NPS as a key metric for sutomer experience and its relationship with profitability

Within the customer experience, the NPS metric is one of the main keys. In December 2003 an article by consultant Reicheld was published in the Harvard Business Review titled “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 from zero to 10, is formulated through the following question: How likely is it that you will recommend the product, service or brand to a friend or colleague?

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

This indicator known as the Net Promoter Score (NPS) is the currently most used metric. The world’s leading companies use the NPS as an indicator to quantify customer experience. The NPS indicator has increased interest in the importance of customers for business growth.

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

To do this, we can see how it impacts the following indicators:

  • Retention rate. Detractors leave the company at higher rates than promoters, with the NPS question you can determine the current retention models and quantify their impact and therefore increase the lifetime value of customers.
  • Price fixing. Promoters are generally less sensitive to price fluctuations than other customers. They don’t choose initially because of price.
  • Annual expenditure. Promoters increase their purchases faster than detractors.
  • Cost efficient. Critics consume more customer service services

 

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