Beyond NPS: Why earned growth is the next metric you need to know

The man who brought the world the Net Promoter Score (NPS) now proposes earned growth as a complementary – and more objective – metric for businesses to consider.

What is earned growth?

This measures revenue growth generated by returning customers (net revenue retention) and their referrals (earned new customers). 

The first component should be easily measurable for most businesses: this year’s revenues from customers who were with you last year, divided by last year’s total revenues, and that figure expressed as a percentage.

The second may require new procedures and systems to capture the percentage of spending from new customers earned through referrals (rather than being bought through advertising) .

Why it matters

The credibility of NPS as a metric has been damaged, believes Fred Reichheld, the developer, by companies misinterpreting it or turning it into a vanity statistic. Writing in the Harvard Business Review, he and two colleagues put forward earned growth as a metric based on accounting results, rather than a potentially biased sample of survey responses, that can reinforce the effectiveness of NPS.

The big idea 

Earned growth provides firms with a clear, data-driven connection between customer success, repeat and expanded purchases, word-of-mouth recommendations, a positive company culture, and business results.

Sourced from Harvard Business Review