Recently someone posed a question to me about what a high Net Promoter (NPS) would tell us about a customer’s intention to renew. In the software-as-a-service (SaaS) business, the answer is “some.” Unfortunately, what customers say is sometimes very different from what they do. Here’s what I mean.
Customer says – we like you!
AND stays – champions. Everyone’s favorite scenario. In it, customers say you are great and then back it up by purchasing your products and services. I classify these as “champions.” They are true advocates of your brand. What to do. Hang on to them.
BUT goes – liars (not really, but the term does create a certain amount of controversy, right?). “Liars” are a problem because you get lip service that everything is fine but then you get a bad surprise when they leave. If only you knew. In my experience, these people aren’t actually liars. What has happened is that they can not articulate/defend the value of your product (either on its own merits or when compared to other competitive products). What to do. This scenario (high NPS but decreasing spending) can sometimes be resolved to good effect, but only if your team understands the value from the customer’s point of view. If it’s low, you can sometimes help them create a stronger internal business case.
Customer says – we hate you!
BUT stays – hostages. They spend with you but don’t like your company. If they could, they’d leave. If you take a short-term view, you might think this is fine. “We get their money, who cares if they like us?” But this limited view hides damage being done to your brand as negative word of mouth tells the market to avoid your company. What to do. This type of customer is a tough call and my least favorite scenario. Should you try to improve their satisfaction, so they become advocates? Or would your time be better spent helping liars become champions? It depends and I don’t have a hard and fast rule.
AND goes – defectors. Defectors don’t like your products, have emotionally already stopped buying from you and are on to your competition. What to do. Don’t despair. Their “loss” may not be a bad thing, for example if they want something your product doesn’t do, and you don’t plan to do. (More here on hiring the right customers.)
The pivot point is that only through an ongoing customer conversation about the value they receive RELATIVE to the value from other products or initiatives will provide a sense of whether your renewal is likely. Take the NPS numbers with a healthy grain of salt.
If you’re still puzzling over this topic listen as this 1980s punk rock song explains the difficulties.