NPS as the main customer experience metric and its relationship to company profitability

Within customer experience, the NPS metric is one of the main keys. In December 2003, the Harvard Business Review published an article by consultant Reicheld entitled “The one number you need to grow” which proposes a way to categorize customers based on the answer to a single question. This question, which is developed on a scale of zero to 10, is formulated through the following question: How likely are you to recommend the product, service or brand to a friend or colleague?

From this question, the consultant generated a measure of how the organization generates customer loyalty relationships. The 0 to 10 scale of the question, its simplicity, allows companies to make a quick measurement of customer feelings and attitudes.

This indicator known as Net Promoter Score (NPS) is currently the most widely used metric. Leading companies around the world use NPS as an indicator to quantify customer experience. The NPS indicator has increased the focus on the importance of customers for business growth.

However, how can we demonstrate the impact of a metric like NPS on a company’s sales, and how does NPS drive profitable growth?

To do this, we can look at how it impacts the following metrics:

• Retention rate. Detractors leave the company at higher rates than promoters, with the NPS question you can determine the current retention patterns and quantify their impact and therefore increase the lifetime value of customers.
• Pricing. Promoters are generally less sensitive to price variations than other customers. They do not initially choose based on price.
• Annual spending. Promoters increase their purchases more quickly than detractors.
• Cost efficiency. Detractors consume more customer services.

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