Did you know that NPS has been updated? NPS 3.0 is the new version of the Net Promoter Score methodology, famous for measuring customer satisfaction and loyalty with products, services, and brands.
Widely used by service and success teams, the metric now also encompasses financial gains, making the profits and financial responses behind customer loyalty and satisfaction more tangible.
To update you on this change, we'll talk more about NPS 3.0, how to calculate it, and how to implement it in your business. Stay tuned!
What is NPS 3.0? Understand the metric's evolution
NPS (Net Promoter Score) was introduced by Fred Reichheld in 2003 in his article published in the Harvard Business Review .
The metric, which looks at customer satisfaction, consists of asking customers a single, simple, and quick question: “ On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?”
Based on the response, customers are categorized into three groups:
- Promoters (grades 9-10) : those who promote your company, speak well of the product and give spontaneous recommendations.
- Neutral (grades 7-8) : has nothing to complain about, but will hardly make the effort to recommend you to anyone, whether negatively or positively.
- Detractors (scores 0-6) : They have had negative experiences and tend to speak negatively about the company to others. This can be detrimental to the company's reputation.
Based on the scores, the calculation is made by subtracting the percentage of detractors from the percentage of promoters to understand the level of customer satisfaction with a business.
From this simple metric, some developments have emerged to introduce deeper insights into the score. As a result, beyond simply seeking quantitative data, many companies have begun introducing open-ended questions to seek qualitative feedback to better understand the reason for the given score.
Then came NPS 3.0, which maintains its principle of understanding satisfaction and loyalty , but also considers how this yields real, financial results for the business. In other words, it also aims to measure company growth based on customer satisfaction .
This update is very important because it takes into account the customer experience , which is the main focus of the relationship between companies and consumers today.
To achieve this, the Earned Growth Rate (EGR) is added to the metric. With this new metric, it's possible to more quickly see the profits—or lack thereof—behind loyal customers, gathering data to consider costs and project whether they will become profitable in the long term.
How is NPS 3.0 different from previous versions?
Like many methodologies, NPS has evolved due to market needs and business evolution. In summary, the main differences between its versions and the author's books are:
- NPS 1.0 – The Ultimate Question : the beginning of the methodology seeks to explain and introduce the NPS system and its statistics: how to understand, improve and apply it to the business.
- NPS 2.0 – The Ultimate Question 2.0: focuses on NPS system management, introducing more quantitative analysis and focusing on financial results and competitive advantages.
- NPS 3.0 – Winning on Purpose: presents NPS best practices, enhancing the use of the methodology in companies and, definitively, focusing on the relationship between experience and revenue.
Earned Growth Rate (EGR): The relationship between customer satisfaction and revenue growth
As we said, NPS 3.0 is based on the Earned Growth Rate (EGR), which measures revenue growth generated by recurring customers and their referrals, in addition to allowing a better understanding of where profit is coming from in relation to satisfaction.
Therefore, before understanding how to calculate NPS 3.0, it's important to understand EGR. To calculate Earned Growth Rate, you need to understand its two components:
- NRR (Net Revenue Retention): This measures the revenue generated from active customers who have already purchased from the company in a specific period.
- ENC (Earned New Customers): measures the value of revenue growth coming from new customers through referrals.
NPS 3.0 Calculation: Understand how to measure Net Promoter evolution
Now that you know what EGR is, let's calculate NPS 3.0: To calculate EGR, you need to add NRR and ENC and then subtract 100 from the result. Doing so gives you the earned growth rate.
Let's think practically: a company's revenue went from R$50M in 2023 to R$80M in 2024. Of this growth, 90% came from existing customers (NRR), while 15% came from new customers (ENC). Therefore:
EGR = 90 (NRR) + 15 (ENC) – 100 = 5%
With this, the growth rate gained was 5% for the business.
Practical steps for implementing NPS 3.0
NPS 3.0 goes beyond simply seeking customer responses; it requires in-house data and foundations for accurate calculations. Therefore, it's essential to invest in how your business has collected data over time and, more importantly, in how your customer input is actually recorded.
1. Invest in data
For the calculation to yield true results, you need to know how much your clients actually earn and, more than that, how much clients who come through referrals .
This can be a major challenge, as many companies fail to measure the number of referrals they receive. Therefore, to be effective with your NPS 3.0, you need to invest in segmentation and database creation.
Knowing how your customer arrived at your business is essential not only for this metric, but also for understanding what works and what doesn't, investing in channels, and creating end-to-end strategies for your business.
2. Understand the metrics used for your business
There are many metrics for service, customer success , and experience, and it's important to keep in mind that not all of them will make sense for your business. It's not enough to simply take all the existing metrics and calculate them for the sake of having them in a spreadsheet. After all, they should be guides to understanding what's successful and what's not, and to paving the way for innovation and business improvement.
It's not enough to implement a variety of metrics that simply get lost and don't make a real difference to your business's bottom line. Therefore, before using NPS 3.0, take a hard look at yourself: has NPS already been implemented? Have you already seen results from promoters and detractors in your business?
There's no point in trying to innovate with the update if the “original” NPS isn't well implemented in the business, does it make sense?
3. Experience first
Customer loyalty will come from the good experiences they have with the business, so it's necessary to invest in experience, personalization, and attention at every point in their journey to, then, implement NPS 3.0.
Only with good experience strategies does it make sense to look at your customers and referrals financially based on a metric.
Conclusion
How important is experience already to your business, and how much are customer loyalty and satisfaction already measured? It's important to stay up-to-date with market metrics and innovations, but it's also necessary to understand what makes sense for your situation so that metrics truly guide change and practical actions for business success.
Could NPS 3.0 now make sense for your business? Now that you know more about it, consider whether your company maps referral-based customers, and invest more in experience and customer-centricity!
