[Digital products] NPS: What is it? How to calculate it? How often should you measure it?
NPS (short for Net Promoter Score) came up for the first time in 2003, in a Harvard Business Review article written by Fred Reichheld, consultant at Bain & Company, a renowned American company. In 2006, Reichhel wrote a book called The Ultimate Question that had a second edition published in 2011, containing the lessons learned through the years.
NPS is calculated based on a single question you should ask your client:
In a scale from 0 to 10, how likely would you tell a friend or colleague about us?
Zero meaning absolutely not, and 10 meaning absolutely yes. People who evaluated from zero to 6 must be classified as detractors; the ones who graded 7 or 8 must be classified as neutral; and the ones who graded 9 or 10 are promoters.
The NPS calculation is very simple, just subtract the detractors’ percentage from the promoters’ percentage. The result is a number varying from -100% to 100%. A negative number means that you have more detractors than promoters, and a positive number means the opposite, that is, you have more promoters than detractors.
Of course, it´s better to have more promoters than detractors, mainly if we think about the word of mouth marketing that comes from both detractors or promoters. Aside of talking your company and services up to their friends, the promoters buy more and are costumers for longer. That is, they like your product or service, and will always give you ideas and suggestions that are important to your business.
Several companies use NPS to measure their clients’ satisfaction and loyalty. Some examples are Apple, Zappos, Rackspace, Microsoft, Intuit and Facebook.
However, how often should you measure NPS? Once a year? Every semester? Every month? Every week? The book recommends to measure it everyday, continuously. That can be done in the following way: everyday you ask the NPS question to clients who are celebrating the X-months or X-years anniversary that day.
For instance, you can ask your clients when they complete 1 month since they have become your clients, then you can pick up some on-boarding issue. You can also ask your 6-months clients and, from thereon, at each 1-year anniversary at the company. This way you can get NPS reports per time the client is your client, then you will know if your treating well both new and old clients. To check if your NPS is evolving, you take the moving average from the last 30 days.