The link between Relative NPS and business results
Let me ask you, how do you interpret the Net Promoter Score of your business?
Do you aim for an increase in absolute NPS year-on-year or do you seek to create continuous performance gaps versus your competition? The key to your company’s growth might be hidden in the answer of this question.
Many organizations focus solely on their current customer base when measuring NPS. In their effort to get a bigger piece of the cake, they invest significant resources in improving experiences and strengthening customer relationships. However, they often see little or no results from these efforts.
What do you think is the reason?
Well, no matter how fast you improve your customer experience, there might be another player out there doing the same thing with even bigger success. Therefore, it is not only about being on the upside, but also standing out from the crowd.
So, what can you do to find out where you really stand?
Think competitive benchmarking! Doing CX benchmarking as part of your NPS studies helps you identify the key drivers of competitive advantage, which will inevitably lead to better market positioning.
Analyzing various industries and geographies, we at GemSeek noticed some patterns in the relationship between Relative NPS (leadership) and company revenue. In the example below, we surveyed B2B customers of an industry equipment manufacturer across several countries and business lines, and linked relative NPS (rNPS) with revenue dynamics. Results show that only the leadership position (rNPS≥5%; 5% higher absolute NPS vs. the best competitor) can predict future growth.
The data shows that the average revenue growth for businesses with NPS leadership position was 13%. Along the lines of this argument, it didn’t make much difference whether the business was lagging or on par vs. best competitor – in both cases we saw moderate or no growth of revenue.
Revenue growth in companies leading on the relative NPS metric is achieved by two main triggers: on the one hand, they attract new customers because of positive Word of Mouth, and on the other, they achieve an increased Share of wallet among current users.
Our research shows that NPS leadership is linked to higher Share of wallet.
High share of wallet ensures stable market shares on one hand, while positive Word of mouth allows room for growth to loyalty leaders.
Being an average performer on the loyalty scale is not enough. And it makes nearly no difference whether you lag or are on par with competitors. What really sets you up for success is being a leader and sustaining a positive gap to your strongest competitor.