When Net Promoter Score (NPS) burst onto the business management scene in 2003, Harvard Business Review author Fred Reichheld touted it as “The One Number You Need to Grow.” Businesses large and small, consumer and B2B, jumped on the NPS bandwagon, perhaps seduced by the apparent simplicity of the approach. After all, what CEO wouldn’t want to have to only look at one metric to get and keep their business running on the right track?
While NPS is an important metric for some businesses, it is not the ONLY metric needed to manage growth in any business. Indeed, for many businesses, it may not be important at all.
What makes a good business metric? Ben Yoskovitz, the co-author of Lean Analytics, gives these characteristics of a good business metric:
- Tracking. A good metric can be compared (over time, among subgroups, against competition) to show the direction of movement. The statement “Revenue is up 10% over last quarter” is a better metric than “Revenue is $20 million.” Corollary: good metrics are often ratios or rates, which are intrinsically comparisons.
- Succinct. A good metric is instantly and easily understandable and directly relates to your business goals. If you must explain it and why it is important, it is not a good metric.
- Behavior-changing. The metric should immediately communicate how behavior must change to drive results.
The ability to drive behavior change is by far the most important characteristic of a good metric because it tells you what to focus on, and what actions to take to drive results. And most businesses are complex organisms: you will need more than one metric to drive change across different functions.
While NPS may be one of the metrics you choose to use in your scorecard, here are several others you should consider:
- Customer Satisfaction Score. Frequently referred to as C-SAT or O-SAT (for Overall Satisfaction), the satisfaction score has been around a long time in the annals of business metrics. Common sense tells us that if customers are not satisfied, they will defect, and our business will not grow. There are many ways to measure customer satisfaction, including immediately after a transaction vs. a more long-term, relationship approach. Think about your market structure, competition, and corporate strategy to determine which type of C-SAT metric is right for your business. While it has long been recognized that satisfaction alone is not sufficient to understand your customers, it remains important as one of the key metrics for many businesses.
- Loyalty. Another important aspect of customer satisfaction is loyalty, which may translate into intent to renew, or repurchase, depending on your business. Think about what’s most important: getting a customer to purchase again, to increase the size or frequency of their order, or to purchase other products and services from your business. That will help you structure the appropriate loyalty metric.
- Exceeding Expectations. The foundation of customer satisfaction is meeting their expectations. But true customer advocacy, you must go beyond meeting their expectations – you must exceed (or “delight”) them. This metric may also be a good choice for your business, depending on your industry and market dynamic.
- Comparison to Competitors. If you are in a very competitive market with little-perceived differentiation between players, you might consider a metric that evaluates how you rank against your competitive set. Are you better, much better, about the same? If so, you may have a competitive advantage you want to exploit. And clearly, if you are worse or much worse, you have some work to do!
There are two additional metrics that are coming into business use that you might want to consider:
- Customer Effort Score. The Customer Effort Score is a relative newcomer to the business metric scene but is very relevant for certain industries. If your product is a big-ticket, long-term process (for example, manufacturing airliners), the customer will expend much effort in the purchasing process. On the other hand, if your company should be easy to work with, and customers believe it takes a lot of effort to purchase from you, you have your marching orders!
- The Net Value Score. Like the customer effort score, some companies are beginning to use a Net Value Score to determine whether the cost and effort of being a customer are less than or greater than the benefit delivered by your company.
These metrics are all big-picture, “overall” indicators and, while they might signal corrective action should be taken, they will not tell you what action is required. So, in addition to whatever overall metrics you choose, you should also evaluate how you are doing on specific important business factors, such as customer service, delivery, product quality, etc.
If you are an NPS fan, we are not suggesting that you stop using it. Any metric is driving customer experience enhancing behavior is a good metric for you. However, most customer satisfaction programs no longer rely on a single metric. Developing a program of the right metrics for your customers and your business may take a little trial and error, but will deliver improved customer satisfaction for the long-term. To learn more about our approaches to customer experience and customer satisfaction, register with us today.