How Does NPS Affect Revenue?

You want customers to buy your product. That's a no-brainer: paying customers mean money in the bank, and that your doors can stay open another day.

However, if you want to enjoy sustainable growth, then it's not enough for customers to buy what you're selling. They need to enjoy a positive experience while doing so. That could very well be the difference between keeping a customer for a lifetime... or losing him to a competitor.

It's no wonder that so many companies are heavily investing in customer experience management (CXM). Research clearly shows that CX leaders outperform their competition by a significant margin; in some cases, up to 26% percentage points!

Thus, it comes as no surprise that Net Promoter Score (NPS), a key CX metric, doubles as a indicator of revenue growth. What evidence backs up NPS' claim to fame in the CX sector? How can NPS positively affect your company's revenue? The following information will answer these and other questions.

The Correlation Between NPS and Increased Revenue

NPS is inherently a simple metric. It basically measures customer loyalty to your brand; in other words, the odds that a customer will recommend your product or service to a friend. NPS is generally measured by means of a survey, with the featured question asking the customer:

"On a scale of 0 to 10, with 10 being most likely and 0 being not at all likely, how likely are you to recommend [product X, or company Y] to a friend or family member?"

Culling data from multiple customer responses, you can then determine how many of your users are "promoters" (9 or 10 on the scale), "passives" (7 or 8), or "detractors" (0 to 6) in relation to your brand.

Does Net Promoter Score actually affect revenue growth? The short answer is: yes! For example, the SaaS provider Mention leveraged NPS surveys to cut its customer churn rate in half in two months. Moreover, one study of compound annual growth rates in the airline industry found that NPS explained up to 92% of the variation in future revenue for major US airlines, such as Southwest, Alaska Airlines, Jet Blue, Delta, and United.

While further research needs to be conducted in order to shore up the current evidence for correlation between NPS and increased revenue, early studies point to a clear trend: the higher a company's NPS, the larger its revenue growth rate.

The ROI for NPS

NPS surveys can provide a company with valuable insights into the consumer base. Some benefits of utilizing NPS include:

Obtaining a "big picture" view of where the company is trending. Even though NPS is certainly a high-level metric, it can give you an accurate idea of how well your business is performing in the CX sector. A shrinkage in the number of passives and an increase in promoters would indicate that your company is on an upwards trend, and you should stay the course. Conversely, an increase in passives or detractors often provides a clarion call for change, whether in product quality, business process, or some other area.

Prioritizing efforts according to customer responses. NPS can also help you to personalize and prioritize your marketing efforts according to the replies that you receive. For instance, your marketing strategy may include an initiative towards detractors. You may decide to communicate your gratitude for their honesty, regret for any inconvenience or frustration that they experienced when using your product, and a special discounted (or free) offer to influence them towards a more positive view of your brand.

Receiving valuable feedback on business processes. If your NPS survey includes an open-ended comments section, then you'll likely receive feedback from your customers on what your company is doing right, and which areas could use some improvement. Both types of feedback are valuable. It could very well be that one customer's complaint is representative of the "silent majority" of your detractors, or that another user's commendation can point to a specific USP you may not have considered before.

Leveraging NPS to Grow Your Business

It may take a little bit of work to set up a streamlined process for compiling and analyzing NPS data. However, the rewards of doing so are well worth the investment. NPS is a simple metric, but it can have a powerful effect on your company's revenue growth.

There are several ways to implement NPS within your day to day operations. For instance, leveraging a comprehensive CXM platform that monitors NPS and provides real-time data can be a huge help. Such a platform can assist your customer success representatives to approach each interaction in the right way: with a view to maximizing NPS through exceptional service.

In summary, you want your customers to buy your product. But more than that, you want them to buy into your company: your values, your mission, and your care for each and every client. When your customers do that, as reflected in your Net Promoter Score, then you're well on your way to increased revenue and sustainable growth.

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