Does improving your Net Promoter Score (NPS) correlate to improved business outcomes?
As long as you’re measuring NPS the correct way, an improving Net Promoter® Score WILL absolutely align with increased revenue growth as well as become your greatest indicator of overall company success.
(Here’s how to measure NPS the correct way)
In fact, some investors, most notably Jason M. Lemkin, have stated that an increasing and/or high NPS score is one of the greatest signs of a good investment.
So, the natural question is, why does it correlate so well?
The most successful companies in the world drive up to half or more of their revenue through word-of-mouth and direct customer referrals.
In order to sustainably drive this organic growth, you need loyal customers who are willing to advocate for you.
In NPS terms, these are your promoters.
Simply put, if your score is increasing, that means that your percentage of customers willing to endorse you is also increasing.
At the same time, churn (lost revenue) tends to decrease in a very predictable pattern.
You are impacting the bottom-line from two different angles.
However, the opposite is true if you see your score begin to decline.
With that in mind, it’s important to note that just because a customer has identified themselves as someone who is willing to recommend you, doesn’t mean that they’re automatically going to do it.
Statistically speaking, only 20% of those who’ve identified themselves as promoters, will proactively endorse you without engagement.
What that means is that an increasing score in itself is not enough. In order to fully realize the growth potential of NPS, you’ll need to “activate” your promoters. Here are 6 ways you can do that.
Regarding detractors, the action here is clear: engage and triage. Nearly 30–50% of detractors can churn in as little as 90 days without some form of engagement, so measure often and “close the loop” immediately when you identify someone who falls into this category.