How to Improve Customer Experience through NPS Segmentation
In a recent piece published on this site, I posited that while Net Promoter Score (NPS) is a key component to measure growth, it is not the be all end all. NPS should be used in concert with other indicators to determine a complete picture of growth and improve upon it.
I also discussed that in order to improve NPS, segmenting customers into promoter, passive, and detractor classes wasn’t enough, but a deep dive into each class was a better approach.
To review, at it’s most basic level, NPS places customers into three classifications based on their response to the question, “On a scale of 0-10, how likely are you to recommend us to a friend or colleague?” With the following segments:
- Promoters (9-10): Highly likely to recommend your company
- Passives (7-8): Less likely to recommend
- Detractors (0-6): Least likely to recommend
While this is a start, it’s not the end of the story.
Unfortunately, many companies segment customers at this level without digging deeper and leave it at that. This is the wrong approach. For starters, it generates inaccuracies about your organization’s health.
For instance, take Detractors. It is a mistake to treat the customer who gave you a 0 the same as the one who gave you a 6. Even though they are both detractors, they are at opposite ends of the the detractor spectrum – one could be a detractor today and passive or promoter tomorrow, and the other may be a candidate for churn.
Another example is Promoters. Does the fact that a customer gave you a 9 or 10 immediately imply that they are candidates for your Advocacy program? Probably not.
Or how about Passives? Are there meaningful differences between a 7 and an 8?
Deeper insights can be found by asking respondents the follow-up question: Why did you select the score that you did?
Looking at the main follow-up question and others that dive deeper still will help you go beyond the number and into the mindset of the respondent to really focus on the reasons your customers responded the way they did.
You’ll be motivated to figure out the whys, whats, whens, wheres, whos and hows, which will help you improve your overall NPS and customer experience.
Digging deeper will help you understand the NPS classes better and to develop micro-segments from each main class. It will also help you determine the feasibility of upgrading customers between the main classes and to create strategies to best go about this.
For instance, not all promoters, passives and detractors are created equal. Going further, it’s important to note that just because a detractor may have a lower “likelihood to recommend” rating, it does not mean that they would trash the brand. Also, companies can use these better micro-segments to target each group with specific marketing, sales and customer experience initiatives more effectively to improve overall customer loyalty.
Using NPS segmentation can actually improve the customer experience, according to Omer Minkara, Vice President and Principal Analyst, at Aberdeen Group, who notes:
“It can point to potential problem areas or strengths. For example, knowing customers using a specific service have a higher NPS than customers of a similar service might help determine what makes the former group unique to replicate success in that category with other services if and when applicable. This might help improve measures such as CLV (Customer Lifetime Value).”
Minkara agrees that using NPS as the only measure of customer experience is not recommended. “It should be complemented with other metrics that relate to the business. This will provide insight into what is working for the business and what needs to be adjusted to achieve desired outcomes” he adds.
In an article discussing these thoughts, Minkara goes on to say that taking NPS at face value might make a company assume that promoters are actually satisfied and will promote the brand, and detractors will spread negative word-of-mouth.
But is this really the case?
Based on the research Minkara conducted for the article, he noted that 71% of customers surveyed who identify themselves as promoters don’t actually promote the business.
Equally shocking was that 24% of the respondents didn’t know or didn’t measure the annual change in customer satisfaction results.
Two key insights of the research are:
- Better and deeper segmentation than the three NPS buckets must occur to get an accurate picture.
- If customers want to improve satisfaction, they can’t just measure NPS once, they need to measure regularly so they know the trends and what’s behind them so they can implement changes to produce desired outcomes.
So, the question is, what do we need to do to better segment customers using NPS data?
First, after you segment customers into the three main classes, segment customers within each class.
Some ways to segment customers by each class include:
- Answers provided to follow up questions
- Company size – for instance, startup, small-to-medium size businesses, or enterprise
- Sector the business operates in (financial, tech, retail, etc.)
- Pricing plan
- Revenue amount
- Account age
- Customer persona
- Profile info such as role within the company
- Point the customer is in in the customer lifecycle
- Different channels the customer uses
- User activity
- Frequency of service calls
- Customer feedback
It is important to be careful in making assumptions that all promoters, passives and detractors are the same. Digging deeper to determine what makes up each class will help you to prioritize segments and develop better strategies for each value segment.
There are a myriad of ways to segment based on NPS. Let your NPS data help guide you.
Second, determine the most valuable segments in each class.
There is a lot of information out there that says you should try to convert your detractors to promoters. While the sentiment is great, the act is often easier said than done. First, it takes gradual steps to move between classes and secondly, it isn’t realistic that all detractors will become passives and then promoters.
Prioritizing segments will help you determine your value customer segments. And these are the segments you want to focus on. The customers in these segments are the ones that you want to encourage feedback and engagement from, address issues, and help to improve their experience.
Once you prioritize segments, determine marketing, sales and service strategies to improve loyalty and overall customer experience.
Prioritizing your segments will help you determine your value customers and what they need/want to improve their experience. These insights will help you determine the sales, marketing and service strategies and activities that will improve engagement, help them be more successful and improve overall customer loyalty and experience.
Finally, ensure you are measuring NPS and other indicators regularly.
Companies should regularly take the NPS pulse of their customers as well as measuring other indicators. NPS and other metric analyses should never be done in a vacuum.
There is a right time to ask the “likelihood” and any follow up questions and knowing the right frequency of the ask. This gives the customer the opportunity to provide valuable feedback.
Developing relationships throughout the NPS process is key. Once you ask the question and its follow-ups, continue to build the relationship with the customer. Focus on building the relationship and turning the customer into an engaged one. Engaged customers will provide you with valuable insights you can take action on.
Each time you analyze NPS data will require you to audit and make changes to your customer segments. Doing this on a regular basis will help you improve engagement, and analyze trends and segments to gain even deeper actionable insights so that you can fine-tune strategies to deliver even more value and a better experience to your customers. This process may even help you do some preventative work of moving would-be passives and detractors to promoters in addition to upgrading detractors and passives, as well as turning promoters into true brand advocates.
Customer Experience drives corporate growth. NPS is one of the tools at your disposal. Digging deeper to find out what your NPS data really means and how you can leverage actionable insights from the data to help your customers will help you drive engagement, value and an overall better customer experience.
As healthy companies continue to grow it becomes harder to do so at the same rate through new logo acquisition. Companies spend an inordinate amount of effort on labor-intensive adoption and reactive, renewal processes with little or no regard to creating a disciplined expansion strategy. It’s time to change your strategy. It’s time for Customer Success 2.0.
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