Broken Promises and Lifetime Value

The following outlines the recommended steps to implement this methodology:

• Calculate the number of broken promises: Identify the total number of commitments made to customers and calculate the percentage that were broken. Broken promises could include missed delivery deadlines, unavailable products, unexpected price changes, or unfulfilled service assurances.
• Identify the nature of broken promises: Categorise the most common types of broken promises to understand where the business is falling short.
• Measure the impact on NPS: Compare Net Promoter Scores (NPS) between customers who experienced a broken promise and those who did not to quantify the effect on customer sentiment.
• Link NPS to retention and lifetime value: Establish the relationship between NPS scores and customer behaviours, such as retention, churn rates, and customer lifetime value.
• Determine the required investment: Calculate the cost of improvements needed to reduce broken promises, such as operational changes, system upgrades, staff training, or supply chain improvements.
• Project financial impact: Estimate the increase in revenue through improved retention and higher lifetime value resulting from a reduction in broken promises.
• Evaluate ROI: Compare revenue growth from reduced churn and higher CLTV with the investment in service improvements.

An e-commerce company identified that missed delivery commitments and stock issues were key broken promises impacting NPS. They invested £100,000 in logistics optimisation, stock management systems, and staff training. Within a year, the percentage of broken promises dropped by 40%, NPS scores increased by 12 points, and customer retention improvements generated £250,000 in additional revenue.