Is “earned growth rate” the complementary metric which will transform the Net Promoter System (NPS) from being not only the most popular customer experience metric but also the most gamed and abused?
Bain’s Fred Reichheld has returned to the Harvard Business Review, where he first introduced the NPS model in 2003, advocating for the new metric.
To calculate their earned growth rates, firms must have systems, process and people that will gather data on the costs and revenues for each customer over time and must ask all new customers why did they buy?
If the reason is a referral or recommendation, a customer is “earned”; if it’s advertising, a promotional deal, or a persuasive salesperson, the customer is “bought”.
Reichheld says “we realized that the only way to make the system work better was to develop a complementary metric that drew on accounting results”.
However, firms will not be able to credible calculate their earned growth rate unless they have their technology, people and process act together and most do not.
Reichheld acknowledges this issue, but states “it’s time to get serious about measuring (and reporting) the progress … and to recognize that improving the lives of the people we serve is the only way to win”.