How to Link NPS, Revenue Growth, and Post-Purchase

Convincing your #CFO to untie the purse strings for resources that enhance the customer experience is never easy. The key to success is proving how such an investment leads to a happier customer, and how that happier customer fuels a surge of #revenue. Yet this is a difficult task—fewer than 40% of business leaders can measure ROI from their expenditures on customer experience.?

Fortunately, your net promoter score (NPS) can help solve this problem.

Not only can an improving NPS be used to track the success of your CX investment, but it can also be used to predict future sales, revenue growth, and net revenue retention.?

This article will explore the revenue impact of NPS, including how an improved CX benefits the bottom line and what kind of returns you can expect from an improvement to your NPS. It will also illustrate how your post-purchase experience shapes CX and, therefore, your NPS.

(If you need a refresher on NPS—including what it is, how it works, and how you can calculate it—check out this eBook. It offers a more in-depth exploration of the material covered in this article, and it includes a detailed breakdown of NPS with easy to understand examples.)

NPS and Customer Acquisition

Customer acquisition expenses are soaring. Research shows costs are up more than 200%, with merchants spending an average of $29 for every new customer acquired (up from $9 in 2013). Within retail where revenue is at risk of contracting in the face of a recession, higher ad costs and increasing return rates are making it exceptionally difficult to profit from new shoppers.?

Amidst such conditions, word-of-mouth becomes the most cost-efficient way to acquire new customers. It is in this area that NPS first presents its value. An improving NPS simultaneously lowers acquisition costs while increasing acquisition rates. Research shows…

• A one-point bump in NPS increases acquisition by more than 3%.
• Companies with positive net promoter scores (>0) grow 4X as fast as those with scores below zero.

Don’t forget retention

Additionally, NPS is the most accurate predictor of customer retention for many brands, outperforming all other metrics.?

For example, using its NPS as a baseline, AirBNB determined that promoters of its brand were 13% more likely to rebook on its platform than detractors.

That knowledge allowed AirBNB to calculate the ROI of investing in their customer experience (in terms of uptick in lifetime value) with pinpoint precision.

As anyone in any industry can attest, strong lifetime value is fundamental to the longevity and health of a business.

“Your customers aren’t numbers, they’re people with emotions and needs,” says Valentin Radu , Founder and CEO at Omniconvert . “If they feel a positive emotional connection with your business and brand, they are more likely to come back, buy again, and tell others how great you are.?

“But you can’t expect customers to keep buying from you—and keep promoting your brand—if you don’t meet their expectations. That means you can’t over-focus on the P&L. You can’t ignore things like NPS and CSAT. These scores are a reflection of how well you’re meeting your customers’ needs.?

“If you’re meeting (and, ideally, exceeding) those needs, you’ll see your success in a rising NPS. Accompanying that score will be higher customer lifetime value, something your CFO is going to love.”

Converting NPS into revenue

A happy customer is one who’s more affable to your brand and, therefore, easier to extract revenue from by way of upselling and cross-selling.?

But just how much more revenue is there to be earned?

• Every 7-point increase in net promoter score correlates to a 1% increase in revenue.
• A 10-point improvement in overall NPS correlates to an additional 3.2% in sales derived from upselling and cross-selling.
• Every 2% reduction in negative word of mouth as measured by NPS correlates to a 1% increase in sales growth.

Using those numbers to project value to the CFO…

Imagine 40% of Nordstrom’s customers are promoters of the brand (13.2 million) and 10% are detractors (3.3 million). Also assume the average promoter holds a lifetime value of $1,000 and the average detractor holds a lifetime value of $200.

In this scenario, Nordstrom’s NPS is 30 and the lifetime value earned from their promoters and detractors is almost $14 billion dollars.

If Nordstrom can convert 1% of its detractors (33,000 customers) into promoters, it would increase the amount of lifetime value earned by $33 million.?

So, if Nordstrom can convert 10% of its detractors into promoters (330,000)— improving its NPS from 30 to 32 in the process—it will increase the amount of lifetime value earned by $330 million.

Post-purchase and NPS improvement

Many factors contribute to a customer’s NPS but one of the most overlooked is the post-purchase experience.

Few things will turn first-time shoppers into detractors faster than a broken post-purchase process. Conversely, an exceptional post-purchase experience cements the happiness of shoppers new to your brand, transforming one-off buyers into lifelong loyalists. For those reasons, it’s critical to nail your post-purchase strategy and deliver the experience people want.

Maintaining customer engagement

Unless you’re in the business of selling t-shirts, most products sold to consumers come with something of a learning curve. From electronics to nutritional supplements to assembly-required furniture, shoppers often need some amount of guidance to get the most enjoyment possible from their purchase.?

To that end, the post-purchase experience is extremely valuable as it helps new-to-brand shoppers understand how your product portfolio works.?

As an example, consider the luxury audio brand Sonos. Sonos used their order tracking pages to provide customers with helpful information about product setup, usage best practices, and more. In other words, they turned order tracking pages into an onboarding engine for new customers, accelerating time-to-value, amplifying brand satisfaction, and powering higher retention rates.

By using the post-purchase experience to educate customers and keep them engaged as they wait for an order, you do two things:

• Increase the likelihood of a positive customer experience and higher lifetime value.
• Decrease the likelihood of seeing a sale transform into a return or an exchange.

Keeping shoppers comfortable

Unbranded order tracking pages aren’t simply unpleasant and uninformative in the eyes of your customers. They also do nothing to enhance the customer experience, limiting your brand’s ability to upsell and cross-sell in the process.?

On the other hand, branded carrier tracking pages elevate the customer experience, which also elevates your NPS. Near-term, branded pages make it easy for first-time shoppers to stay engaged with your brand, buy more products, and boost your top-line revenue.

Keeping shoppers informed

People hate feeling like they’re out of the loop. That is why your customers should always know where their order is within the fulfillment journey. Even when things aren’t going right with fulfillment, transparency helps people understand and tolerate longer-than-expected timelines. It also increases their likelihood of becoming a repeat buyer.

Yes, a customer might be upset to know their order or refund is delayed, but they’ll be even more upset if they don’t receive a proactive notification. This is especially true when it comes to returns. Unambiguous return and exchange policies eliminate shopper uncertainty pre- purchase and strengthen their loyalty to your brand post-purchase.

In sum, keeping shoppers informed cultivates trust, which leads to deeper loyalty, higher NPS, and stronger revenue.

Three things to remember…

CEOs and CFOs aren’t going to put money behind any customer experience improvements unless they can be sure they’ll see a return from their investment. Digging into NPS and finding ways to tie those scores to things like acquisition, retention, and lifetime value isn’t just important—it’s essential.

For the biggest impact in the least amount of time, start by looking at your detractors.

“NPS allows you to identify, understand, and address the needs of your detractors,” says Steve Bernstein , Principal at Waypoint Group LLC . “That last piece is critical—following up on those needs demonstrates that your brand cares, which is a differentiator of and in itself. Truly listening and addressing customer concerns strengthens relationships and provides actionable data that—when linked to financials—allows your brand to prioritize CX improvements that reduce churn and negative word-of-mouth.”

In addition to your detractors, pay close attention to those who aren’t saying anything at all.

"Perhaps the greatest value from NPS is derived from recognizing the silent majority—the customers who don’t engage in your NPS surveys,” continues Bernstein.?

“These silent customers are up to 14x more likely to churn than those who provide feedback, be it positive or negative. The name of the game here is engagement—putting a best-foot forward to commit to following up with demonstrated listening improves response rate significantly.?

“If you are looking for ways to raise customer engagement and stop customers from ghosting you, try asking for feedback with a commitment to address what they tell you—it works! By taking steps to reduce the silence, you see better engagement, better NPS, and lower churn rates.”

Finally, make your post-purchase experience front and center.?

Improving the post-purchase journey is critical to meeting consumers’ increasing demand for convenience and choice while simultaneously keeping expense management in mind for business leaders.?

As acquisition becomes more expensive, brands must focus on retention and keeping customers in the loyalty loop because the cost of churn is too great to bear. An optimized post-purchase experience is essentially a loyalty engine that feeds retention and leads to higher NPS—something that’s sure to put a smile on your CFO’s face.