The relationship between your Revenue Growth and Net Promoter Score

//The relationship between your Revenue Growth and Net Promoter Score

Customer experience is a crucial factor for gauging how well a brand is doing. The reason for this is the intense competition in virtually every niche. Customers today have more choices than ever. Companies can build better relationships with their target audience by enhancing their Net Promoter Score (NPS).  However, what is NPS?

 

Net Promoter Score

The business world saw the term NPS for the first time in 2003. Fred Reichheld wrote an article for the Harvard Business Review, aptly titled ‘One Number You Need to Grow’. This indicated that Net Promoter Score somehow correlated with revenue growth. Furthermore, he stated that CEOs and executives failed to fathom the NPS. After the article’s release, the biggest companies, tech moguls, and global conglomerates adopted the system.

This managerial tool measures how loyal a customer is to a certain brand, with regards to a specific brand or product. The tool measures the inclination of the customer to recommend the product/brand to their friends. This will specify whether your customers actively take part in promoting your company’s products or not. And all you need to do is ask them a question; ‘would you recommend our brand to friends or family?’ The customer responds on a scale from 0 – 10.

You can divide respondents into three categories. Promoters, who give you a 9 to 10, will improve your growth through positive word of mouth. Customers that give you a score of 6 to 8 are fairly risky. They detract from your brand or become promoters at any time. Lastly, detractors who give scores of 0 or 1 are likely to choose your competitors. Moreover, they’ll also spread a negative image of your brand.

 

How Does Net Promoter Score Lead To Revenue Growth

A good NPS will actually lead to a return on your investment of conducting the test in the first place. Research by the London School of Economics shows that revenue grows by 1%, at every 7% rise of a brand’s NPS. The study, ‘Advocacy Drives Growth’, shows the correlation between the factors.

If you’re wondering about companies that benefited from implementing the NPS system, Apple is heralded as the best example because of how much they were able to increase revenue. Quite a while ago, the debate of Mac vs. PC was considered to be a big deal, but mainly because the audience at that time was fixated on their quality and features, which offered a fair deal of benefits, give or take a few.

When it came to the price point, however, many advocates for Apple even agreed that it was a bit high, but nothing they wouldn’t pay for ‘perfection’. Apple wanted to top the scales in their favor, without having to lower their prices, which would put them at the same level as their competitors. Instead, they increased their number of retail outlets from a few niche stores to a chain of customer care centers. Ron Johnson was heading the process of growing Apple’s network of outlets and shape-shifted them from simple outlets to centers that were focused on customer service.

This emphasis on customer satisfaction proved a crucial turning point for the tech giant. The change in approach explains the rise of their NPS from 58% to 72%. It goes to show that offering impeccable customer service is a small price. In the process, they can convert customers into brand ambassadors.

 

The Impact of Net Promoter Score in Today’s Economic Climate

Previously, customers considered quality and affordability to be essential aspects of being loyal to a brand. However, this isn’t the case anymore. Now, they consider seamless customer care service to be influential in determining what companies they will be loyal towards. In fact, consumer behavior has shifted to such an extent that they’re willing to pay higher prices for such services.
The objectives have become clearer for brands. However, this doesn’t mean that that the process to fulfill them is any easier. You need to do everything possible to foster customer loyalty and boost revenue. This includes offering additional training to employees, setting up forums and adding more people to their workforce.

The proportional relationship between your Net Promoter Score and revenue growth indicates the rate at which your customers are becoming promoters for your products. Hence, you can save money in other areas. For instance, you can scale back your marketing campaigns and loyalty programs. The purpose of these initiatives is to attract and retain customers. Since you are doing it via word of mouth, you can leverage it for a greater NPS.

2019-04-08T09:13:21+00:00August 23rd, 2018|