Bain uses cookies to improve functionality and performance of this site. More information can be found in our Privacy Policy. By continuing to browse this site, you consent to the use of cookies.

We have limited Portuguese content available. View Portuguese content.

About

How the Net Promoter Score℠ Relates to Growth

How the Net Promoter Score℠ Relates to Growth

Bain & Company research has established a strong link between organic growth and a company’s Net Promoter Score.

To establish the correlation between relative Net Promoter Scores and growth, Bain teams identified the relevant competitors in a business and measured the Net Promoter Score (NPS®) of each competitor using the same methodology and sampling approach. These relative Net Promoter Scores were then correlated with organic growth measures. In most industries, Net Promoter Scores explained roughly 20% to 60% of the variation in organic growth rates among competitors. On average, an industry’s Net Promoter® leader outgrew its competitors by a factor greater than two times.

In other words, a company’s NPS is a good indicator of its future growth. But the relationship is stronger in some industries than in others.

The relationship between NPS and growth is strongest when . . .
  • The industry includes a substantial number of players, so customers have a real choice
  • Network effects are minimal, so customers can easily switch providers
  • The industry is mature, with widespread adoption and use of its products or services

Wherever these conditions do not hold, the relationship may be weak or inconclusive. Other factors may undermine the relationship as well, at least in the near term. Companies with deep pockets can open loads of new stores or flood the market with promotions or discounts. Companies with partial monopolies and companies that dominate distribution channels sometimes grow despite weak Net Promoter Scores. And technological breakthroughs can create growth surges. But while loyalty—as indicated by high Net Promoter Scores—isn’t the only factor determining growth, profitable organic growth cannot long be sustained without it.

There’s another important caveat to the connection between high Net Promoter Scores and growth: A high score in and of itself is not the real objective. A high score by itself does not guarantee success. Net Promoter merely measures the quality of a company’s relationships with its current customers, and high-quality relationships are a necessary but insufficient condition for profitable organic growth.

For example, HomeBanc Mortgage Corporation—which was featured in the first edition of our book, The Ultimate Question—had the highest NPS among mortgage banks at the time. But it still fell victim to the mortgage meltdown of 2007, which swept HomeBanc and many of its competitors into bankruptcy. A company must build an army of loyal customers, as HomeBanc did, but it will squander the potential they create if it can’t make effective decisions about risk, pricing, innovation, cost management and everything else necessary for sustainable, profitable growth.

Want to continue the conversation

We help global leaders with their organization's most critical issues and opportunities. Together, we create enduring change and results