From Net Promoter Score
to Earned Growth Rate
to Earned Growth Rate
Why does the Net Promoter Score show growing customer loyalty, but this does not correlate well with your company's revenue growth?
It's all about the imperfection of the NPS, and in addition to it, you need to consider one primary indicator of your faithful adherents.
On a simple data model, we showed how Tableau could implement the calculation and visualization of this metric. Check out what we got on Tableau Public!
How will we get to know Earned Growth Rate
How will we get to know Earned Growth Rate
The Vibrant History of Net Promoter System
In a traditional NPS, survey customers are asked how likely they are to recommend the company on a scale of 1-10 after an experience. Those who give scores of 9 or 10 are considered Promoters. Those who present scores of 7 or 8 are Passives, and those who score under 6 are Detractors. To calculate the NPS score:
- Add up the total responses.
- Take the total for each group and divide it by the total number of survey responses to get the percentage.
- Subtract the percentage of Detractors from the portion of the Promoters to obtain the NPS score.
The system has gained the highest popularity!
What's wrong with NPS?
What are these weaknesses?
- Organizations don't always understand the idea of NPS and try to calculating it themselves.
- Misuse of the indicator by linking it to the salary/bonus of employees.
- Basing suggests the client's intention, which doesn't turn into action.
- NPS doesn't suggest that someone can simultaneously be a promoter and a detractor.
Net Promoter 3.0:
NPS enriched with Earned Growth Rate
Now we have a tool for obtaining reliable data on customer loyalty. Let's add to the emotions of the NPS metric calculation of the growth of our referrals. The ideology of the Earned Growth Rate is based on the value of the attracted clients (referrals). They bring the most income now and in the future.
This single survey question is the best predictor of top-line growth can usually be captured in.
This finding is based on two years of research by NPS' creator in which various survey questions were tested by linking the responses with actual customer behavior. Risking one's reputation is possible only if loyalty is observed.
The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It's simple and profound.
— Fred Reichheld, NPS' and EGR' author.
Earned Growth Rate Formula
Already used in some industries, NRR is calculated by counting current period (e.g., month, quarter, year) revenue from existing customers and dividing by the prior period's total revenues.
ENC is the percentage of spending from new customers acquired through referrals (in contrast to customers who come on board due to advertising or other promotional efforts).
How to calculate Earned Growth Rate?
Our Data Model consists of 3 tables, where "Sales by Customer" is the root table, "Customer Acquisition Channels" and "Customer NPS" are related tables.
Relationships are established between tables and defined by the "Customer Name" matching field.
How do I calculate the revenue generated from ENC?
Depending on the answers, customers form into categories:
Attracted and Acquired.
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