Net Promoter Score (NPS) is one of the most widely adopted metrics for measuring customer satisfaction. Its cornerstone question—"How likely are you to recommend us?"—yields a straightforward numerical result that companies find easy to analyze and act upon. Proponents value NPS for its ability to identify trends and pinpoint brand advocates among their customer base. However, its relationship with revenue growth is more nuanced than many realize.
Connecting NPS to revenue growth
Net Promoter Score continues to demonstrate a strong connection to revenue growth, according to multiple research studies. The London School of Economics' 2019 study revealed that companies in the top NPS quartile achieved 20 % higher revenue growth than those in the bottom quartile, while Frederick Reichheld's seminal research in Harvard Business Review showed businesses with NPS scores between 50-80 experienced revenue growth 20-60 % higher than competitors. In the retail sector specifically, research by the Temkin Group (2016) found that every 7-point increase in NPS correlates to a 1 % revenue growth.
The financial impact of promoter customers is equally compelling. The Temkin Group's analysis revealed that promoters generate 1.5x more revenue than detractors, while LSE's study found they stay with companies 50 % longer (6.2 years vs 4.1 years) and demonstrate 2.6x higher customer lifetime value. Particularly striking are findings from the B2B software sector (de Haan et al., 2017), showing that companies with high NPS (>70) achieve 23 % higher renewal rates and 13.9 % average revenue growth compared to 6.1% for low-NPS companies. These findings collectively reinforce NPS's position not just as a satisfaction metric, but as a reliable insight into business growth and customer loyalty.
In other words, a company’s NPS can be a good insight into future growth. Measuring this metric not only serves as a measure of the success of your CX investments, but also helps predict future sales, revenue growth, and bottom line retention. However, this relationship is stronger in some industries than others. That’s why it’s important to benchmark your results against your competitors.
How companies use NPS
Taylor & Hart: A London-based custom engagement ring jeweler, adopted NPS as their core metrics. Further research revealed that "detractors" and "passives" were reluctance to purchase online without seeing rings in person, prompting the company to focus on exceptional service through dedicated consultants. By acting on this feedback, they enhanced customer satisfaction, leading to a doubling of their revenue.
Wolters Kluwer Asia Pacific: By analyzing their NPS data, Wolters Kluwer identified a significant correlation between rising NPS and improved customer retention. This insight enabled the company to implement targeted initiatives, resulting in increased profitability and revenue. For example, developing proactive check-in protocols at strategic points in the customer journey.
Dr. Max: In our recent Minimum Viable Podcast episode, Chief Marketing & Customer Officer Jana Kutlíková talked about how their chain of pharmacies uses NPS to benchmark individual stores to identify under-performing customer experience. To understand the "detractors" better, the company follows up the rating with a qualitative call with the customer. This process allows them keep the experience across the chain consistent while driving revenue growth.
Downsides of NPS as a customer metric
While NPS is widely used, there are common concerns regarding its reliability. Critics often point to response bias and its impact on company goals. NPS has limitations that must be understood and communicated effectively. When used in isolation, without qualitative data and behavioral metrics, it fails to capture the complete customer experience. Additionally, it requires a sufficiently large sample size to obtain statistically relevant results.
NPS can also overlook valuable insights by categorizing ratings into three groups (promoters, passives, detractors), thereby ignoring passive respondents who may still contribute significantly to revenue. Passive customers are often on the verge of becoming promoters or detractors, making them critical for targeted interventions. Furthermore, if measured only at a general level, it cannot capture satisfaction with specific product or service aspects.
However, companies that effectively implement NPS focus less on the absolute score and more on identifying patterns by combining it with other metrics. This approach provides a more complete picture of customer experience, allowing businesses to use NPS as an early indicator of growth.
How to avoid NPS being a vanity metric?
As mentioned earlier, measuring NPS is just the beginning. Knowing how to leverage this data effectively is crucial. The score itself is merely an indicator, not a complete solution. Here’s how to extract genuine value from your NPS:
1. Look beyond the numbers: If you focus only on numerical evaluations, you may miss the bigger picture. Always include a follow-up question: "What led you to give this rating?" These qualitative responses reveal more accurate customer experience and provide context for your numbers. You can also supplement this with user interviews. The story behind the score holds more value than the score itself.
2. Pay attention to passive customers: Analyze why they're not fully convinced of your value proposition. Their feedback can highlight opportunities for improvement and reveal subtle enhancements that could convert them into promoters.
3. Analyze trends over snapshots: Tracking trends over time is more valuable than analyzing single data points. A declining trend demands immediate investigation into root causes. On the other hand, when scores improve, identify the successful initiatives driving this change and replicate them across your organization. Regular trend analysis helps predict future customer behavior patterns.
4. Link NPS to business result: Integrate NPS with other business metrics by linking your NPS data to concrete business outcomes like retention rates, repeat purchase frequency or average order value. This correlation helps validate whether higher scores truly translate to improved customer loyalty and business performance. Understanding these relationships can guide more effective resource allocation.
5. Take action: Don't just measure. Act. When detractors consistently criticize specific aspects of your service, acknowledgment isn't enough. Develop a structured action plan to address these issues, set clear improvement targets, and monitor the impact of your interventions. Create a feedback loop where NPS insights drive tangible improvements in your customer experience.
Key takeaways
- Research shows a strong correlation between NPS and revenue growth – companies in the top NPS quartile achieve on average 25 % higher revenue growth, with promoters generating 1.5x more revenue than detractors.
- While NPS is valuable, it shouldn't be used in isolation. NPS alone may not be the most accurate predictor of specific customer behavior, but provides valuable insights when combined with other metrics.
- To extract real value from NPS data, companies should look beyond raw scores by collecting qualitative feedback, monitoring passive customers and trends over time, connecting NPS to concrete business metrics, and implementing targeted action plans.
NPS is not just a number – it's a tool that, when used effectively, can unlock critical insights into customer behavior, loyalty, and business growth. Companies that go beyond the score, leverage qualitative data, and take meaningful action will see the greatest returns. The real power of NPS lies in how it is implemented. Are you making the most of your NPS insights, or is it just another vanity metric? The choice is yours.
Go further: Choose the right CX metric
Customer experience metrics are key performance indicators used to assess and understand the quality of interactions between a company and its customers. Although there are many articles on the topic, they often lack guidance on choosing the right form or metric and may even contradict each other. That's why we've compiled all the essential information into the CX Metrics Cheatsheet to help you get started.
