Is the NPS a predictor of growth?

18 December 2014 – Andrew Cook

People often comment that customer experience is the “fluffy stuff” in a company, and much like marketing, its effect can’t really be measured. Many companies use the Net Promoter Score (NPS) to measure satisfaction and our entire business is built on the technology that companies need to do this.

While you can measure whether your customers are happy or whether they will refer your services or products to a friend, how can you show that customer experience directly and emphatically impacts the bottom line?

Bain & Company’s research shows a strong link between a company’s growth and its NPS. To make it quantifiable, their research includes growth patterns relative to competitors.

They did this by identifying the specific competitors in a business and then measuring the NPS rating of each competitor. Obviously, they used the same methodology and sampling approach for each and correlated the NPS results with organic growth statistics. What Bain found was that “NPS explained roughly 20% to 60% of the variation in organic growth rates among competitors”. In other words, a company with a leading NPS would outgrow its competitors by two-fold.

NPS used as a predictor of growth

The results also showed the following:

• The relationship between NPS and growth is stronger in mature industries where customers have greater choice and can easily switch providers.
• Companies with deep pockets can open loads of new stores or flood the market with promotions or discounts. Companies with partial monopolies and companies that dominate distribution channels sometimes grow despite having weak NPS ratings.
• NPS depictions of customer loyalty may not be the only factor determining growth, but growth cannot be sustained without it.

If you took the time to learn about why the most successful companies in the world are the most successful companies in the world, I have absolutely no doubt that customer service would feature high on the list of priorities for each. No company in today’s market could thrive without putting their customers first.

While is great to know that how customers rate your company is directly linked to growth, it’s also important to keep in mind that the NPS and other survey methods are simply the first step – growth doesn’t happen if you don’t take your NPS rating and act on it – build on what’s working and fix what isn’t.

Read more about how Bain & Company link loyalty and growth:

http://www.bain.com/publications/articles/linking-loyalty-and-growth.aspx