Net Promoter Score is a metric that aims to measure customer satisfaction and loyalty towards companies. Organizations of all sizes and places in the world use NPS as it is a practical and effective method during periodic surveys conducted with their customers. The methodology was developed by Harvard professor and management consultant Fred Reichheld and later published in his book The Ultimate Question.
The book is called The Ultimate Question because Reichheld builds his methodology around customer satisfaction regarding their answer to the following question: “from 0 to 10, how much would you recommend our company to friends?” So after having tabulated the answers then you can move on to calculate NPS, using the formula: % promoting customers (grades 9 and 10) -% detrimental customers (grades 0 to 6) =% NPS
So why is it important to calculate customer satisfaction using NPS? Well, through Net Promoter Score (NPS) you will be able to identify and segment customers in different groups and draw different actions towards each group. So, with that being said, I can give you an example: For the detrimental customers you can identify the root cause of their feedback – it is important to keep in mind that if someone is willing to give you feedback, it is because one still believes in your product or service. After knowing the root cause you can segment them into different kinds of marketing actions like special events, putting them into the beta-testers list and so on.
When we think of SaaS companies or startups in general, NPS has been the most important metric to drive growth. As a real case study, take a look at Uber`s rating method after each ride.