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Silent Accounts are Clear Sign of Churn Risk

Silent Accounts are Clear Sign of Churn Risk

The loudest customers often get the most attention. But the silent majority is very often an ignored asset for most companies.  Let’s explore:

Those that are familiar with Net Promoter (or NPS) tend to think of the 3 customer segments that Net Promoter explicitly discusses – Promoters, Passives, and Detractors.  But in reality there are 4 segments.

One of our SaaS clients has been very proud of their 68% NPS.  And they should be – they have a strong base of loyal customers (~71% of key respondents rate them a 9 or 10 on the Recommend question) with very few Detractors.  More importantly, their business has been growing for some time (as NPS predicts).

But a 2nd question needs to be addressed:  Is the 68% NPS reflective of their customer base?  The answer here is unfortunate as it turns out — the score was provided by only 9.8% of their customers.  So we then looked back at their customer renewal behavior to see how accurate NPS is for their business.  Here’s the punchline:

  • They obtained a 97% (!) renewal rate for customers who responded– regardless of score (whether they were a Promoter, Passive, or Detractor);
  • BUT only a 78% renewal rate for those customers that didn’t respond to their call for feedback.

 [Click image for full -screen view]

silent account churn risk net promoter

Pay attention to the 4th segment – customers that don’t respond – as a source of improved growth

So NPS holds up as a segmentation model and leading indicator of churn.  This company’s need for stronger customer relationships (especially for their strategic customers) is quite clear.  In their case, the Silent Accounts provided clear evidence that although overall scores may be high, account-based insights tell a different story. The majority of customers here are disengaged, and this silence has a history of linking to churn.

The fact is, no matter how much you may believe in a given KPI such as NPS (or CLV, LTV, or any other TLA), a single metric never tells the whole story. And “Customer Coverage Rate” (“representiveness” of the customer base in the survey feedback results) proves once again to be a leading indicator of the leading indicator (the latter being NPS).

We’ve seen this research be proven time and time again – Silent Accounts are up to 14X more likely to churn than accounts that do respond. It makes sense. They are already checked out, why bother to spend the time giving feedback? It won’t benefit them when they’ve switched to your competitor.

I’d be very interested to hear of examples where a single metric provided all the evidence you needed to go forward…?  Or where “coverage rate” worked or didn’t work as thought?


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Steve is the Founder of Waypoint Group and mastermind behind TopBox, the voice of customer engagement platform for B2B. As a customer success veteran, Steve has helped shift the Net Promoter® framework for SaaS and B2B companies, highlighting the need for account-based KPI's and measuring ROI for CX. Beware of those silent accounts! Contact him at steveb@waypointgroup.org.

4 Comments

  1. Mark Ratekin 8 years ago

    I’m a bit confused by your conclusion that NPS is a viable segmentation tool – if the renewal rate was 97% regardless of score, doesn’t this suggest a lack of differentiation in the Promoter, Detractor and Passive categories? If this is the case, how is it that NPS is a strong predictor of future growth? If anything, I think it validates what some (myself included) have argued about NPS – that is, recommend is a good metric to track (and is more relevant in some businesses than others), but it is hardly if ever the single best predictor of future financial performance.

    Based on the data you have shared, it suggests that customer engagement (as measured by response rate) is the growth predictor, not the NPS segment.

    Mark Ratekin
    http://www.walkerinfo.com

    • Author
      Steve Bernstein 8 years ago

      Hi Mark — Yes, I generally agree in this case and absolutely agree with your bottom-line that NPS is a good metric to track but not often the only number you need. I would add that the longer-term implications aren’t represented here: While renewal rate is important, I’ve consistently found that segmenting customers into Promoters & Detractors (at minimum) is helpful to understand key drivers and also define treatment strategies. For this client, we know from the data that Promoters are referring at higher rates, and we also know that this word-of-mouth component is a key part of their growth to scale customer acquisition costs (another key metric). An important element of this program is identifying what customers are in each segment (Promoters, Detractors, “Checked-out” non-responders, and Passives), and then working tactics (“campaigns”) to engage them.

Pingbacks

  1. […] 3.    Feedback doesn’t scale. Most companies lack the resources to physically call every customer and discuss the individual responses. That level of 1-to-1 engagement for everyone doesn’t scale. But with all the automation and marketing technologies at our disposal, certainly an email to all your customers explaining the results of your feedback research can be done easily enough. It’s your decision on which people you want to follow-up with and directly discuss the results with – Tier 1 or Strategic Accounts, customer with extremely low marks, or Silent accounts where no one responded. You want a leading indicator for churn? Bingo. […]

  2. […] 3.    Feedback doesn’t scale. Most companies lack the resources to physically call every customer and discuss the individual responses. That level of 1-to-1 engagement for everyone doesn’t scale. But with all the automation and marketing technologies at our disposal, certainly an email to all your customers explaining the results of your feedback research can be done easily enough. It’s your decision on which people you want to follow-up with and directly discuss the results with – Tier 1 or Strategic Accounts, customer with extremely low marks, or Silent accounts where no one responded. You want a leading indicator for churn? Bingo. […]

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