Roi of Nps

The ROI of NPS
How a Focus on Customer Loyalty

Delivers Financial Gains
Overview
The research that created Net Promoter Score clearly demonstrated a link between NPS and
growth, and over the years, many organizations have proven this financial linkage with their own
internal data. Time and again, higher NPS results in:
Higher retention rates
Increased upsell/cross sell
Lower cost to serve
Lower marketing costs due to word of mouth
This ebook will share a number of economic linkage examples and provide a framework for how
to quantify your own Net Promoter economics.
Table of Contents
INTRODUCTION
RISKS & REWARDS
CALCULATING THE IMPACT OF YOUR ACTIONS
TAKING STOCK OF YOUR WORK
Introduction
Since Net Promoter was first introduced in 2004, the resulting organizational discipline has
gained a strong foothold in the business community. Companies that have embraced Net Promoter
have demonstrated its benefits time and again. Just among our own customer base at Satmetrix,
for example, some of the highlights include:
50%
98%
30%
$183M
A 50% increase in
customers over six months
A retention rate of 98%
A growth rate that

outperformed the market
by 30% over two years
A $183M increase in
revenue in two years
The growth of Net Promoter has also produced more wide-ranging effects, as business
leaders have come to more fully understand the importance of customer experience to the
broader success of their companies.
91%
of marketing leaders
believe that in two years
they will be competing
primarily on the basis of
customer experience
18%
of marketing budgets
were spent on customer
experience initiatives in
2014, making customer
experience the highest
marketing tech
investment
Read on to learn
the facts about

The measurable rewards of prioritizing this
critical element of business strategy
The measurable risks of failing to focus on
customer experience
How to calculate and demonstrate the
impact Promoters and Detractors have on
your bottom line
Risks & Rewards

of Focusing on Customer Experience
This section will offer some concrete examples of how Net Promoter can provide clear insights into important customer
behaviors and how those behaviors can be linked to profit and growth. But first, a quick review of the research behind the
Net Promoter Score and discipline. The original research measured how closely the answers to various questions correlated
to future business profit and growth. The recommend question (How likely is it that you would recommend our company/
product/service to a friend or colleague?), also called the Net Promoter Score question, had the highest correlation across
industries when compared to other questions designed to measure some aspect of customer loyalty.
12
10
Data from the question On a scale of 0-10,

how likely would you be to recommend
[company] to a friend or colleague? was
the number 1 or 2 correlation to profit and
growth in the highest number of industries.
# of Industries
8
6
4
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Net Promoter Score Defined

Despite its apparent simplicity, the Net Promoter Score offers powerful insight into
customer behavior and guides a business discipline that can transform your company.
Net Promoter Score Defined

The Net Promoter question:
On a scale of 0-10, how likely would you be to recommend [company] to a friend or colleague?
Not at all likely
Neutral
3
Detractor
Extremely likely
8
Passive
10
Promoter
% PROMOTERS - % DETRACTORS = NPS (NET PROMOTER SCORE)
Detractors More Likely to Leave

Detractors have a higher propensity for leaving your company, as seen in this example from the insurance industry.
Detractors
2.3x
Promoters
Passives
Years Since Policy Issued
Average Lapse & Surrender Rate
Rate of Lapse & Surrender Rate
Average Lapse and Surrender

Rate Year Over Year
Detractors are
2.3x more likely
to leave.
NPS Linked to Growth

In this example from the banking industry, its clear that branches with higher NPS outperformed others.
Growth in Operational Income
Growth in Operational Income
80%
60%
65%
57%
41%
40%
27%
20%
14%
1%
0%
-16%
-20%
-40%
-29%
-60%
-80%
-54%
All Branches
All with NPS <60%
All with NPS 60%+
(n=82)
(n=46)
(n=36)
Promoters Deliver Greater Value

In this example, the greater value of Promoters extends across three key business measures.
Promoters defect less
Promoters buy more
Indexed average gross premium

volume cancelled per customer
and year1
Indexed average of newly

concluded gross premium volume
per existing customer and year
Partly
Cancelled
Partly
Cancelled
-50
-100
-150
100
Fully
Cancelled
83
60
-100
Fully
Cancelled
-200
-300
-271
Promoter
Detractor
Defection
100
50
0
-50
40
-100
20
-250
Indexed average new GPW

generated through
recommendation per customer
100
100
80
Promoters drive business
-150
-200
-200
Promoter
Detractor
Cross- and up-selling
Promoter
Detractor
Referral
Converting detractors to promoters increases

profitable growth significantly
Promoters Deliver Higher Profits

In this example from the telecommunications industry, Promoters delivered higher profits than
Detractors. Profit was calculated for each Net Promoter category by subtracting cost to serve (lower for
Promoters) from revenue (higher for Promoters).
Promoters Buy More

Another way to quantify the value of promoters is to understand how many products are purchased by each NPS
segment (promoters, passives, detractors). In this case, Promoters on average purchase more products that detractors.
Products by Net Promoter Category
Average Number of Product Types
Promoter
2.00
1.80
Passive
Detractor
1.94
1.71
1.60
1.53
1.40
1.20
1.00
.80
.60
.40
.20
.00
*Figures based on Q2 2014 data
NPS Linked to Market Share

NPS Ranked by Brand: All Product Lines
Brand
MyBrand
Brand
Brand
MyBrand
Brand
Brand
Brand
Brand
Brand
Brand
MyBrand
MyBrand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
MyBrand
Brand
Brand
Brand
Brand
MyBrand
Brand
Brand
Brand
Brand
Brand
Brand
Brand
1.6%
10.9%
37.5%
26.8%
Net Promoter Score
+70
+63
+58
+55
+52
+45
+45
+37
+32
+32
Brand
+49
11.7%
+75
+69
+57
+53
+41
+39
33.6%
+71
+56
+68
+49
+55
+48
+54
+41
+47
+38
+29
+31
Market Share by Category
+77
+57
+55
+45
+43
+19
One of the keys to achieving financial

benefits is understanding your NPS
relative to competition. In this example,
a consumer electronics company clearly
demonstrated that the products that had
the highest NPS in their category also
had the highest market share, and those
with lower scores, found themselves with
lower market share.
Calculating the Impact of
Your Actions
To drive change within your organization, its helpful to be able to quantify the
impact of change. Once you have demonstrated the greater value of Promoters,
you can model the financial effects of changes in your Net Promoter Score.
Calculating Average Customer Value

To build a ROI model for your business, start by calculating the relative value of Promoters, Passives and
Detractors. For consumer businesses, this means taking an individual customer NPS response, then evaluating
the subsequent financial behavior (did they stay with your business, did they purchase more?). In business
to business organizations, this requires that you calculate NPS at the account level and classify accounts as
Promoter, Passive, or Detractor (you may want to base your analysis on just your decision makers). Then, look at
their subsequent financial performance to establish account level economics.
Heres a sample approach. Looking at data over at least 6 to 12 months, calculate:
Percentage Retained | Percentage Change in Spend
At Least 6-12 Months

C U S T O M E R D AT A
FROM CRM
SURVEY RESPONSE
SPEND AMOUNT
WHEN SURVEYED
CUSTOMER
R E TA I N E D ?
SPEND AMOUNT
NOW?
PROMOTER
PROMOTER 1
1,00
YES
1,500
Retention Rate: 67%

Increase in Spend*:35%
PROMOTER 2
1,000
YES
1,200
PROMOTER 3
750
NO
PA SS I V E 1
1,000
YES
PA SS I V E 2
700
NO
DETRACTOR 1
800
YES
800
DETRACTOR 2
800
NO
1,00
DETRACTOR
Retention Rate: 50%
Increase in Spend*:0%
*Increase based on
those retained only
Average
Large Acounts
Account Value
+ $134.5k
$1,800,000
vs. Detractors
$1,600,000
$1,400,000
$1,200,000
$1,487,492
$1,319,302
$1,622,010
Detractor
Passive
Promoter
$1,000,000
Project the
Impact of Change
Now, lets see how improving NPS will Improve financial importance. In this simulator you can
estimate the financial benefits of improving NPS by using the economic value of each segment(here,
weve simulated converting 5% of Detractor to Promoter accounts). As you can see, the benefits of
creating more promoter accounts can add up to millions of dollars!
NPS
Total 12-monthly Revenue:
$99,636,089
Recovered Revenue via
Detractor Conversion
$1,782,912
Simulate converting
Detractors to Promoters
39
53%
Promoters
34%
Passives
14%
Detractors
5%
TO MAXIMIZE THE IMPACT YOUR

NET PROMOTER PROGRAM
WILL HAVE ON YOUR COMPANYS
GROWTH AND PROFITS, KEEP
THESE BEST PRACTICES IN MIND.
Net Promoter programs must begin with an

understanding of your customer journey
Craft your customer listening strategy to
match the customer journey
Put actionable data in the hands of your
employees, and do so frequently
Set up closed loop processes that go
beyond Detractor recovery
Enable your Promoters to help drive new
business through referrals and positive word
of mouth
Taking Stock of
Your Work
Develop and maintain an effective

governance structure for your program
Communicate with frequency and clarity to
customers and employees
Support your program with robust
technology that enables analysis, reporting,
and follow up
Become an
Expert
on Economics!
Ready to take your knowledge of Net Promoter to the next

level? Join us for an upcoming certification course and
become part of a community of customer experience experts.
Our two-and-a-half day certification course, reflecting the
very latest NPS2 methodology developed by Satmetrix, gives
you a deep dive into this powerful business discipline. Add
our one-day Net Promoter Economics course to learn all the
details behind the information in this ebook.
Explore Certification
About
Satmetrix
Data
Our annual NPS benchmarks, drawing on 15 years of
customer data and ongoing research on NPS best practices.
Learn More
With more than a decade of practical

experience and best practices research
built-in to our products and services,
Satmetrix delivers customer experience
management success. Satmetrix not
only helps organizations manage
the customer experience, but also
transforms the way they do it. Our
software draws on more than a decade
of practical, in-the-field experience
helping companies build and deploy
successful CEM programs, based on the
proven, ground-breaking Net Promoter
methodology that we co-created. Find
out how we can help you take your
customer experience management
program to the next level.
Technology
Satmetrix helps companies to measure and manage the
customer experiences that drive their business with the most
complete, powerful, and user-friendly platform for CEM on
the market today.
Learn More
Expertise
Our consultants have worked with over 1,500 global

organizations, business units and leadership teams to move
their customer experience programs forward.
Learn More
INTERNATIONAL +44(0) 845.371.1040 | NORTH AMERICA 888.800.2313

[email protected] | www.satmetrix.com

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The ROI of NPS

How a Focus on Customer Loyalty

A retention rate of 98%

A growth rate that

the facts about

Risks & Rewards

Data from the question On a scale of 0-10,

Net Promoter Score Defined

Net Promoter Score Defined

% PROMOTERS - % DETRACTORS = NPS (NET PROMOTER SCORE)

Detractors More Likely to Leave

Years Since Policy Issued

Average Lapse & Surrender Rate

Rate of Lapse & Surrender Rate

Average Lapse and Surrender

NPS Linked to Growth

Growth in Operational Income

Growth in Operational Income

All with NPS <60%

All with NPS 60%+

Promoters Deliver Greater Value

Promoters buy more

Indexed average gross premium

Indexed average of newly

Indexed average new GPW

Promoters drive business

Cross- and up-selling

Converting detractors to promoters increases

Promoters Deliver Higher Profits

Promoters Buy More

Products by Net Promoter Category

Average Number of Product Types

*Figures based on Q2 2014 data

NPS Linked to Market Share

Net Promoter Score

Market Share by Category

One of the keys to achieving financial

Calculating the Impact of

Calculating Average Customer Value

Percentage Retained | Percentage Change in Spend

At Least 6-12 Months

Retention Rate: 67%

TO MAXIMIZE THE IMPACT YOUR

Net Promoter programs must begin with an

Develop and maintain an effective

Ready to take your knowledge of Net Promoter to the next

With more than a decade of practical

Our consultants have worked with over 1,500 global

INTERNATIONAL +44(0) 845.371.1040 | NORTH AMERICA 888.800.2313

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