Thomas from Ariyh - 🎓 Using NPS to predict growth
🎓 Using NPS to predict growthNet Promoter Score (NPS) is often called “The One Number You Need to Grow”. This is false. But it can predict growth if you survey all your potential customers and track its changes over time.New to Ariyh? Join 6,616 evidence-based marketers for 3min tips 💡 based on research 🎓 to grow your business 📈 If you find these tips useful please share them with your colleagues and friends, Ariyh grows thanks to you! Today’s tip is brought to you by… Outlier Creative Outlier Creative is a small, fast-growing marketing agency that can help you with:
Get in touch to discover how you can work together. 📝 IntroNet Promoter Score (NPS) is a widely used metric. Companies use it to measure both immediate satisfaction with an experience (e.g. after an interaction with customer service), and brand attitudes over time (e.g. how they change quarter by quarter). NPS is based on one question: “How likely is it, from 0 to 10, that you would recommend [company X] to a friend or colleague?” People who answer 10 or 9 are considered ‘promoters’, 8 or 7 are ‘passives’, and 6 to 0 are ‘detractors’. The score is calculated by subtracting the proportion of detractors from that of promoters (here’s an easy, visual calculator). When Fred Reichheld (Bain & Company) introduced NPS in a Harvard Business Review article in 2003. He called it “The One Number You Need to Grow”. That’s not what the evidence shows. For the past 18 years, scientists all over the world have tried to replicate Reichheld’s conclusion and looked for evidence to back it up. At best, some studies found that NPS is as good as other commonly used and evidence-based metrics (e.g. customer satisfaction). At worst, they found no evidence that good NPS is linked to growth. Yet, companies keep using NPS. Perhaps because everyone else uses it and it’s simple and intuitive. But it’s likely that at least some companies have found a useful and reliable way to use it. Today’s study shows us when that is. NPS does predict sales, but only if you use it correctly. Here’s how. P.S.: The NPS debate that rages in the scientific community is a great example of the beautiful process of academic research. Scores of researchers have spent almost two decades uncovering new evidence, crunching data, debating, and - often - tearing each other apart, to understand whether NPS is or isn’t useful. During this process, each study inched us towards a true understanding of it (which of course isn’t complete, and likely never will be). Thanks to this, today we have real evidence of when we should use NPS, and we don’t have to rely on biased advice. Want to sponsor Ariyh? Here’s all you need to know. Previous tip: The Amazon effect (All tips here) NPS predicts short-term sales growth if it measures all potential customersImpacted metrics: Brand attitudes 📈 RecommendationTo use Net Promoter Score (NPS) to track your performance:
If your NPS increases, your short-term sales will likely increase (e.g. the next quarter). If it doesn’t grow or it decreases, use it as an advance ‘general health’ warning bell that you should investigate. Having a high (static) NPS or surveying only your current customers does not reliably predict growth. 🎓 Effects
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🔍 Study typeMarket observation (analysis of 193,220 NPS evaluations and sales growth over five years of the seven of the biggest US sportswear brands). United States 📖 ResearchBaehre, S., O’Dwyer, M., O’Malley, L., & Lee, N. (July 2021). The use of Net Promoter Score (NPS) to predict sales growth: insights from an empirical investigation. Journal of the Academy of Marketing Science. 🏫 AffiliationsKemmy Business School, University of Limerick and Warwick Business School, University of Warwick. Ireland and United Kingdom Remember: Because of the groundbreaking nature of this research, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely. Rate today’s tip to help me make Ariyh's next tips 🎓 even more useful 📈 How was today’s tip? Want to sponsor Ariyh or ask a question? -> Reach out at thomas@ariyh.com New to Ariyh? -> Subscribe below or read other 3min marketing tips here |
Older messages
🎓 The Amazon effect
Tuesday, August 3, 2021
Amazon keeps changing people's expectations, and it's not all about free fast shipping anymore. Shoppers are now most dissatisfied with the return and refund handling of non-Amazon retailers.
🎓 Don’t retarget shoppers too early
Friday, July 16, 2021
Customers abandon products in their online shopping carts all the time. Wait 1-3 days to remind them and boost sales. If you remind them too early your message backfires.
🎓 Promoting early platform growth
Tuesday, July 13, 2021
To increase signups of early users to a new platform (by ~20% in one experiment), tell them about your expected future growth (eg "we expect 10000 people to join this year").
🎓 Welcome to Ariyh + Bonus tip
Saturday, July 10, 2021
Thank you for signing up for Ariyh
🎓 Which review you should show first
Saturday, July 10, 2021
Sales were up to 84% higher on a UK retailer's website when the first review showed had five stars (vs one star), independent of the product's average rating.
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