Dec 17 2018 - NPS is a waste of time. Use these metrics instead.

NPS is a waste of time. Use these metrics instead. 

View this email in your browser

Ask any executive what the top 3 metrics they watch in their company are and you’ll get some combination of revenue and sales metrics and, of course, the company’s NPS. Net Promoter Score, a measure of customer satisfaction and loyalty, is so widespread and common that over two-thirds of the Fortune 1000 claim to use it. It’s popularity might lead you to believe it was introduced decades ago, forged in years of trial and error and scientifically tuned to become the “one metric to rule them all” in enterprise and startup alike. It turns out it was introduced in 2003 by Fred Reichhold in an HBR article called The Only Number You Need to Grow. In that article Reichhold rightfully sees word-of-mouth marketing as a key driver of growth and, in fact, without these “promoters” exponential growth is nearly impossible. He posited that a short survey with the right questions could predict customer loyalty. And so, the NPS survey was born.  

(I’m working with the assumption that most of you know what NPS is but if not, there is a short overview here.) 

The cult of NPS has grown so quickly that there is almost no service or commercial experience today that doesn’t end with a short survey. Often times those survey requests are accompanied with a nudge to rate the company highly. Over the years though, many have raised objections about the validity and supremacy of NPS as the core metric the organisation should work to improve. Along with complaints of organisations pushing for high ratings (gaming the system in essence) you’ll find concerns with whether asking consumers to predict future behaviour is accurate, how the scale is laid out and what makes someone a “9” vs “8” or “8” vs “7” — significant differences on the NPS scale — as well as many other critiques of this technique. The cult of loyalty survey scores has gotten so pervasive, annoying and prominent that it’s led even Reichhold himself to lament his creation.  

So, if we can agree that word-of-mouth marketing and loyalty are critical to company growth and that measuring them with NPS surveys is highly flawed and likely yielding far less value than your organisation thinks it is, what should an organisation measure? 

The real billion-dollar question

There’s a concept I use when working with organisations on their transformations into customer-centric, product-led companies. It’s the concept of outcomes — measurable changes in customer behaviour that drive business results. Outcomes are the indicators of future business success. We can apply this concept in search of customer loyalty and satisfaction as well. 

Instead of asking your customers some variation of, “Are you satisfied enough right now to do something in the future we find valuable?” ask them nothing, observe their behaviour and pose the following question to your team:

“What do satisfied customers do in our product?” 

The answers your team comes up with will be customer behaviours — outcomes. These are the metrics you should be measuring instead. They are the current behaviours of existing customers. Here are some examples:

• Commerce:

  • Number of items purchased per visit

  • Number of visits per user per month

  • Number of referral codes redeemed

• B2B:

  • Number of sales leads from current customers

  • Number of products sold per customer

  • Number of positive reviews in trade publications

  • Number of licenses activated

• Healthcare:

  • Number of family members using the same practice

  • Number of transactions handled via your website compared to in-person/telephone

Asking people to predict the future — what the NPS conversation is all about — is highly risky. In the future we always make the best decisions, we never make mistakes and we don’t make people feel bad. However, measuring, getting stories about or better yet, observing first-hand, recent behaviour in a particular product or service is far more telling about how well you’re meeting customer needs and whether it’s enough to retain those customers and attract new ones. 

Modern businesses are complex and unpredictable. Your customers are too. Attempting to boil down how well you’re meeting customers’ needs with one question and one  metric is naive and risky. Instead, do the work to understand what success means to your customers and what that looks like in the usage of your service. Measure that behaviour. Optimise your product to promote those outcomes. Remember, regardless of what the surveys say, whether your customers rate you a 7, 8, 9 or 10 doesn’t matter if they never act on it. Happy holidays and a new year. Thanks so much for being a part of this ongoing conversation. See you in 2019!

[Jeff]@jboogiewww.senseandrespondpress.com[email protected] 

Upcoming EventsSmart Scrum Product Ownership - London - February 7-8, 2019 - join Jeff Patton and me for 2 days of hands-on learning on how to bring together scrum, lean ux, product management and customer-centric product development. These workshops sell out well in advance and this one is no exception. Currently there are 6 seats left in this class. 

As always, if you want me to work directly with your company on training, coaching or workshops on the topics of organizational agility, digital transformation, product discovery and agile leadership, don’t hesitate to reach out.Like this newsletter? Forward it to a friend.