Why use NPS?
The Walker Survey report Customers 2020: The Future of B-to-B Customer Experience vouches that “by 2020, the customer experience is predicted to overtake both product and price in distinguishing one firm from another.” There’s no getting around the business case for helping our customers be successful. If they lose, we lose. Conversely, as their success goes, so does ours.
There are myriad theories on how to delight our customers. How, though, do we measure their delight? How do we know if they are gaining value from their experience with us and our solution? There’s no shortage of thoughts on health scoring and analysis, as well. One pervasive rule of thumb emerges among them all: loyalty. If a customer is loyal, then their experience is likely a positive one. The trick is determining how to measure loyalty.
NPS (Net Promoter Score) employs a single question survey to determine your customers’ overall perception of your brand. The question, “How likely is it that you would recommend this company to a friend or colleague?” targets customer loyalty and willingness to promote your product to others. Customers answer based upon a scale of 0 – 10. Scores are aggregated for companies to be able to identify if their customer base includes more “detractors” or “promoters” (see below)
NPS is a great tool in the B2C world. The larger the customer base is, the more accurate the score is. Companies can use NPS scores to market themselves, and prospective buyers appreciate the validity of the metric.
How to Use NPS
Does NPS work in the B2B world? Yes, but we don’t suggest using it the same way or for the same purposes as B2C companies use it. For NPS to be an informative metric for B2B companies, two things must happen:
- The scores must be aggregated such that each account represents a single NPS score, rather than each respondent within each account representing a customer.
- The survey should be administered and analyzed in the context of specific life stages within a customer journey, and analysis used for benchmarking purposes, and to inform internal decision-making.
Let’s consider each of these separately.
The scores must be aggregated such that each account represents a single NPS score, rather than each respondent within each account representing a customer.
Consider the potential inaccuracies that can happen with various approaches to calculating NPS for B2B companies. Net Promotor Scores are calculated as the percentage of net promotors – the percentage of net detractors. (Passive scores do not count in the score other than to determine percentages). In a B2C environment, all scores have the same weight, (i.e. every individual is a buyer/customer.)
In the B2B world, each account is a single customer. However, each account has various numbers of potential respondents to an NPS survey. This variability can dramatically affect NPS scores, and account for discrepancies. Companies can essentially distort the data by weighing individual scores (especially from large, happy clients) instead of aggregating scores for each customer before calculating a single Net Promotor Score.
In the example below, Customer A is a large happy (promotor) customer. Customer B is a mid-sized passive company. And, Customer C is a small, unhappy (detractor) company. When each user within each of these Customer accounts takes the NPS survey, their scores can be aggregated differently to arrive at different Total NPS scores.
Take a look at the final column, “Total NPS Score”.
- The first “Total NPS Score” is calculated when the average score of each company is regarded as a single customer (1 NP – 1ND = 0.0)
- The second “Total NPS Score” is calculated when the NPS of each company is regarded as a single customer and then averaged to get a single NPS (25% + 0% + (-50%))/3 = -8.3
- The third “Total NPS Score” is calculated when each individual respondent is regarded as an NP or ND and then a composite is calculated based upon the total number of respondents. (8NP/26)% – (7ND/26)% = 3.8
Since the lack of any real standard method of surveying in a B2B world exists and the variability in how an NPS survey is administered (e.g. which customers get surveyed and how many at each company etc.), it really makes no sense to try to compare Vendor A’s NPS score vs. Vendor B’s NPS score without knowing the detail of how they arrived at that number.
That said, NPS can be and should be considered a valuable metric for internal benchmarking and planning. This can best be done when the surveys are administered contextually, and the data used to inform delivery.
When to Administer NPS
The survey should be administered and analyzed in the context of specific life stages within a customer journey, and analysis used for benchmarking purposes, and to inform internal decision-making.
To garner the most value from NPS, we suggest administering the survey no more than twice a year and during two distinct life stages within your customer lifecycle. For example, you may want to send the survey to all customers at a routine point within their kick-off (such as the time you have promised the realization of first value). Rather than administering the survey with all customers in September, you would then be sending the survey out to all customer when they are at the same point in their journey with you. This data will most accurately inform how well your team is getting customers to first value. If you then deliver the NPS survey again the following calendar year to all accounts during kick-off, you can assess baseline and year-over-year improvement within your organization more accurately.
Another good time to administer the survey would be when customers are nearing renewal (typically 90+ days out). Again, sending it out to all customers at the same point within their lifecycle (rather than the same time of year) will proffer results that reflect how well your team has done in preserving customers. Using that data each year is informative. How has your team improved (or not) in continuing to deliver value to customers such that they are loyal, or, better yet, wiling to promote you to others.
Even as an internal benchmarking tool, NPS should still be aggregated per account before trying to come up with a composite score. If you want to use a company-wide NPS score as an internal motivator, all responses from each company should be averaged for a single account score before aggregating with other account scores. If not, accounts with larger numbers of respondents will have inordinate value in the overall score. (Note: the data points of loyalty among contacts within an account can still be informative for a CSM assigned to that account. However, the composite score is the more meaningful metric as a benchmark and progress report.)
NPS is a valuable tool in understanding your customers’ experience. However, in the B2B world, the method for using it is simply different than for B2C companies. Consider using it for benchmarking, year-over-year reviews, and establishing best practices for Customer Success Management.