You cannot build a lasting company without understanding how your customers actually feel about you. In the early days of a startup, you might rely on anecdotal feedback or casual conversations. As you scale, you need a quantifiable metric that cuts through the noise.
Net Promoter Score, or NPS, is a management tool used to gauge the loyalty of customer relationships. It serves as an alternative to traditional customer satisfaction research and is often correlated with revenue growth.
The core of NPS is a single survey question.
How likely is it that you would recommend our company/product/service to a friend or colleague?
Respondents answer on a scale from 0 to 10.
How the Score is Calculated
#The calculation divides your customers into three distinct categories based on their numerical response.
- Promoters (score 9-10): These are loyal enthusiasts who will keep buying and fuel growth by referring others.
- Passives (score 7-8): These are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6): These are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
To get your actual Net Promoter Score, you take the percentage of Promoters and subtract the percentage of Detractors.
Passives count toward the total number of respondents, but they do not directly increase or decrease the score.
The result is a number between -100 and +100. A score above 0 is generally considered good, while a score above 50 is excellent.
NPS vs. CSAT
#Founders often confuse NPS with CSAT (Customer Satisfaction Score). While they seem similar, they serve different functions in a business environment.
CSAT measures satisfaction with a specific interaction. You might send a CSAT survey immediately after a customer closes a support ticket or completes a purchase. It tells you if a specific process is broken.
NPS measures the overall relationship and brand loyalty. It is not about a single transaction. It is about the customer’s emotional connection to the product and their willingness to put their own reputation on the line to recommend it.
Use CSAT to fix operations. Use NPS to predict long-term growth.
When to Measure NPS
#Timing is critical. If you ask for an NPS rating too early, the customer has not experienced enough value to form an opinion.
For a SaaS startup, you might send the survey after the user has completed a key activation step or has been active for 30 days. For an ecommerce brand, you might wait until the product has been delivered and used.
The goal is to capture sentiment when the user has a full understanding of what you offer.
Limitations and Critical Questions
#Data is only useful if it leads to action. A common mistake in startups is obsessing over the score itself rather than the feedback behind it.
NPS tells you what is happening, but it does not tell you why.
When you implement this, you must allow for an open-ended follow-up question asking why the user gave that score. Without the qualitative data, the number is just a vanity metric.
There are also unknowns regarding cultural nuance. In some cultures, giving a 10 is rare, which can artificially deflate scores for global companies.
As you look at your own dashboard, ask yourself if a high score is actually correlating with retention. Are your Promoters actually referring new business? If the score is high but churn is also high, the metric may be giving you a false sense of security.