Every time I meet a founder and we discuss growth levers, new customer acquisition takes up the bulk of the time. Seldom do founders say that I plan to meet 20-30% of my yearly growth goals via retention of existing customers. And even if there are some startups who account for this lever, most of them struggle to identify what it will take to make it happen (barring giving more discounts!).
Having worked with 30+ startups on this topic, I can confidently say that “measuring your customer NPS” is the starting point of your journey. I’m sure your startup must have an NPS framework in place too. As simple as it may seem, more than 95% of startups don’t know how to effectively work with NPS and end up turning it into a vanity metric.
At xto10x, we’ve turned hundreds of our founder conversations on customer experience into four main points. These questions will act as your guardrails on a steady path to growth:
- Do you measure transactional NPS, relationship NPS, or both?
An online pharmacy company that we worked with sent their NPS survey only post successful deliveries. While the CSAT looked great at 4.4, they could never really explain poor repeat rates. After instituting the relationship NPS survey (-25) measuring customer experience at every step of the journey (including failed transactions) and studying detractors, they realized that the majority of them had at least 1 order which went unfulfilled leading to poor CX. This insight could never be derived from their transactional NPS surveys done only on successful orders.
As you must have understood, relationship NPS attempts to capture a 360 ̊ health of your customer relationship. It is highly correlated with business metrics like repeat rate, referral and ratings. However, 80% of startups in the ecosystem just measure transactional NPS.
- Do you quantify what matters to your customers through Key Driver analysis (KDA)!
A D2C company collected NPS survey just after delivery and hence was mostly hearing delivery-related issues. KDA revealed the most important drivers to be quality & pricing where the company was not focusing at all.
Almost in all cases, the top 3 drivers tend to influence more than 60% of the NPS. Most startups(~90%) form a narrative based on anecdotes and miss a quantitative understanding of what matters most to customers.
- Do you understand the monetary value of your NPS?
A growth stage startup that we worked with realized that ~20% potential GMV was hidden in improving customer experience. And this was made possible by moving NPS from their current 25 to a reasonable 45. This led to an increase in the percentage share of Promoters who transacted ~2.5x more than Detractors. The entire exercise has allowed them to attribute a monetary impact to the increase in NPS. Worryingly, less than ~5% of startups truly understand the monetary value of NPS.
One of the most common refraining thoughts that I hear from business leaders is, “Why should I spend money when I don’t understand how the experience will improve”. Sure we can improve our delivery speeds, enhance quality checks, and even give a freebie with every product. However, how much money I should spend and what I will get in return is unknown.
- Do you measure relative NPS w.r.t to your competitors?
An investment platform knew that many of their users toggled across competing platforms, but never understood where they stood in terms of perception among their users and why. When they actually measured this, they found a shocking number of “loyal” users on the borderline of churn! (Delta of 10 NPS points on average w.r.t competition)
Knowing where you stand with respect to competition is a great way to set targets and rally your organization.
I hope these four points were of help to you. If you’re interested in further talking about this feel free to reach out to Pawan Raghuveer, GM- Customer Experience at xto10x. He and his team have successfully implemented this framework at some of the most loved startups in the ecosystem such as Wakefit, Housing/ Proptiger, Licious, Cashify, and CoinDCX, amongst others.