Effect of Capital Investment on NPS

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Effect of Capital Investment on NPS

Key Takeaways

  • Companies that invest more in their customer experience management outperform their competition by a significant margin — up to 26%.
  • Over two-thirds of Fortune 1000 companies now invest in and use an NPS system, as a way to keep track of customer engagement and loyalty.
  • There are 11 healthcare companies currently using an NPS system, including Ascension Health, Medtronic, and Team Health.
  • Organizations that invest in an NPS system can experience 2x industry revenue growth, and experience a cost advantage of 15%.

Introduction

Net promoter score (NPS) is a metric used in customer experience programs to measures customer loyalty. Brands with high customer retention rates usually have the highest NPS scores among competitors. Companies often use the benchmark for their industry as a baseline or compare the benchmark to past performance. Examples of companies with relatively high NPS scores include Netflix’s NPS is 68, Starbucks’ NPS is 77, Amazon’s NPS is 62, Airbnb’s NPS is 74, and Tesla’s NPS is the highest at 96.

After an exhaustive search for benchmarks about the use of a net promoter score (NPS) to justify large capital investments, specifically for digital therapeutics companies, we have found the data is not publicly available. However, we have broadened our scope to provide as much detail as relates to the direct correlation between increased revenue through capital investments linked to an NPS system.

Capital Investment Relationship to Higher NPS

  • According to Bain and Company, organizations that invest in an NPS system can reduce customer attrition by 20%, experience 2x industry revenue growth, increase NPS gains in the first year by 10+ points, and can experience a cost advantage of 15%.
  • Companies that invest in company-wide initiatives experience greater growth. For every NPS point increase in respondent score, conversion rates go up on average 3.9 percentage points- the difference between a score of 6 and 9 is a 21% conversion rate increase.
  • Research shows companies that invest more in their customer experience management outperform their competition by a significant margin — up to 26%.
  • Recent research highlights the value of NPS by illustrating that promoters are a business’ greatest asset- they are more likely to recommend a company to 3.5 people, 5 times more likely to purchase additional goods or services, 7 times more likely to forgive brands, and 9 times more likely to try new product offerings from the same company.
  • Over two-thirds of Fortune 1000 companies now invest in and use an NPS system, as a way to keep track of customer engagement and loyalty. Interestingly, CSAT is used in less than 50% of companies, and only 14% measure CES.
  • Healthcare organizations using NPS scores are better able to manage their online reputations to improve their brand. Many healthcare consumers base their decisions on where to seek care on what they read in online reviews (Google). If a healthcare organization receives three out of five stars on Google's rankings and increases its rank by one star, that can translate into a 5 to 10% increase in revenue.
  • In a recent poll by Retently, the overall benchmark for the healthcare industry was 38 NPS; internet software and services at 39 NPS.

Companies Using NPS Software to Grow Revenue

  • Spooner Physical Therapy monitors feedback from patients through Net Promoter Score tracking, as a result, over the past three years, patient reactivation doubled, resulting in $306,000 in revenue, and $234,000 in potential retention revenue, with almost 12x return on investment.
  • Apple retail store managers tracked the purchase patterns of detractors through its NPS system and learned that customers who had spoken with store managers versus those that had not spent more, resulting in more than $1,000 in additional revenue or $25 million in the first year.
  • A recent study of the airline industries' compound annual growth rates found that NPS explained a 92% variation in future revenue for major U.S. airlines, such as Southwest, Alaska Airlines, Jet Blue, Delta, and United Airlines.
  • Healthcare companies that are currently using the NPS system include Ascension Health, Cancer Treatment Centers of America, Cigna, Humana, Kaiser Permanente, Johnson and Johnson, Medtronic, National Health Services, Novartis, Smith and Nephew, team health, and Zeiss.

Research Strategy

For this research on the relationship between the use of NPH to justify large capital investments, we leveraged the most reputable sources of information that were available in the public domain, including Bain and Company, Healthcare Finance News, Customer Gauge, Clear Link, Net Promoter System, and Augment CXM. Although we were not able to locate data regarding the cost to increase NPS by one point or ways to establish a baseline, we were able to provide data about how capital investments increase NPS ratings.
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