NPS as an Indication of Growth

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Valerie Access

February 21, 2017

The Net Promoter Score (NPS) is a universally adopted metric for benchmarking a company’s success. Typically, companies use this metric to get insight into the customer experience, but it can also function as an excellent indicator of business growth.

How Does Your NPS Score Indicate Company Growth?

Bain & Company discovered a link between organic growth rates and the NPS score. In the industries research, the relative NPS scores between competitors explained between 20 to 60 percent of the variation in organic growth rates. In some cases, businesses with high NPS scores outgrew their competitors on a two-to-one basis.

Your company depends on customer retention, loyalty and advocacy for long-term progress, so the NPS score connection makes logical sense. This metric provides an overview of your client relationships and their satisfaction with your company. If you have strong relationships with most of your audience and they are satisfied, they are more likely to do more business with you, and bring their networks along with them. If you neglect customer relationships and your customers are unhappy, the churn rate can prevent you from a sustainable growth position. While the NPS score doesn’t function as the only predictive metric for your company’s success, it can help you determine whether you are on the right track.

What Industry Factors Can Skew the Correlation Between NPS and Growth?

These research findings don’t apply to all industries equally. There are several factors to keep in mind when using your NPS scores for long-term measurements.

Do consumers have a choice in your market? Some customers have no choice but to stick with companies they dislike when there are no viable alternatives. For example, many regions have virtual monopolies with their cable, Internet, and television providers. Customers might hate the service and rate it low on every NPS survey, but the business continues expanding. Larger, competitive markets, on the other hand, offer the perfect environment for the NPS to growth link. In these environments, focusing on the NPS score can help determine future growth.

What’s the cost to the consumer when they switch companies? Lengthy contracts, termination fees and other roadblocks can force customer to stay with a business despite low NPS scores. Competitors have to offer a compelling reason to motivate this audience to leave their current contracts. Industries that have little to no barrier when moving between options have to invest more resources into developing quality customer relationships. Because the customer can easy jump ship, making sure the customer is satisfied with your business becomes even more important.

How mature is your industry? If you’re operating in a relatively new market without products and services that are used on an everyday basis, you might lack the right audience mix to generate meaningful data. The Internet of Things is a good representation of this NPS growth indicator problem. In this market, there are a lot of companies who are still in the beginning stages, trying to figure out how to expand IoT’s presence. With an excess of failed experiments and poorly understood market expectations, growth becomes difficult to measure through the NPS score.

How to Address Low NPS Scores

Are you in an industry where NPS scores matter for your future business growth? Learn how to boost your NPS scores and position yourself as a top performer. You can’t please everybody all the time, but these strategies help you improve your overall performance and put you in a great position for future growth.

Ask Why
The creators of NPS designed it for simplicity, but you can’t take action based on numbers alone. You have to ask your customers the all-important question: “Why?” Customer feedback gives you the context you need to improve your performance. Pay particular attention to respondents who give you low NPS scores. This demographic provides critical insight for improving customer relationships. Look for common trends in their pain points and determine how to fix the issues. For example, customers may get upset because your phone-based customer support can’t see sales information or tickets from the email support channel. You can address this need through a contact center solution integrating customer data throughout your organization.

Customer-Centric Company Culture
Customer relations isn’t the sole responsibility of customer support and account managers these days. With so many touch points and opportunities to interact with a business, you need everyone on board, dedicated to providing an exceptional customer experience. Give your employees the training and resources they need to handle customer interactions. Instill a customer-centric company culture throughout the organization. While your company culture won’t change overnight, you’re aiming for long-term improvements with this approach.

Examine Your Consistency
An inconsistent customer experience can lead to long-term relationship problems with your audience. If your in-person experience is spectacular but your mobile website is impossible to navigate, consumers slowly build up. They might not leave at the first few inconsistencies, but they can easily reach a breaking point where they churn. Discover the weak links in your customer touch points and bring them up to speed. Fix any inconsistencies across the entire business to offer the best possible customer experience and build loyal relationships.

Set Reasonable Expectations
Are your customers coming in with unreasonable expectations based on sales team promises or other miscommunications? Let your audience know exactly what to expect when they do business with your company. They experience less disappointment when they know what to expect. You also screen out consumers looking for something completely different, which can improve the quality of your current customer base.

Your NPS score can be more than just a way to gauge your customer loyalty. Depending on the industry in which you operate, your NPS score can be a powerful tool to determine your future growth rate and competitive positioning. Incorporate this metric with other growth indicators to help you make informed decisions about the future of your business.

Sources:

  • http://www.netpromotersystem.com/about/how-is-nps-related-to-growth.aspx
  • http://www.forbes.com/sites/micahsolomon/2014/07/20/customer-centric-culture/
  • http://www.mckinsey.com/industries/retail/our-insights/the-three-cs-of-customer-satisfaction-consistency-consistency-consistency
  • http://sixteenventures.com/customer-success-definition
  • www.SeniorLiving.Org