The premise behind the ubiquitous “BI Dashboard” is to show the high powered executive the critical key performance indicators to help her keep the company on track. They certainly look impressive, but they’re only useful if the KPIs actually matter.
The best way to determine the success of something is to measure it. If I’m running a race, the time I take to finish the course can be used to compare my ability to win a race by comparing with previous records. I can measure my progress by comparing with my own records.
If you develop a product, how can we measure the success? Is it profit? Is it revenue? Is it a vibe? Is it positive customer feedback? Whatever it is being able to measure it easily and often will ensure we keep on course. Having a 100% accurate measure for product success is probably not possible. There has to be a trade-off between ease of measurement and accuracy. What we’re looking for here is of course, effectiveness.
NPS or Net Promoter Score is regarded by many as a powerful and effective measure. The score is a simple number that can be used for comparison, but more importantly for measuring trends.
Here’s how it works: You simply ask customers how likely they would be to recommend your product on a scale of 0-10. Responders are then split into 3 groups according to score:
- 9-10 – These are your fans or “promoters’
- 7-8 – Therese are lukewarm or neutral
- 0-6 – These are your “detractors”, people who obviously have some sort of problem with your product and are probably warning their friends and others against your product.
To calculate the NPS, take the percentage of promoters and subtract the percentage of detractors.
A positive or higher score indicates you have more people cheering for you than against you, a negative score means it’s time for some serious reflection.
Here are the scores of a few well known companies:
As far as revenue and profit goes, the most powerful advocates of your product are your customers. If they promote your excellent product, your (significant) sales and marketing costs will be reduced.
Critics of the approach say that it’s too simplistic. It does however put a focus on the product and the overall customer experience. These factors are crucial to the success of products, particularly websites or software products.
Good and Bad Revenue
Another benefit of NPS is the concept of good revenue and bad revenue. Sometimes there are opportunities to enhance a product, perhaps to provide a custom modification for a “special” customer.
Sometimes our special customers can make a major impact on our short-term revenue (particularly when your organisation is small). Making them happy is important. The impact of making custom modifications that may not enhance the overall product may be serious.
The added complexity may degrade or impair our product in some way, which will in turn reduce overall customer satisfaction. Sometimes the impact of these changes can only be determined over a long period of time and by then it may be too late.
What you can do with your NPS
Because of it’s simplicity, NPS can be a powerful tool for delivering products with happy users. NPS also be compared across products, companies and even across industries, but the best use, like most kpis is to measure your progress. In making decisions about your product, make sure you consider impact on your NPS and you can be sure you’ll be moving in the right direction.
- Net Promoter Score Operational Tool – http://www.startuplessonslearned.com/2008/11/net-promoter-score-operational-tool-to.html– Great practical overview of calculation with implementation recommendations
- The Ultimate Question: Driving Good Profits and True Growth– Where NPS Comes From
- Inspired: How To Create Products Customers Love– How NPS fits in with Product Management
- Picture Credit – Lee Heywood , SFalco