ROI of CX: How can NPS affect revenue?

Not long ago I shared a blog post entitled Calculate ROI of CX: a simple example where I used Customer Satisfaction (CSAT) as a Customer Experience metric and customer’s Average Spend as a business metric. Recently I was asked about the impact of another popular CX metric, Net Promoter Score (NPS), in the bottom line.

Most of you know that NPS measures the customer’s loyalty to the brand. It measures the customer’s “long-term” happiness, and tries to predict what customers will do in the future. And you also know that NPS is calculated by subtracting the % of Detractors, from the % of Promoters.

Measuring NPS, comparing your NPS to the competition’s, and bragging about a high NPS score might be fun. But in the end, it could be useless if you cannot show your senior leadership or C-suite how it impacts the companies bottom line.

Truth is loyalty means much more. Sure, you want customers to buy your product. But more than that, you want them to buy into your company – your values, your mission, and your care for each and every client – and when they do that, you will see a reflection in your NPS, and you will be well on your way to increased revenue and sustainable growth.

So, how do you prove your board that having a higher NPS impacts revenue and growth positively? You can start by stating that higher NPS scores usually result in 4 very tangible things:

  1. Higher Retention Rates
  2. Increased up-sell and cross-sell
  3. Lower cost to serve
  4. Lower marketing costs (due to word-of-mouth)

But let’s get to the fun part, of calculating the impact of NPS in the company’s revenue. So you can have some data and facts to backup your blurb. For this example I created a scenario of a company with 1 million customers, and used average spend as a business metric.

Let’s say that Promoters represent 54% of customers and spend $500 per year; And Detractors represent 14% of customers and spend $100 per year… NPS would be 40 and the revenue $348m

Now let’s say we were to convert 10,000 Detractors into Promoters… NPS would be 42 and the revenue $352m

Now let’s convert another 10,000 Detractors into Promoters… NPS would be 44 and the revenue $356m.

The correlation between NPS and revenue is obvious. And would allow us to conclude that by converting 3,75% of Detractors into Promoters, would move the NPS needle by 1 point, which would in turn increase the revenue by $2m in a year.

Note: An interesting study from Satmetrix shows that, among the various CX metrics, NPS has the highest correlation to profit and growth. You can also see from the chart below that CSAT seems to have the lowest correlation.

Does the NHS have any Promoters?

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After a visit to the St Thomas’ hospital A&E department, I received a request for feedback via SMS. For the second time this year (the first was with Rosa’s Thai Cafe) I was surprised with what was clearly the NPS question, but with a scale of 1 to 6.

It seems that the National Health Service (NHS) in the UK is so bad that they assume, straight off the bat, everyone will be a detractor!

Despite all efforts from CX specialists, we still see misuse of well designed, considered and established CX metrics, created to measure customers experience, but also to ensure the market has standard and consistent metrics, that allow comparisons.

I’m all for people being creative when measuring customers experience, and using whatever scores and calculations work for their organisations. Ultimately, the goal is not the metric, the calculation or the score itself, but the actions or improvements they trigger.

However, certain metrics are used for more than that. And they should serve the important purpose of benchmark. NPS was created, and is a trade mark of Bain and Satmetrix. The way it should be used is well explained in the official website – with Detractors (0-6), Passives (7-8) and Promoters (9-10).

I’m unsure if there are CX guidelines from the NHS, or if each of the NHS agencies has its own program (NHS England, NHS Scotland, NHS Wales, HSC Northern Ireland), or even if each trust does as it pleases.

A quick Google search throws things like “Patient experience book” or “Patient experience improvement framework” where lots of right things are said “Good experience of care, treatment and support is increasingly seen as an essential part of an excellent health and social care service, alongside clinical effectiveness and safety“.

However, there doesn’t seem to be a joined up and consistent approach to measuring the patient experience, which will surely make it harder for the trusts, and the NHS as a whole, to improve the experience of patients – as well as their families and the staff.

After all, the NHS is not as bad as this “bastardised” St. Thomas’ NPS question scale question makes it. I, for one, am a Promoter of the services of Guy’s and St Thomas’ NHS Foundation Trust.

Rosa’s Thai Cafe and a 1-5 NPS scale

Yesterday my wife was craving for coconut rice, so we decided to have a late lunch at Rosa’s Thai Cafe – which many say is the best thai in London. We had been there a few times already, and as always the food was excellent, but this time there was something new.

The bill came in a tablet (see picture below). And the app, enabled by Yumpingo, not only had the detailed bill, but also a thumbs up/down against each item, as well as a final quick survey to collect our feedback.

This made our experience at Rosa’s even better. A paperless transaction is a great innovation and, in my opinion, should be mandatory (mainly for environmental reasons). And the willing to collect customer’s feedback is still something most companies, let alone restaurants, are still not keen to do.

But in the middle of all this, something made me raise the eyebrow. The first question in the short survey was “How likely are you to recommend Rosa’s Thai Cafe to a friend or relative” and the answer had a 1 to 5 scale!… When this was clearly a NPS question, which should have a scale between 0 and 10.

A few months ago, in my blog post Does changing NPS scale make sense? I raised the question around NPS, and if it would make sense to have a European variant where 6-7 were Passives (rather than standard 7-8) and 8-10 were Promoters (rather than standard 9-10).

What didn’t cross my mind was having a different scale of 1 to 5, rather than the 0 to 10, set by Fred Reichheld, Bain & Company, and Satmetrix; Accepted and adopted by the majority of CX practitioners and specialists; Ensuring that the market had a standard and consistent way of measuring NPS.

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5 takeaways from carbon copy NPS

A few days ago, when in Portugal, I took my Gramma’s car to the local Renault dealer, as it needed some servicing. The Customer Service Manager looked up the car in the system, and then wrote down, in what looked a random piece of paper, what I needed – replace a headlight and a tire valve – “the system is having a hick-up“.

No bother. Everyone was very nice and attentive. I left the car in the shop in the morning, and when I came back at the agreed time in the afternoon, it was all done. “Car is ready, you can go to the office. They have all details and will take your payment“, the Customer Service Manager said.

In the office, the Finance person struggled to find the the information about my car’s service. Somehow it didn’t surprise me, as he was looking into a big pile of papers. Decided then to call the Customer Service Manager, who came running from the service area to provide him with the piece of paper he was looking for.

Again, no bother. I happened to have plenty of time, and in between the backwards and forwards, they were actually being very nice to me. I ended up paying and given a printed detailed invoice. When I was about to leave, the Finance person asked me if I would mind providing feedback, and presented me with… a block of chemical carbon copy paper.

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I was not surprised by being asked for feedback in a piece of paper, but it was the first time I have seen it in a block of chemical carbon copy paper. I was curious. Asked if it was a dealer’s initiative, or a global one from Renault. He said it was a dealer’s initiative, across the various dealers of that dealership, and that I should receive another request from Renault via email – “but be aware that the link doesn’t say Renault, as this is outsourced to a 3rd party”.

A few points to take away from this experience…

1 – You must be able to collect, analyse, and action quickly. It is great to collect customer’s feedback, but you must be able to analyse it, and gather insights swiftly, as well as close the loop in a timely manner. Collecting feedback on a piece of paper will surely prevent you from doing that.

2 – You should make sure the collection of customer feedback is effortless. Not only for the customer, but also for the person or team gathering it for analysis. I pity the person who, at this dealership, will have the job of collecting the carbon copies, and count or add responses.

3 – You must provide option for anonymous and more insightful response. Customer feedback surveys of this kind, should always have the option to be anonymous (“I need to put your car registration number, and you to sign, otherwise it is not valid”, he told me), and it should provide the customer with an option to explain why he gave that score.

4 – You should not overload your customers with feedback surveys. Let alone about the same transaction, service or experience. If the global brand (in this case, Renault) has an automated and more modern way of collecting feedback (email invitation + feedback management system), surely the dealer can ask them to provide the data re. their dealership.

5 – You must ask your 3rd party supplier to ensure feedback invitation is branded. These days everyone receives tens of fake emails per week, with phishing links, etc. Hence it is very important that your email invitation for customer feedback, as well as the link you share for the online survey, is branded and trustworthy.

Does changing NPS scale make sense?

Recently, a few clients were asking my opinion on NPS and the way it is calculated, scored, as well as its scale. And one of them pointed me to this article: Why there needs to be a European variant of the Net Promoter Score

nps-eu-difference
By Alexander Dobronte in http://www.checkmarket.com

It is an interesting article, and you can see that the author put some thought on the topic, and tried to build a logic around it, and for that alone it is worth reading. However, I must confess it is the first time I see such a thing, even though I would not be surprised if someone told me others have already suggested changing the way to calculate NPS.

I completely understand where the author is coming from, and what he says may even make sense in certain scenarios. But, it would fall short if we look at it from various other perspectives. For example, in my home country, Portugal, the school grades are given on a scale of 0 to 20. Also, I think that a person with low expectations would easily give a NPS score of 10 for the same service or experience that a person with high expectations would class as a 8 or 9.

No system is foolproof, and applies to every scenario in the same way, or is interpreted by every person the same way. I think the way people react and respond will always depend a little bit on one’s idiosyncrasy. As well as one’s cultural, educational, sociological and economical backgrounds. Sometimes even one’s momentarily mood!

And it is probably recognising exactly that, that the NPS creators and the majority of CX practitioners and specialists, choose to respect NPS score/scale. There’s no point in trying to create multiple variations of the way you calculate NPS, otherwise every company would end up with a different way of calculating NPS, defeating the whole purpose of a standard and consistent way of measuring.

As we all know, NPS was created (and is a trade mark) by Fred Reichheld, Bain & Company, and Satmetrix. And the way it is calculated and measures is well explained in the official site – with Detractors (0-6), Passives (7-8) and Promoters (9-10).

What are your thoughts? Are you using the official NPS scale or diverting from it?