NPS First, Profits Later: The Future of Sustainable Business Design
NPS First, Profits Later: The Future of Sustainable Business Design
Rethinking Business Models: Beyond Profit-Centric Approaches
For centuries, businesses have operated under the relentless pursuit of profit maximization. This profit-centric mindset, taught in business schools worldwide, has driven companies to set objectives, streamline processes, and allocate resources with a singular focus. However, this approach often sacrifices customer satisfaction, resulting in fleeting successes and long-term stagnation. It’s time to challenge this paradigm: prioritize Net Promoter Score (NPS) as the primary business objective, allowing profits to follow naturally as a by-product.
(NPS is a measure of how satisfied the customer is with the product/service. NPS surveys ask the question - "How likely are you to recommend this service to friends/family?" A rating of 1-10 is given as options to customers. Customers who give 9 and 10 are called Promoters, ones who give 7 and 8 are called Passives and ones who give 1 to 6 are called detractors. NPS is the % of Promoters minus Detractors and is a measure of customer satisfaction. Higher the NPS, better is the customer satisfaction)
Key Assumptions of This Model
Capital is Accessible: Investors—ranging from venture capitalists to governments—are more inclined to support well-structured initiatives that promise measurable returns.
NPS Fuels Long-Term Revenue: High customer satisfaction leads to referrals, organic growth, and sustainable profits.
Employee Satisfaction Matters: A content workforce (measured through employee NPS) drives operational excellence, innovation, and retention.
Short-Sightedness of Profit-Centric Models: Cost-cutting measures that compromise customer experience diminish long-term brand equity.
The Profit-NPS Conflict
Modern businesses grapple with a critical conflict:
- Profit maximization often necessitates cost reductions throughout the customer journey.
- Conversely, prioritizing customer satisfaction demands investment in product development, customer service, and employee welfare.
Companies that chase profits frequently deliver inferior quality and customer experiences. In contrast, organizations that prioritize customer delight cultivate goodwill, enhance brand loyalty, and reduce marketing expenses through organic referrals.
Tesla, for instance, has cultivated a community of loyal customers through significant investments in customer experience. This high NPS reduces advertising expenditures to nearly zero. Similarly, Netflix invests in top-tier talent to ensure outstanding service, leading to lasting customer satisfaction.
A Case Study: Reframing Profitability with BBMP
Consider Bangalore’s municipal authority, BBMP. If BBMP operated like a traditional business focused solely on cost-cutting, it would lead to underpaid, disengaged employees and exacerbate issues like the city’s notorious traffic congestion—costing the economy approximately $60 billion annually in lost productivity and fuel waste.
Imagine if BBMP shifted to an NPS-driven model instead. The plan could include:
Investing in Infrastructure: Building sustainable public transport systems and incentivizing their use.
Promoting Behavioral Change: Implementing reward systems for public transport users, convertible to tax breaks.
Prioritizing Employee Satisfaction: Offering above-market salaries to attract and retain talent.
Measuring Impact via NPS: Regularly surveying citizens to gauge their satisfaction with traffic policies (Road NPS) and adjusting dynamically.
With an initial investment of $1 billion in infrastructure improvements, BBMP could generate an additional $1.5 billion in tax revenue within a year. This 50% return on investment would build investor confidence and lead to further enhancements, resulting in increased citizen satisfaction, reduced traffic, and diminished economic losses.
This approach illustrates that prioritizing NPS yields tangible returns, while a profit-centric approach merely perpetuates the status quo.
Harnessing Employee NPS (eNPS)
A business thrives on its workforce. Companies that attempt to minimize hiring costs often face burnout and high attrition rates, erasing any short-term savings. Netflix counters this trend by offering competitive salaries and autonomy, fostering a motivated, productive workforce that enhances service quality.
By conducting employee satisfaction surveys (eNPS), businesses can identify what truly matters to their staff. Rather than suppressing salary expectations, companies can seek funding to meet reasonable demands, thereby reducing attrition and building loyalty.
Customer Feedback: A Strategic Asset
Many organizations treat customer feedback as an afterthought, relying on outdated surveys that fail to capture meaningful insights. To overcome this, businesses must actively engage customers using interactive tools with valuable incentives.
Tesla exemplifies this approach by involving customers in product development. Imagine a select group providing ongoing feedback during design phases in exchange for rewards like vouchers. This co-creation model ensures products meet customer needs from the outset, minimizing marketing costs and enhancing NPS.
Redefining Marketing with NPS
While traditional marketing retains its importance, its application must evolve. Businesses that depend solely on conventional marketing for minimally customer-involved products see diminishing returns.
By engaging customers early in the process, companies can assess product readiness through NPS. Once sufficient customer satisfaction is achieved, marketing can be strategically deployed, targeting channels aligned with customer preferences.
This data-driven strategy ensures every marketing dollar is maximized, reinforcing product value.
Conclusion: NPS as the New Guiding Principle
The future of business lies in prioritizing customer and employee satisfaction as fundamental objectives. When NPS becomes the north star, profits will naturally follow.
Tesla, Zappos, and Netflix have demonstrated that investing in people pays off, resulting in lower marketing costs, enhanced loyalty, and sustained profitability.
Business leaders must confront these pivotal questions:
- Are we sacrificing long-term value for short-term profits?
- What if we invested in delighting our customers and employees instead of cutting corners?
The answer is clear: businesses structured around NPS principles will outperform profit-centric models over time. It’s time to abandon outdated business practices and embrace a future where customer and employee satisfaction drive sustainable growth.
The journey to infinite returns begins with a fundamental shift in perspective.
Practical Example: Transforming Bank Branch Strategy through NPS
Branch Experience Strategy Design: A bank faced the challenge of increasing branch revenue through various initiatives and struggled to balance profits and customer experience, resulting in mere incremental gains.
Imagine if NPS-centric design transformed this scenario. Currently, customer interactions at the branch are evaluated weeks after the customer visit through random sampling—an inefficient approach. Instead, we could install real-time feedback tablets at branch counters to gather NPS data immediately. However, to gain deeper insights, we must understand the entire customer experience, not just a numerical score.
Recognizing the need for a quick win, I proposed integrating SMS follow-ups to gather NPS and qualitative feedback without causing queues. While this system requires some integration, it offers immediate benefits.
For a more innovative approach, consider employing CCTV with audio recording at branch counters to capture every interaction between customers and staff. Transcribing these recordings allows AI to audit interactions, enabling continuous improvement in customer experience. This low-cost solution promotes NPS growth, resulting in increased referrals and long-term revenue.
The mindset shift involves solving customer journey challenges with a focus on maximizing NPS rather than minimizing costs. By establishing a Customer Experience Points system, customers earn rewards for providing feedback, fostering loyalty and encouraging referrals.
Even if some respondents provide shallow answers for rewards, careful survey design can ensure meaningful input, engaging customers in co-creating branch services that align with their needs.
I believe any business can be redesigned based on NPS maximization approach to maximize long term revenue growth. Above is one such example of a business model that can be restructured to prioritize NPS, yielding long-term revenue. There would be a cost involved in setting up these systems but the long term revenue impact would be disproportionately higher. The profit-first mentality is myopic, shaped by societal conditioning that misguides our understanding of business success.
If you’d like to delve deeper into how societal conditioning affects not just businesses but also the human mind in general leading to major loss to life/society and if you wish to know more about the disruptive potential of this NPS-centered approach to your own business and society, I have posted a few articles starting from the one below. Please follow sequentially to gain a change in perspective and gain insights.
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