Why You Need to Upgrade to Net Promoter Score 3.0

Net Promoter Score (NPS) is an absolute favorite of mine to simply get a pulse on what your customers or employees are thinking and feeling about your company. By asking them how likely they are to recommend your company to a friend or colleague, you get an indirect measure of word-of-mouth marketing. Which is the ultimate for growing your revenues or your team.

Calculate your Net Promoter score

Just a refresher, people are categorized into three different groups:

  • Promoters – people who rate you 9-10 for their likelihood to recommend you.
  • Passives – satisfied but unenthusiastic people who score you 7-8.
  • Detractors – unhappy people who may spread negative word-of-mouth.

To get your Net Promoter Score (a range from +100 to -100), subtract the percentage of detractors likely telling people to stay away, from the percentage of promoters likely to say good things about you.

Get valuable information

In our work with many companies, around the world, to implement and use NPS to drive better team alignment and customer engagement, we’ve found it a very simple and effective pulse of how they’re doing as a company. Individual comments also guide us to specifically what is done well, and what we can consider changing to create a better customer or employee experience.

By working with some of the team at Bain & Company (creators of the system), on one of our clients who did a very robust implementation of NPS, I was very fortunate to learn how to leverage insights beyond net scores, to drive better business decisions.

Problems with misuse

We continually find that NPS is mismanaged in companies, particularly when leaders are incentivized to get high scores. Humans are very creative at finding ways to be successful, especially when there’s money on the line. Additionally, when people are told how important it is to get a 10 rating and then persuades or strongly influences someone to give a high score, our customer or employee experience can get worse.

How NPS 3.0 Works

This recent Harvard Business Review article, NPS 3.0 (by Fred Reichheld, Darci Darnell and Maureen Burns), adds a second measure to calculate the return you’re getting on a great NPS – your Earned Growth Rate (EGR). They say that if you have a high engagement score, you should have a high degree of customer retention and referrals that came from them. Separated from how much new business you paid for through sales and marketing efforts. This can be confirmed via accounting results that measure the source of new customers.

In the article, the authors share how to do the calculations. When one of our advisors did it on our firm, we were very happy to see our score, since most of our business comes from referrals from existing clients and relationships.

Simple summary: If you invest heavily in thrilling your customers, the ROI you should get is your EGR, in terms of retention and referrals.

How to fix a less-than-optimal EGR

If your EGR is what you want, congratulations!

If it isn’t, even with a high-engagement customer and employee score, it may be a matter of just reminding clients. Let them know that you have the capability, desire or bandwidth to take on additional clients – and you would welcome their referrals.

A lower score can also open your mind to think what else you need to do. How can you turn your highly engaged customers or employees into a stronger ROI?

Tracking an NPS and EGR

In your KPI reviews, calculate NPS and EGR scores to see if they are in sync and how they correlate. Additionally, it helps to remind you that the reward for taking great care of your customers is retention and referrals.

The same thing should apply to your internal team. Your EGR (in terms of new employees) should correlate when  people are highly engaged. And, if you’re not getting enough referrals from your team for new hires, that means there’s different work to do.

The Challenge

  • What do you need to do to understand and enhance your earned growth rate?

For more, listen to Episode 111 of The Growth Whisperers.

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We help high-achieving leaders to have it all – a great business and a rewarding life. Contact us for simple and impactful advice. No BS. No fluff.