differences: Which customer segments have higher/lower NPS?
• The feedback: What are customers actually saying?

Red Flags to Watch

• Sudden drops in NPS (investigate immediately)
• Large gap between different customer segments
• Declining trend over multiple periods
• High percentage of detractors giving scores of 0-3 (very unhappy)

NPS varies significantly by industry. Here are typical benchmarks:

Industry Average NPS Scores

• Technology/Software: 40-50
• Retail: 40-45
• Financial Services: 30-40
• Healthcare: 35-45
• Hospitality: 35-45
• Restaurants: 30-40
• Telecommunications: 20-30
• Airlines: 25-35
• Insurance: 25-35
• Utilities: 15-25

World-Class NPS Examples

• Apple: 72
• Amazon: 69
• Netflix: 68
• Starbucks: 77
• Costco: 79
• USAA: 75

How to Use Benchmarks

• Compare against your direct competitors, not just industry average
• Consider your market position (premium vs. budget brands have different expectations)
• Focus on improvement over time, not just hitting a benchmark
• Remember that B2B and B2C have different typical ranges

NPS improvement requires systematic effort. Here's a proven framework:

1. Close the Loop with Detractors

This is the highest-impact action you can take:

• Reach out within 24-48 hours of receiving negative feedback
• Listen without being defensive
• Apologize and take ownership
• Offer concrete solutions or compensation
• Follow up to ensure resolution

Result: Up to 70% of detractors can become promoters when their issues are resolved well.

2. Convert Passives to Promoters

Passives are your biggest opportunity:

• Identify what's missing from their experience
• Small improvements can make a big difference
• Personalization often moves the needle
• Surprise and delight tactics work well

3. Activate Your Promoters

Promoters want to help you—let them:

• Create referral programs with meaningful incentives
• Make it easy to leave reviews
• Feature their testimonials and case studies
• Build a community or ambassador program

4. Address Root Causes

Use the qualitative feedback to identify systemic issues:

• Categorize feedback by theme (product, service, price, etc.)
• Prioritize by impact and frequency
• Create cross-functional teams to address issues
• Track improvements over time

5. Build NPS into Your Culture

• Share NPS scores with all employees
• Include NPS in performance metrics
• Celebrate wins and learn from setbacks
• Make customer feedback visible across the organization

Avoid these common pitfalls that undermine NPS effectiveness:

1. Only Looking at the Score

Mistake: Obsessing over the number while ignoring the feedback.

Fix: The qualitative feedback is where the actionable insights live. Read every comment.

2. Gaming the System

Mistake: Only surveying happy customers or asking "Can you give us a 10?"

Fix: Survey all customers consistently. Inflated scores give false confidence.

3. Not Taking Action

Mistake: Collecting NPS data but never acting on it.

Fix: Every detractor should receive follow-up. Create action plans for common issues.

4. Surveying Too Often

Mistake: Bombarding customers with surveys causing survey fatigue.

Fix: Relationship NPS quarterly is enough. Set rules for transactional surveys.

5. Wrong Timing

Mistake: Sending surveys at bad times (during issues, too long after experience).

Fix: Time surveys appropriately—soon after positive experiences, not during problems.

6. Not Segmenting

Mistake: Looking only at overall NPS without breaking it down.

Fix: Segment by customer type, product, region, tenure, etc. to find patterns.

7. Ignoring Passives

Mistake: Focusing only on promoters and detractors.

Fix: Passives are your biggest growth opportunity. Understand what would make them promoters.

8. No Competitive Context

Mistake: Celebrating a score without knowing industry benchmarks.

Fix: Compare against competitors and industry standards for proper context.