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What’s the One Best Predictor of Organic Growth?

by | High Performance, Profitability and Growth

Fred Reichheld, author of the 1996 bestseller, The Loyalty Effect, revealed that a “5% improvement in retention can boost profits by up to 100%.”

These numbers confirm what many of us already know—it’s phenomenally important to keep your customers coming back.

Now Reichheld is back with a new book that reveals that, of all the metrics of business, the best predictor of organic growth can be boiled down to one determinant—what he calls the Net Promoter Score.

Reichheld found, after analyzing over 24 industries, that leaders in the Net Promoter Score were growing at a rate of 2.5 times that of their competitors.

The Net Promoter Score works like this:

Customers are asked, “On a 1-10 scale, how likely are you to recommend us to a friend?”

Customers who score nines and tens are promoters. This sector is the driving force behind your success. They account for 80-90% of positive word of mouth.

Those scoring a seven or eight are satisfied—meaning indifferent. If the bank across the street is offering a one-week rate special, they’re out the door.

People who score within the zero to six range are dangerous. They voice their complaints to others and eventually become detractors of your institution. What is really tricky about this group is that they are currently adding to your profits monetarily but detracting potential profitable customers in the long run. Accountants can’t tell the difference.

What can you do with this powerful understanding about the predictability of your future success?

Constantly survey your customers to find out how you score. If you receive anything under an 8, ask questions to find out what you need to fix. Then, get busy fixing.

The key to success in business is focusing on the right things. Seems like the Net Promoter Score is where you may want to direct your focus.

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