Executive Summary: As B2B growth and transformation consultants, we all have our frameworks to assess if we can help the client grow topline while scaling. However, I have found that one special metric – NPS or Net Promoter Score – can very quickly tell me if the potential B2B growth opportunity is small, medium or large. If the NPS score is below 50 (on a 0-100 scale), I know instantly that restoring meaningful growth can be achieved. This blog briefly describes why an NPS score is the king of growth metrics, and the pros and cons of implementing NPS.
Why NPS Is A Good Proxy To Project Growth: Growth happens in 3 ways – first, efficient new customer acquisition and the largest growth driver; second, existing customers buy more (land and expand); and third, if you’re a subscription business like software, growth is also tied to reducing leakage or churn. NPS, often incorrectly lumped in with other loyalty metric, is best at measuring cost efficient new customer acquisition or growth potential. On a scale of 0-10, customers are asked one simple question – “what is the likelihood of the customer recommending your company to a friend or colleague ”. Customers scoring at 9 or 10 are called Promoters, and said they will proactively promote the company to friends and colleagues – the most cost effective way to grow your business. 7s and 8s scorers are considered Passives, and will only passively talk about your brand. And 0 through 6 scorers are called Detractors, who cannot be expected to promote your brand. The Promoters (free marketers) less the Detractors (will not proactively advocate or may hurt you) is your NPS score. An 80 NPS score could mean 90% were Promoters and 10% were Detractors. The NPS scores rise, so do growth rates and this is true across industries. Note, ‘will you agree to talk about me’ is different from ‘are you happy with me’, and the latter is what loyalty metrics measure.
The pros of implementing NPS: First, NPS trends are well understood metric that CEOs and senior leaders can leverage with the customers, the street and employees. Second, NPS very easy to administer – customers need to spend 10 seconds on answering one question. Corporates can get millions of pulse checks on various customer segments daily by adding this question online, onto email marketing and after every phone queue chat. Last, it allows you to very quickly identify unhappy customers (0-6 score) and escalate before you lose the relationship.
The cons of an NPS score? First, it is very easy to manipulate scores. I was recently on a call with customer service agent from my mobile wireless carrier. At the end of the call, before transferring me to an automated system to capture my NPS score, the agent hinted that 20% of his compensation was tied to receiving a good NPS score. Did I give that agent a good score? – yes. Will I proactively talk about my mobile carrier experience - no. Second, companies often overinvest on improving their scores, which leads to uncompetitive pricing. Third, if scores are low, it will not tell you why. You still have to break down the problem, and validate for NPS impact before fixing.
You want customers that will proactively tells others about their experiences with you company (free marketing & repeat purchasing) verses just happy with your company (loyalty & repeat purchasing) - what NPS measures best