Using Net Promoter Score (NPS) For Measuring Your Product/Market Fit
When it comes to measuring customer satisfaction with your product, the Net Promoter Score (NPS) can be one of the most important metrics you should pay attention to. The metric was originally developed by Fred Reichheld, Bain & Company, and Satmetrix, and it was introduced by Reichheld himself at Harvard Business Review in 2003. I consider it an essential customer relationship measure for every product company and find this system yet another relevant technique for measuring the product/market fit.
The NPS score is essentially an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. It is used as an indication of the customer’s overall satisfaction with a company’s product or service and their loyalty to the brand. The core idea of measuring this index comes from a simple NPS survey that asks a single question:
How likely is it that you would recommend our company/product/service to a friend or colleague?
The customer is given a range from 0 to 10 to answer this question. People who respond with a score of 9 or 10 are called Promoters. These are the people who are considered to be loyal customers. They tend to be returning users, frequent buyers, and generally people who will refer the product to others. In other words, they are the unofficial brand ambassadors of the product. People who respond with a score from 0 to 6 are called Detractors. These are the people who don’t really like the product and can even provide negative feedback about it. And finally, people who chose options 7 or 8 are classified as Passives. Even though this is not entirely a danger zone, these people are not likely to promote the product at all. They might use the product from times to times, but it doesn’t mean that they love the solution.
The NPS score is then calculated by taking the percentage of people who are Promoters and subtracting from it the percentage of people who are Detractors. Note that people who were classified as Passives are not part of the calculation process as they are in the neutral zone and NPS only takes into account the extreme scenarios. Here are some examples to illustrate the process. If the percentage of Promoters is 100% (no Detractors and Passives), then the NPS score will be 100. If the percentage of Promoters and Detractors is 50% each (no Passives), then the NPS will be 0. Finally, if the percentage of Detractors is 100% (no Promoters and Passives), then the NPS is -100.
NPS scores can be different across various industries. However, it is generally accepted that a score above 0 is considered to be a good start. If the score is close to 50, then this is considered to be a great result. This is when you can sense that you are close to your product/market fit. People love your solution. They are willing to come back and buy even more, becoming the key figures for your word of mouth strategy. Finally, if the score is above 70, it is considered to be an exceptional case. However, note that very few products reach this level.
I consider NPS to be one of the primary metrics when it comes to measuring the overall quality of the product. However, being a quantitative metric, it only gives you numerical results and does not answer the WHY question. I always recommend that if possible, you should combine the NPS with a supplementary question that will give you some qualitative learnings from your customers. A question such as “What would make you more likely to recommend this product to others?” can be completely sufficient. The magic happens when you have quantitative + qualitative data about what your customers think about your solution.
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Rafayel Mkrtchyan is a product management consultant who helps companies improve their product discovery and delivery processes. He teaches teams how to set up a winning product strategy, run customer and product development processes, as well as robust their lean, agile, and design thinking skills. Contact him via contact@productguy.io.
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