By Kristen Hayer
As you’ve seen from my previous post on annual planning for customer success, in September we recommend thinking about your key metrics and team goals for the coming year. It might sound a little early for that, but key metrics are the foundation for your plans going into 2022. You can’t create compensation plans, develop a hiring profile, or plot out Q1 tactics without understanding how you’ll be measuring success.
We think about CS metrics in 3 major categories: Retention, Expansion and Satisfaction. As CS leaders, we tend to spend a lot of time talking about the first 2, sometimes rolling them into NRR, and sometimes breaking them down into their parts. We don’t spend as much time talking about Satisfaction metrics. A lot of the teams we start working with default to Net Promoter Score (NPS) without giving much thought to whether that is an optimal way to measure customer satisfaction. In this post I’d like to talk about the pros and cons of NPS, and present some other options you may want to consider as you think about satisfaction metrics for your CS organization.
Net Promoter Score
I haven’t made it a secret that NPS is not my favorite satisfaction metric. For most B2B technology organizations, there are problems with both the structure and execution of NPS programs. That said, there are some good things about NPS.
First, it’s simple, and customers are much more likely to answer a simple (in this case, one-question) survey than a complicated one. Second, because of its simplicity, it is easy for executives and investors to understand, which is why it is so prevalent today.
On the downside, it wasn’t initially developed for B2B, it was built to help large B2C brands (think Nestle, GAP, United Airlines) understand customer loyalty. In a B2B setting there is often a much lower volume of business (as compared to a consumer brand), and the math becomes volatile and less predictive of retention and advocacy. In addition, many companies implement NPS through an annual survey that balloons up the questions that are asked, reduces the response rate, and results in a single, point-in-time number that isn’t very useful.
While you may not want to stop using NPS because it has become an important metric inside your organization, you can also supplement it with other, more useful satisfaction measures.
Alternative Approaches to Customer Satisfaction Metrics
We have found three alternative measures of customer satisfaction to be much more effective than NPS in a B2B setting. These are some of my favorite options, along with the pros and cons of each:
1. Customer Effort Score – I recently reviewed the book The Effortless Experience on my podcast, Reading for Success. The premise, backed up by a lot of great research, is that customer loyalty stems from how easy it is to use your solution, engage with support materials, and get help when needed. The authors argue that most customers today prefer self-service options to talking to someone, and that companies who have digital engagement models will have more loyal customers. This book is a fascinating read and presents a model for how to calculate a customer effort score. Downside: This is different for every company, and isn’t easy to calculate, so it may require some time to build and automate. Upside: This is much more predictive of loyalty than NPS for B2B companies.
2. Customer Satisfaction (CSAT) at Key Touchpoints – Customer satisfaction surveys have been around for ages and have largely been abandoned because in their previous form they were cumbersome surveys that often took 15+ minutes to complete. Newer approaches to CSAT look like short, touchpoint-based surveys that are similar to NPS in structure but sprinkled throughout the customer journey and tied to specific touchpoints. For example, you might send a CSAT survey to a customer after onboarding, a support ticket, or a business review. Downside: There is a temptation to try to gather more and more information and surveys tend to become too big, which reduces response rates. Upside: You can tie survey results to specific touchpoints and start to understand where you need to focus improvement efforts.
3. Referenceable Customers – I like to think of this as the real NPS score. What percentage of your customers are willing to serve as a reference for you? Companies who track and regularly look at this metric are getting a real version of what NPS is trying to capture: Do you have customers who like you enough to recommend you to another person or company? It’s easy to give a 9 or 10 on an NPS survey. It’s harder to agree to speak on behalf of a vendor. You can think of this metric as continuously maintaining a specific number of customers who have agreed to serve as a reference, or you can look to always maintain a specific percentage of your customer base who are referenceable. Either way, this is where the rubber hits the road. Downside: If you haven’t been collecting this information, it might take time to build up a baseline for this metric. Upside: This is a true measure of loyalty.
What to Choose
How should you choose the metrics that are right for you? Keep in mind that metrics do two things. First, they serve as a measure of success to the broader organization and help to benchmark you against similar companies. This lets you and your leadership team ensure that your business model stays on track for growth. Second, they are a management tool that allows you to measure the performance of your program and team members. You may find that one metric (say, NPS or Referenceable Customers) best serves the first purpose, while another (say, Customer Effort Score or CSAT) best serves the second.
You should also consider two practical items as you choose your approach to satisfaction metrics. First, what can you and your team influence? While a metrics that is mainly upward facing may not need to meet this criterion, the one you’ll be using to set team goals absolutely must, or you run the risk of demotivating your team. Second, do you have the tools to measure your chosen metric today? If you don’t, you’ll need time to implement a new tool, roll it out, test it and establish a baseline. This is why we recommend considering metrics in September instead of December!
As you move forward in planning your satisfaction metrics for 2022, we would recommend that you choose a couple of different approaches. It is likely that if your organization has bought into NPS you won’t be able to move away from it, and that’s OK. It has some upside. However, you may want to consider other approaches that provide more practical and actionable data for your CS organization. We would also recommend that you start small, and then expand. For example, if you decide to implement a Key Touchpoint CSAT program, don’t go too crazy with the touchpoints. Choose 2-3, roll out your program for those, establish baselines, and then expand the program over time. Finally, be sure you do have a baseline for any metric you plan to roll out as part of a goal for your team. Nothing is more discouraging to a team than having to hit a goal that has no basis in reality.
Using alternatives to NPS will help you refine your satisfaction metrics and drive better customer satisfaction, which in turn will help you get ahead of both retention and expansion metrics. Get started now, and by January, you’ll be ready to roll with customer satisfaction metrics that you can actually use!
Need some help? The Success League is a customer success consulting firm that helps leaders build and develop top performing customer success teams. We offer short-term consulting engagements that can kick-start your planning efforts, as well as coaching for leaders who need some weekly advice. Check out TheSuccessLeague.io for details.
Kristen Hayer - Kristen believes that customer success is the key to driving renewal and expansion revenue, and delivering exceptional customer experiences that produce referrals. Over the past 20 years Kristen has been a success, sales, and marketing executive, primarily working with growth-stage tech companies, and leading several award-winning customer success teams. She has written over 100 articles on customer success, and is the host of 2 podcasts about the field: Transforming Experiences in Customer Success (formerly Strikedeck Radio) and Reading for Success. Kristen serves on the board of the Customer Success Leadership Network and the board of the Customer Success program at the University of San Francisco. She received her MBA from the University of Washington in Seattle, and now lives in San Francisco.