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If someone asked what is a good NPS score for companies in our space, what would you say?
What’s a good NPS score? How do we compare to other companies like us?
I’ve been asked these questions too many times to count.
I wish I could just say something like “30” but it’s not that easy in B2B.
The key metric, especially for growing B2B companies, should be an accelerated rate of profitable growth. When it’s trending up, NPS should be a leading indicator of expansion opportunities, reduced churn, lower cost to serve, and a higher volume of prospects in the top of the funnel from positive word-of mouth.
On the other hand, if your NPS is trustworthy (more on that below) and improving but financial metrics are flat or declining then your company probably isn’t activating those promoters. Remember, unlike B2C companies there are few opportunities to “promote” a B2B provider. You don’t generally see people talking about accounting software, construction equipment, or business intelligence products at cocktail parties. Have you provided your promoters with opportunities for exposure?
“But my boss wants an NPS benchmark,” I hear you say.
- One sector, our B2B SaaS clients, range from around 5 to around 35. But a higher NPS isn’t necessarily always better. There are costs involved to improve (i.e. optimization should be the mantra). A bottoms-up approach to NPS targeting is the best way to view the aggregate score and how well your company is doing.
- Benchmarking should compare apples-to-apples. NPS reflects a company’s ability to meet customer expectations across the spectrum of interactions, so different B2B solutions should have different expectations of their NPScore. As a B2B example, is it effective to compare your software company against “any” other software company? Savvy business leaders would recognize that things like solution scope, size and complexity, maturity, valuation, market position, specific sector, and price/margin all impact perceptions and expectations of a vendor, and therefore impact the measurement of any company’s NPS. Would you compare QuickBooks against Oracle Financials, just because they are both used for financial accounting?
So, what we recommend is:
- Analyse for internal benchmarking: This approach probably means an apples-to-apples comparison, including similar survey methodologies. Does one segment of your customer base have a higher NPS than others? Does one account in one segment have better NPS than other accounts in the cohort? Why? What are the practices and/or customer expectations that are different in one versus another?
- Be sure to activate promoters. That’s the key to accelerating growth in B2B. Since B2B folks aren’t likely to act on their own, engaging those promoters to work on your behalf is the “money move.”
- What is the cost/benefit of an improvement? Is a higher NPS worth the investment? What are the key drivers of NPS for a given segment, and what would it cost to improve them? What are the resulting gains worth based on #1 and #2 above?
In other words, take a moment to educate your audience when comforted with the question of “How does our NPS compare?” Hopefully you’ll have a compelling response that highlights the ROI of improvement, and not just a comparison of scores.
But you still want a benchmark…
- Most accurate benchmark would be a 3rd-party blind study asking target contacts to rate companies with which they have direct experience. By ensuring the study acquires perceptions of like persona (e.g. stratified sample of decision makers or administrators or end users, etc) across a set of directly-competitive companies using a consistent methodology you’ll see how your company stacks up against others. This is expensive and rarely worth it. Instead, consider purchasing industry studies from 3rd-parties like Temkin Group (who shows NPS for tech companies ranging from -22 to +43).
- Less accurate from an “industry” standpoint (but if someone really “wants to know” a comparison): if there are direct competitors sharing a customer’s wallet, or in a situation where your customer contacts work with a number of different vendors (i.e. where your customer contacts have a direct basis on which to compare your company against others), you can add one question in a relationship questionnaire to find out how they think of your company relative to the other companies with whom they work. With that you’ll at least be able to see how well your firm meets customer expectations relative to the others they engage. Hopefully your firm is at the top of their list.
- Internal benchmarking is the best direct apples-to-apples comparison and least expensive. Compare one cohort of your customer base to another to discover bright-spots that can be replicated to other parts of your company. What causes one group of customers to love your firm, and another to be the opposite?
- Understand the “why” behind the question: Even if you have an NPS of +100, does that mean you’re “done” with driving improvement? Maybe… or, what will your competitors be doing? Or, if you’re not in a competitive industry then maybe a -100 NPS is just fine. The taxi industry thought they could treat customers like garbage until Uber came around…
- What’s the advantage of working with a promoter versus working with a detractor? Promoters tend to be less costly to serve, not to mention easier on employee morale. But that comes at a cost… understand and communicate if a higher is NPS definitively better.
- Critically, is your NPS trustworthy? Does your Net Promoter Score represent the business and are you really hearing from all the right people? If your own score comes from 50% of your buying committee members but a comparison score comes from 5% of their end-user population, then you certainly aren’t comparing apples-to-apples. NPS can decline as response rate improves, not to mention differences in respondent persona, so where and how you measure NPS is critical. Given low response rates from most B2B NPS efforts, you may be surprised to find your NPS coming from less than 5% of your total company revenue and/or from a mixed bag of persona or non-influential customer contacts. How can comparing that un-trustworthy number to other studies with different methodologies yield anything but more Fear, Uncertainty, and Doubt?
So, what did I miss? Why do so many business leaders want to compare their NPS other companies — does that tell them something that I’m not understanding?