NPS Blog

Webinar Q&A: How does relative NPS correlate with financial return measures?

Fred and Rob discussed the upcoming book in a July 20 webinar. In this and subsequent posts, they answer additional audience questions from the webinar question-and-answer session.

Q: In your NPS-related client work, what correlations have you found between relative NPS rankings in an industry and financial return measures such as return on capital employed and relative share price performance?

Our work with clients focuses on helping them achieve profitable, sustainable organic growth. The most powerful relationships between Net Promoter scores and business outcomes link “relative NPS” (the Net Promoter score of your business compared to the best in the relevant competitive set) to organic revenue growth. In retail, for example, it is same store sales growth that links most closely to relative NPS. In retail banking, however, because revenue varies so much with interest rates, we generally correlate same branch deposit growth to NPS. The trick is doing the comparison on a business properly defined (using the standard Bain business definition toolkit) and figuring out how to define organic growth.

On average, the loyalty leader in a business (the company with the highest Net Promoter score relative to its competitors) achieves a revenue growth rate about 2.2x the rest of the industry and also achieves a roughly 15% cost advantage.

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