The NPS Calculation Method: A Guide for Banks and Credit Unions
Table of Contents
Key Takeaways:
- The formula for calculating NPS starts with asking customers how likely they are to recommend your bank or credit union to others.
- Essential features of an effective NPS tool include multi-channel survey distribution, customizable survey design, real-time data collection, and robust segmentation.
- By digging deeper into reasons behind customers’ scores, financial institutions can uncover actionable insights to identify areas of opportunity or concern, improve customer experiences, and build long-term loyalty.
Calculating the Net Promoter Score (NPS) involves surveying customers, categorizing responses, calculating percentages of Promoters and Detractors, and computing the final score. Banks and credit unions rely on this process to gauge customer loyalty.
NPS Formula and Calculation
Like any equation, the formula for calculating NPS involves a series of steps.
Step 1: Survey Customers
Step 1 of calculating Net Promoter Score (NPS) involves surveying customers to gather their feedback on how likely they are to recommend your product, service, or brand to others.
The primary question in an NPS survey is: “On a scale from 0 to 10, how likely are you to recommend us to a friend or colleague?”
The 11-point scale captures a range of customer sentiment, from those who are extremely dissatisfied (0) to those who are enthusiastic advocates (10).
In addition to the main question, it’s recommended to include a follow-up question that asks respondents to elaborate on the reasons for their score. This open-ended feedback provides valuable insights into what drives customer satisfaction or dissatisfaction, and offers actionable data for improving the customer experience.
The survey can be distributed through various channels, depending on how you engage with your customers. Popular options include email surveys, in-app pop-ups, website widgets, or text messages.
The timing of the survey is also important.
It should be sent at key moments in the customer journey, such as after a purchase, following customer support interaction, or after a specific milestone in the product or service experience.
The goal is to capture a representative sample of customers to ensure the results are reliable and reflective of the broader customer base.
Step 2: Categorize Responses
Step 2 in calculating NPS involves categorizing customer responses based on their rating. After collecting responses, customers are divided into three distinct groups: Promoters, Passives, and Detractors.
These categories help organizations quickly assess overall customer loyalty and identify areas for improvement.
Promoters are respondents who give a rating of 9 or 10.
They are the most loyal and enthusiastic customers, likely to recommend your product or service to others. Their high level of satisfaction makes them valuable assets for word-of-mouth marketing and customer retention.
Promoters are typically seen as brand advocates. Their loyalty can have a significant impact on growth, as they actively help attract new customers.
Passives are those who provide a response of 7 or 8. While they are generally satisfied, they are not as enthusiastic as Promoters and may not actively recommend the brand.
However, they are not as likely to churn or damage the brand’s reputation.
Since they are on the borderline of becoming Promoters or Detractors, it’s essential for companies to focus on converting them into loyal advocates by addressing their concerns or offering additional value.
Detractors are respondents who give a score between 0 and 6. They are typically unhappy or dissatisfied with the experience, and they pose the highest risk to your reputation.
Detractors may not only leave but can also spread negative word-of-mouth, which can harm your brand image. Identifying the reasons behind their dissatisfaction is critical, as this group provides insight into areas needing improvement.
By categorizing customers into these groups, companies can prioritize actions for improving customer experience.
Engaging with Promoters, converting Passives into Promoters, and addressing the concerns of Detractors are key strategies for driving a higher NPS and enhancing overall customer loyalty.
Step 3: Calculate Percentages
Step 3 of calculating NPS involves determining the percentages of Promoters and Detractors from the survey responses. These percentages are the basis for the final NPS calculation.
Once the responses have been categorized into Promoters (scores of 9-10), Passives (7-8), and Detractors (0-6), the next task is to calculate the proportion of Promoters and Detractors relative to the total number of respondents.
To calculate the percentage of Promoters, divide the number of respondents who scored 9 or 10 by the total number of respondents and then multiply by 100. This gives the percentage of customers who are enthusiastic and loyal, willing to promote your product or service.
Similarly, to calculate the percentage of Detractors, divide the number of respondents who scored between 0 and 6 by the total number of respondents, and again multiply by 100. This provides the proportion of dissatisfied customers who may harm your brand through negative word-of-mouth.
Passives, while included in the survey, are not factored into the final NPS calculation.
Even though their feedback is valuable for understanding customer sentiment, the NPS formula focuses solely on Promoters and Detractors.
However, it is still useful to monitor the percentage of Passives, as they represent a segment of customers that could potentially move in either direction—toward becoming Promoters or slipping into the Detractor category.
Once these percentages are calculated, you can assess the balance between Promoters and Detractors to gain an initial sense of overall customer sentiment.
A high percentage of Promoters indicates strong customer satisfaction and advocacy, while a high percentage of Detractors signals dissatisfaction that may require urgent attention. These percentages provide an essential snapshot of customer loyalty and serve as the basis for the final NPS score in the next step.
Step 4: Compute NPS
Step 4 of calculating NPS involves using the percentages of Promoters and Detractors from the previous step to compute the final NPS score.
The formula is straightforward: subtract the percentage of Detractors from the percentage of Promoters. The result will give a score between -100 and +100, which represents the overall level of customer loyalty and satisfaction.
For example, if 60% of respondents are Promoters and 20% are Detractors, the NPS would be calculated as 60 – 20 = 40. This score of 40 indicates a positive sentiment, meaning that more customers are enthusiastic about recommending the product or service than those who are dissatisfied.
Conversely, if a company has a higher percentage of Detractors than Promoters, say 30% Promoters and 40% Detractors, the NPS would be -10, signaling that the business has more unhappy customers than loyal advocates, which is a cause for concern.
Scores above 0 indicate that the company has more Promoters than Detractors, and the closer the score is to +100, the better. On the other hand, a negative score highlights a potential issue with customer experience that requires immediate attention.
While NPS offers a clear metric, it should be viewed as a starting point rather than the final measure of success.
Analyzing the underlying reasons for customer dissatisfaction (from Detractors) and satisfaction (from Promoters) is essential for taking meaningful action to improve customer loyalty.
Regularly tracking NPS over time also helps you measure the effectiveness of your efforts in enhancing the customer experience.
Tools for Calculating NPS
Tools for calculating NPS should include several essential features to ensure accurate data collection, efficient analysis, and actionable insights:
The first key feature is multi-channel survey distribution.
Since customers interact with banks and credit unions through various touchpoints—such as in-person, mobile apps, websites, and call centers—NPS tools must support survey distribution across multiple channels. This ensures that institutions capture feedback from a diverse range of customers and accurately reflect their experiences.
Whether through email, SMS, app notifications, or embedded website widgets, the tool should make it easy to reach customers in a way that fits their preferences and habits.
Another essential feature is customizable survey design.
While the core NPS question remains standard, banks and credit unions should be able to tailor follow-up questions to gather more detailed feedback on specific services or products. For instance, after the main NPS question, the tool should allow institutions to ask open-ended questions like, “What’s the main reason for your score?” or product-specific questions such as, “How satisfied are you with our mobile banking app?”
This customization helps institutions dig deeper into customer sentiment and pinpoint areas for improvement or highlight successes.
Real-time data collection and reporting is also critical in NPS tools.
Immediate access to customer feedback enables banks and credit unions to respond swiftly to issues or negative experiences before they escalate. For example, if a customer provides a low NPS score, the tool should trigger alerts or notifications to customer service teams, allowing them to follow up with the Detractor quickly.
Real-time reporting dashboards should visually display NPS trends, segment analysis, and customer feedback, making it easy for teams to monitor performance and identify patterns.
A robust NPS tool should also offer segmentation and filtering options to analyze data by specific customer groups, regions, or products. Banks and credit unions often serve a wide variety of customers with different needs, so the ability to filter NPS scores based on criteria like account type, demographics, or the type of interaction (e.g., loan application, customer service inquiry) is invaluable.
This allows institutions to target specific areas for improvement and identify which customer segments are the most loyal or dissatisfied.
Analyzing and Interpreting NPS Data
When banks and credit unions analyze and interpret Net Promoter Score data, they must go beyond simply calculating the score.
NPS is a reflection of customer sentiment, but the real value comes from understanding the underlying factors driving those sentiments. Analyzing and interpreting NPS data requires financial institutions to look beyond the raw score and delve into the “why” behind the numbers.
One of the first steps is to segment NPS data across various customer groups, such as by product (e.g., checking accounts, loans, or credit cards), geographic regions, or customer demographics.
For example, a bank might find that customers who use mobile banking services have a higher NPS than those who primarily visit physical branches. This insight could signal the need for improvements in the in-branch experience or more effective cross-promotion of digital services.
Similarly, analyzing NPS by age or income brackets can help a credit union understand how different segments perceive its services, allowing for tailored strategies to address each group’s unique needs.
In addition to segmenting data, banks and credit unions should pay close attention to the open-ended feedback provided by Promoters, Passives, and Detractors. This qualitative data provides context to the numerical scores, helping you identify common pain points or areas where you excel.
For example, if Detractors frequently mention long wait times for customer service, the institution might prioritize streamlining its call center operations or enhancing self-service options.
Promoters, on the other hand, might highlight exceptional service or easy-to-use mobile banking features, which can help the bank understand what is working well and leverage those strengths in its marketing efforts.
Trend analysis is another critical aspect of interpreting NPS data. Financial institutions should track their NPS over time to identify patterns and measure the impact of any changes or initiatives.
For instance, if a bank rolls out a new mobile app and sees a subsequent increase in NPS, it can infer that the app has been well received.
Conversely, a sudden drop in NPS might indicate that a recent policy change or service issue is negatively affecting customer sentiment, allowing you to react quickly and address the problem before it worsens – or your customers leave for good.
Finally, benchmarking NPS against industry standards is essential for understanding how a bank or credit union’s performance compares to competitors.
While NPS can provide valuable internal insights, external benchmarking allows financial institutions to gauge whether they are leading, lagging, or on par with others in the sector. This competitive analysis can help guide strategic decisions, whether that means doubling down on strengths or taking corrective action to improve weak areas.
Common Mistakes to Avoid in NPS Calculation
When calculating NPS, banks and credit unions need to be mindful of common mistakes that can skew results or lead to misguided actions.
One of the most frequent errors is failing to collect a representative sample of customers.
If only a small or biased group of customers is surveyed—such as exclusively reaching out to those who have recently had positive interactions—the NPS will not accurately reflect the overall customer experience.
For example, a bank that surveys only new account holders may miss out on critical feedback from long-term customers who might be dissatisfied. Ensuring a diverse and comprehensive sample across various customer segments, such as account types, geographic locations, and service usage, is essential for getting an accurate and actionable NPS.
Another common mistake is relying solely on the NPS score without analyzing the underlying feedback.
While the score provides a quick snapshot of customer loyalty, it does not explain why customers feel the way they do. Banks and credit unions that focus only on the numerical score miss out on valuable insights found in open-ended feedback, which often reveals the specific reasons for customer dissatisfaction or advocacy.
Ignoring this qualitative data can lead to a superficial understanding of customer sentiment and limit your ability to address the root causes of dissatisfaction or leverage strengths identified by Promoters.
Improper timing or frequency of surveys is another pitfall. Sending out NPS surveys too frequently or at the wrong moments in the customer journey can frustrate customers and lead to low response rates or biased results.
For example, sending a survey immediately after a customer has opened an account or completed a transaction may not give them enough time to form a well-rounded opinion about the bank’s services.
On the other hand, waiting too long after a customer interaction can result in forgotten details, leading to less accurate feedback. It’s crucial to survey customers at key touchpoints—such as after significant interactions like loan applications or customer service engagements—while avoiding survey fatigue by maintaining a reasonable frequency.
Overemphasizing Passives or conflating them with Detractors is another common mistake. Passives (those who score 7 or 8) should not be ignored, but their scores do not count in the NPS calculation.
Some banks and credit unions mistakenly interpret them as detractors or as a bigger risk to loyalty than they actually are. While it’s important to pay attention to Passives and work on converting them into Promoters, treating them as Detractors can lead to misallocation of resources.
Lastly, failing to take action based on NPS results can render the entire process meaningless.
Collecting NPS data without following up with improvements or strategic changes based on customer feedback leaves the institution stuck in a feedback loop with no real progress. Customers who provide feedback—especially Detractors—expect their concerns to be addressed.
When banks and credit unions fail to act on the insights gained from NPS, they risk further alienating dissatisfied customers and missing opportunities to strengthen relationships with Promoters.
It’s essential to have a structured process for acting on NPS results, whether that’s improving services, addressing customer complaints, or enhancing areas that are already strong.
Advanced Analysis of NPS Data
While traditional NPS measures customer willingness to recommend an institution, more advanced techniques delve deeper into understanding the drivers behind these scores and identifying actionable insights.
These advanced methods can provide a more nuanced understanding of customer sentiment.
Segmentation is one of the most powerful techniques in NPS analysis. Rather than looking at an aggregate NPS score, banks and credit unions can break down the data by customer segments—such as by age, income, account type, or branch location. This approach allows financial institutions to identify specific groups that may be more satisfied or dissatisfied and to tailor strategies for improvement.
For instance, younger customers might have different expectations for digital banking services than older clients, and segmenting NPS by demographic can help banks fine-tune their offerings.
Root cause analysis is another critical method for deepening NPS insights. By correlating NPS data with transactional data, customer interactions, and complaints, financial institutions can uncover the underlying issues that drive promoters or detractors. This can help pinpoint systemic issues, such as slow processing times, outdated technology, or insufficient customer support, that affect customer satisfaction.
Advanced data analytics tools can automate this process, enabling faster identification of problems and the ability to track changes over time.
Finally, text analytics allow banks and credit unions to extract valuable insights from open-ended responses in NPS surveys. Through natural language processing (NLP) and sentiment analysis, these institutions can automatically identify common themes in customer feedback, such as service quality, digital experience, or fees.
By analyzing patterns in language, you can gauge customer sentiment beyond numerical scores, providing a deeper understanding of what truly matters to your customers.
Integrating text analytics with NPS enables you to address specific pain points and improve customer loyalty more effectively.
In Summary
A customer experience metric is only of value if it is used properly. By following proven procedures in calculating and analyzing NPS, banks and credit unions can gain a clearer view of their customers.
Such clarity is essential to consistently meeting customer expectations and winning life-long loyalty.
We do the work of calculating NPS and analyzing the data to serve up insights that respond to real customer concerns. Find out how we can make MX measurement easy for you – reach out to our CX experts today!
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Net Promoter®, NPS®, NPS Prism®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.