As a corollary to our recent blog post on the importance of referral marketing, we decided to delve deeper into NPS (Net Promoter Score). NPS is a measure of how likely a customer is to recommend your company – arguably the most important KPI to measure when looking to optimise your referral channel. Therefore, where better to start than reading “The Ultimate Question 2.0” by Fred Reichheld, the inventor of the metric, and Rob Markey?
The book is grounded in the author’s experiences at leading management consultancy firm, Bain & Co., where they worked with, and studied some of the world’s most successful companies to learn how to improve customer loyalty. We view this is as vital to scale-up businesses who are building sustainable, long term companies.
The authors demonstrate business growth through sustainable “good profits” is derived from reliably delivering incredible customer experience that is worthy of that loyalty. They show how to use the Golden Rule – treating others as you’d want to be treated – and thrive in a customer-driven world through profitable customer relationships.
The book is filled with several important takeaways, however some of our key conclusions include:
- NPS works due to its simplicity. Never overcomplicate it
- NPS is only useful if it drives action within your business – monitoring feedback into key processes and integrating it into decision priorities to create closed-loop learning is imperative
- NPS is not a short-term fix but should drive long-term, cultural change
- NPS is built on two equal pillars: economical and inspirational – it requires “buy-in” from the CFO as well as the CEO
- NPS is relative – there is no generic score to aim for as it’s dependent upon multiple factors like industry, geography, demographics, etc.
NPS is by no means an exact science. There are several others in the space that hold contrarian views to those championed in the book, and as such, it must be read in context. However, we still feel that “The Ultimate Question 2.0” is a must-read for operators rethinking their company’s view on customer loyalty and is an area that we focus on during our diligence of potential investment opportunities.
About the author
Jens joined Frog in 2012 and became a Partner in 2016. Active across all Frog’s investment themes, he has a particular focus on investment opportunities in German-speaking Europe and BeNeLux.