Using Net Promoter Score framework in B2B organizations
Net Promoter Score (NPS) has gained traction as the de facto standard for companies to track and improve its customers’ loyalty and advocacy. Higher the NPS score, higher the prospect for the company to grow through upsell to existing customers as well as through new customer organic growth.
NPS is essentially a survey sent to customers asking the following two questions:
- How likely is it that you would recommend this company to a friend or colleague? (0 to 10 scale)
- What is the most important reason for your score? (text entry)
Respondents are grouped into three different buckets based on the answer to the first question, as follows:
Promoters: Respondents who gave the score of 9 or 10
Passives: Those who gave the score of 7 or 8
Detractors: Those who have a score between 0 and 6
Then, NPS is derived as:
Net Promoter Score = % Promoters – % Detractors
While the first question in the survey gets the most attention because it generates the score, the second question (also called “verbatim”) is equally important because it makes the NPS actionable.
This blog will not go deep into the theoretical underpinnings of NPS – a lot of material can be quickly accessed through a search query. However, we will discuss on how to operationalize and internally present the NPS results.
It is very important to stick to the verbiage of the two NPS questions as provided above. Some companies tend to deviate from the questions (example: “how likely are you to buy from us in the future”). Such deviations change the meaning completely, and furthermore, it makes the survey results not comparable to NPS of other companies available through benchmark studies.
Also, many companies tend to make NPS simply another part of their customer loyalty surveys that includes many other questions. If NPS has to be made part of another survey like this, make sure the NPS questions are listed first, so that it will get maximum responses. Also, try to make the remaining questions as few as possible.
While presenting results, in addition to providing NPS score, it would be useful to provide representative answers for Question 2 (verbatim) as examples for Detractor, Passive, and Promoter segments. This will make the survey responses more “real” to the audience.
There is an inclination by the executives to reach out to Detractors to “put out the fire”. This practice is fine, but convey that it is only a sample of your customers, and potential detractors. The real solution is to solve the root causes of poor scores. This can be facilitated using categorization of verbatim, as discussed below:
You will notice that many of the verbatim are similar, allowing you to group them under categories. Ideally, these categories roll up to functions like Product, Customer Support, Professional Services, and Marketing. Estimating proportion of comments by categories, say in Detractors, will provide clues on what areas need the biggest improvements for changing NPS.
Many CEOs are eager to improve the NPS score, and it will be of great relevance to show how much improvement in the score the company can achieve if specific issue categories are solved. Use the proportion of verbatim by categories discussed above for this estimation. Use the following two scenarios:
- Detractors migrate to Passives (assuming underlying issues are solved)
- Passives migrate to Promoters
Use the former as the realistic goal and the second as the “stretch” goal.
NPS by Key Dimensions
You can provide more color to NPS results by connecting respondents with customer data in CRM. Reporting by following dimensions are especially appropriate:
Company Size: Show NPS scores by company size – for example: small, mid, and enterprise. Typically, larger the company size, higher the NPS. This is probably because there is a higher bar of selection for enterprises, and this selection bias makes your product especially suitable for them.
Tenure as customer: Interestingly, longer the tenure, lower the NPS. This is likely because of the “captive customer” syndrome.
Title of the respondent: Executive respondents tend to rate higher than non-executive respondents because they are a bit removed from day-to-day operation with the product.
Net Promoter Score framework is an important management tool to make your business competitive in today’s market. As discussed, proper implementation, reporting, and tactical operationalization are critical to its success.