NPS Benefits Quantified
NPS is much more than a measurement of promoters, passives and detractors. If used correctly and to its full potential, the metric has numerous benefits that can help your business to improve in challenging areas. A well-executed NPS programme will lead to reduced business costs, customers spending more, more new customers through referrals, and fewer customers lost to competitors, amongst other benefits. Below, we explore a number of benefits that prove how NPS improves business outcomes and demonstrate aspects that contribute to the ROI of an NPS programme.
An average NPS increase by 7 points correlates with a 1% growth in revenue.
NPS growth is directly correlated with revenue growth according to Bain & Company who founded the metric, and NPS leaders grow 2x faster than their market competitors. Furthermore, loyalty leaders grow revenues roughly 2.5x faster than their industry peers. Both promoters and loyalty programme members are two categories of customers that spend more, so if your business is excelling in these categories, you will see higher returns. American Express, for example, sees a 10-15% increase in spending by promoters and far better retention rates.
Increased loyalty, customer lifetime value, & word of mouth marketing through NPS.
While gaining new customers is integral to any business strategy, customer retention is ultimately what your brand’s reputation is rooted in and defined by. Loyal customers will advocate for you and ultimately help you to gain new customers, but in a much less expensive manner than normal customer acquisition strategies. Loyalty and NPS go hand-in-hand. A truly loyal customer wouldn’t hesitate to recommend you to their friends, family and colleagues. These are your best customers, and the more you have, the better your business will perform. Plus, 95% of businesses have reported that customers who are members of their loyalty programs spend more.
An increase in loyalty of 7% can boost lifetime profits per customer by up to 85%, and a loyalty increase of 3% can correlate to a 10% cost reduction.
Customer lifetime value increases when they promote your brand to bring you new customers who will hopefully continue the trend; with the lifetime value of a customer obtained via referral being 16% higher than a non-referral customer. Brands spend up to 11x more on recruiting new customers than retaining existing ones, but the existing customers are where the true value lies. The value of a word of mouth referral is significant, with 92% of customers trust recommendations from people they know and 70% trust opinions posted online. Furthermore, nearly 65% of new business comes from referrals, so the lifetime value of a loyal customer who is a promoter is multiplied when you factor in their willingness to advocate for your brand. They are spending more and bringing you new customers who will also spend more than a customer obtained via a traditional new customer acquisition strategy.
