How to Predict Churn with NPS
Updated: Jun 27, 2020
Want to predict churn? 🔮
Three letters can help you with that…
Hey everyone 👋, in this post, I’ll be recapping a podcast episode hosted by Churn.fm with Adam Dorrell, the CEO of CustomerGauge.
Adam has been working with NPS for over 16 years (the guy knows what he’s talking about)! Back then, he was working for a large corp that sent out a 40-page survey whenever they wanted to collect data from their customers. Adam thought there had to be an easier way and there was, it was called NPS.
Today, Adam is the CEO of CustomerGauge, a software that helps companies monetize the use of Net Promoter Score (NPS).
He sat down with Churn.fm, a podcast hosted by my friend and teammate, Andrew Michael. Andrew brings on big names in SaaS to help us understand churn, customer retention and other related topics.
In my last post with Brian Reuter from Zendesk, there was a huge emphasis on collecting data from customers. But if you don’t have a data science team to help you get this data, that’s where surveys come in.
In this post, we’re going to be covering why NPS isn’t the perfect metric but who cares, the 3 stages of NPS and how to prioritize feedback within your company.
Let’s dive in:
"NPS is not the perfect metric"...so what?
The 3 stages of NPS
SWOT...but for NPS
“NPS is not the perfect metric”…so what?
“How likely are you to recommend this tool to a friend or a colleague” is usually the question asked when collecting NPS. The problem, Andrew mentions, is that if he’s in a niche industry, the likelihood of having relatives in his family also in his industry is slim and with colleagues, they’re probably using the tool right along with him.
One could say that the question asked is flawed
But Adam highlights that it’s not the question itself that really matters, somehow we all interrupt it well despite not having friends/colleagues within our industry.
Some people have even claimed that it’s too simple to get all the information you need. But that’s the thing, it’s a metric that’s become a standard, and just like a lot of metrics floating around, it too has its flaws.
Despite all of this, Adam says that it “doesn’t matter what metric you use, you could use Customer Satisfaction, or Customer Effort Score or NPS or a made-up metric, as long as you are consistent. And you just keep doing it, you don’t change”.
Consistency is key with NPS, that’s what matters. So how do we properly collect NPS? That’s the second takeaway.
The 3 stages of NPS
Spread and Coverage
It’s not enough to just ask the question to anyone/everyone, understanding how much of your revenue is covered in your survey is the point that Adam is really trying to drive home here.
At least 80% of your revenue should be covered in your customer feedback. This means that if you offer a freemium SaaS product and 60% of your responses are coming from people on your free plan, you’re doing it wrong!
There should be a well-distributed spread across your plans/tiers and you also really need to hear from your biggest accounts! these responses carry different values and should be segmented (you’ll learn why in the third takeaway 😉 ) Overall, it’s the engagement that also determines whether or not you’re properly collecting NPS.
How often should you ask?
Seems like the average is on a quarterly basis and it’s important that we keep measuring the relationship with the clients/customers. But if you’re curious about when to start, post-purchase is the most important stage within their customer journey. Establish the relationship and cadence early on.
This next step requires corporate courage as Adam puts it, it’s the step that moves us to do something about the feedback in an organized way.
Like replying to negative feedback, for example.
We should have a Service Level Agreement (SLA) setup that ensures that within 48 hours we’re reaching out to that person saying “sorry about this, we’d like to help”.
And we’re not used to doing this, Andrew puts it nicely by saying that “feedback is often thought of as a one-way discussion”
I ask you something
I’m expecting something
But don’t expect a response back from me
At first, only 20% of Adams’s clients were replying back to feedback, and over time, he’s been able to maximize this to over 80%.
So why reply?
Adam’s mom taught him to be polite but moreover, these people who are leaving you feedback, “they’re acting as a consultant. They’re spending some time on this.” so why not thank them?
Another great idea Adam brought up was summarizing the feedback on a monthly basis and sending out a summary to the customers who participated. By doing this, you’re demonstrating to the customers that you actually listened and that you’re doing something about their feedback.
Saying thank you and sharing the feedback gives you an immediate competitive advantage and Adam has the stats to back that up! Doing this also helps you fight churn and the best part about it, it’s simple.
Actioning the feedback internally
When analyzing the feedback, you want to find themes to help you bucketize the issues and distribute them with the relevant teams/people within your company.
Bring the issues directly to the VPs of the departments and hold them accountable for fixing these issues.
To help teams prioritize the feedback, you can also overlay the revenue of clients affected by the issue. This, Adam mentions, is an “eye opener because we can get really distracted by a low score, but it might not necessarily impact that much business. Alternatively, a massive amount of business might be impacted by just a few comments.”
Including the revenue streams is what really moves the needle because that’s how you get the attention of the C Suite.
In NPS, a person who is highly likely to recommend our tool/service would leave a score of 9 or 10 and these people are known as growth levers. And it’s because you can get back to these folks acknowledging their feedback and asking them “what are the tools that I can give you to go off and promote my business?”.
Monetizing on the promoters is a great way to grow and it can be done in different ways, for very cheap (if done correctly). You can invite your promoters to co-create content with you or write a review for you.
Another part of growth is also embracing the customer feedback and as an example of this, CustomerGauge proudly displays their NPS score on their site AND they show the comments as well. While some of the feedback could be biting as Adam would put it, it’s a level of transparency that quickly shows clients whether or not they’d be a good partner for them.
So there is a way to help companies really monetize the customer base to grow rather than just having to acquire new customers and Adam, along with his team over at CustomerGauge, are on a mission to figure this out!
SWOT…but for NPS
One thing that Adam is proud of which they do at CustomerGauge is a SWOT(strength, weakness, opportunities and threats) Analysis with their NPS feedback.
There are four quadrants in which you can place the feedback based on your data around revenue or growth.
Here’s what it would look like if you were to do this with your team:
By doing this, you’ll be able to see what needs to be worked on first based on the overall impact, instead of just going off of the number of times a given thing is mentioned.
It doesn’t matter which metric you use as long as you’re consistent
There’s more to NPS than just collecting the feedback, it’s important to make sure all your revenue is covered, how to act on it and how to use it as a growth lever
You can easily prioritize your feedback by using the SWOT analysis technique