What is NPS?
Net Promoter Score (NPS) centers around a key question: How likely are customers to recommend your company, rated on a scale of 0 to 10?
Based on their scores, customers are categorized as follows:
- Promoters (9-10): Enthusiastic and loyal customers.
- Passives (7-8): Satisfied but not overly enthusiastic.
- Detractors (0-6): Dissatisfied customers who could potentially harm your brand.
NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. Ultimately, a high NPS indicates that a greater proportion of your customers are actively recommending your business compared to those who are neutral or negative. Companies often include an open-ended question after the initial NPS rating to gain deeper insights into the reasons behind customer scores.
So, does NPS work for B2B audiences?
The idea of using a single metric to gauge customer loyalty is appealing, especially to business leaders. However, B2B customer relationships are typically more complex than for B2C products, and often a single metric is not enough to fully understand the relationship with B2B customers. Our experience with NPS among B2B clients has driven us to discuss other approaches. Here are four major reasons why NPS may not be the best:
Smaller B2B Segments Results in Volatile NPS. As we’ve discussed in past blog posts, B2B audiences are typically smaller than B2C, which means the sample sizes are also much smaller. With smaller sample sizes, each customer has a greater weight and can have a heavier impact on the results. A small handful of respondents switching from a rating of 9 to a rating of 8 can change your NPS from a positive score to a negative score. However, is there a meaningful difference to customers of a rating of 9 or 8? Their loyalty to the company is probably not significantly different, and it is definitely not a crisis, but the NPS might suggest there is a big problem.
B2B Relationships Are Complex. Unlike buying a pair of shoes or tube of toothpaste, the B2B sales process is multi-faceted and complex. As a general rule of thumb, I like to understand five key components of B2B customer relationships: ROI/value, product, ease of use (UX), servicing, and invoicing/billing. Depending on the industry and the product, some of these components are weighted more heavily than others in driving loyalty. If you have a unique product that is clearly differentiated from the competition, it may mean servicing is less important. If your product is a commodity, servicing can become much more important in the relationship. Understanding how you perform in these areas is critical to understanding the overall relationship with your customers and the opportunities to strengthen loyalty. Attempting to summarize all of these components into a single metric (NPS) prevents a full understanding of the relationship customers have with the business. NPS can potentially mask threats to the business, as it may miss weaknesses developing at one of the relationship touchpoints.
Relying on a Single Follow Up Open-End Can Lead to Recency Bias. To get clarification on the NPS rating, some researchers will ask a follow up open-ended question. We have found that asking a single follow up open-end to NPS often reflects top-of-mind feedback. This can be helpful in identifying new issues that may have popped-up. That being said, your customers typically will not take the time to list all the issues that prevent stronger relationships unless you ask them. For instance, if the account management team failed to respond to a question in a timely manner, the customer may highlight the lack of customer service in the open-end, but forget to also mention that their frustrations with the user interface drove them to focus more time (and money!) with a competitor’s product. Based on that feedback, your team would focus their attention on improving SLAs, rather than improving the interface – which is where you are actually losing budget.
It’s a Competitive World. The attraction to NPS is that it is just one question: How likely they will recommend your brand. Even more attractive: It’s a single number (metric) teams can hang their hats on. However, you are not operating in a vacuum, and your competitors are actively attempting to recruit your customers. Without capturing how your customers are also rating competitors, it is hard to put your NPS performance into context. For instance, your NPS may be in-line with historical levels, or industry averages (if you are lucky enough to have them), but it won’t capture the competitor who has slowly been improving their scores and is closing the gap with your company. On the flipside, you may miss capitalizing on an opportunity to gain market share if loyalty to the leading competitor is eroding and customers are looking for an alternative.
Of course, there are some reasons our clients have to use NPS in a B2B setting, for instance, when their entire company uses NPS as their core metric and the B2B division needs to be in alignment. In these instances, it’s important to be aware of the limitations and attempt to manage them. It also doesn’t hurt to share these limitations with leadership and discuss the impact it might have on how the business responds to customer feedback. If your organization is still focused on a single metric, you might consider transitioning to an index score. Index scores can be calculated using multiple factors of the B2B customer relationship and they can also help reduce the impact of outliers, particularly when working with smaller B2B base sizes.
Often leadership turns to NPS as a way to simplify their inputs, so they can focus on the day-to-day of the business. However, while leadership wants a high-level overview, the team will need to fully understand each key area in the B2B relationship to ensure customer retention over the long term. So regardless of the metric, it is key to collect the right data to track loyalty and collect
the data that can provide guidance on what areas need attention.