Just like revenue and profit, Customer loyalty can be systematically measured, managed, and improved. As we know that loyalty is directly proportional to word of mouth.
To compute NPS for your organization, select a random sample of one hundred customers and ask them "On a scale of 1-10","How likely is it that you would recommend (Brand) to a friend or colleague?" After you receive the responses,divide them into three buckets. In the first bucket,place the responses that are a 9 or 10,and label that bucket "Promoters". In the second bucket,place the responses that are either a 7 or 8,and label it "Passives". In the third bucket,place the responses that are 0 through 6, and label it "Detractors".
Once done,focus only on the Promoters and Detractors. NPS = Promoters - Detractors. For example responses are 50/20/30 for Promoters/Passives/Detractors respectively them, NPS= 50-30= +20. If it is 20/10/70, NPS= 20-70= -50. So NPS above 0 means that majority of your customers are happy and willing to give you strong referrals for free.
Promoters are customers who love your organization so much that you might as well think of them as your sales ambassadors. They spread positive word of mouth.
Detractor are their exact opposite. They are your unsatisfied customers,who had bad experience with your organization.
The Passives are neither excited nor disillusioned, they are neutral, they do not spread any word of mouth.
So, NPS quantitatively captures the net word of mouth power of your organization.
