Net Promoter Score℠ and the Subscription Economy®

The term “Subscription Economy®” (as coined by our friends at Zuora) refers to a business model that is dependent on your customers making repeat purchases. Loyal, happy, high value customers.

In this business model, the cost of customer acquisition is offset by those repeat purchases until – ideally – the customer stays around long enough to become profitable.

Imagine your customer base as falling into three buckets:

  • Customers who leave before they are profitable to you (net-loss customers)
  • Customers who stay long enough to be profitable (break-even customers)
  • Customers who stay AND who cause others to purchase your product too (hyper-profitable customers)

With so much revenue at stake, it’s vital to know which customer is which. And, it’s vital to know what drives customers into those buckets.

Net Promoter Score℠ to measure each customer’s mindset and engage them appropriately

Taking stock of each customer relationship and where they fall among the 3 buckets requires a combination of “what they say” and “what they do”.

We’ve written about measuring “what they do” – as in product usage. It’s also important to measure your customers’ mindsets, i.e. “what they say”. This is where Net Promoter Scores (NPS®) come in.

Consider the fact that customers’ mindsets are never fixed. There’s anecdotal evidence to suggest that overcoming an unhappy customer with an excellent recovery experience can often build loyalty. And at the same time, previously loyal customers that are neglected can become unhappy in time.

So, making continuous measurements of NPS scores is important. It allows for timely, targeted engagement on the basis of a customer’s current mindset.

Net Promoter Score to identify the drivers of outcomes like retention, churn and referrals.

Net Promoter isn’t just about scoring each customer’s health. The composition of proponents, passives and detractors and how they change over time will help you confirm key trends in customer base health. The qualitative comments they provide on their NPS survey responses can also reveal great clues into underlying drivers for churn risk and renewal likelihood.

Finally, NPS gets even more powerful when combined with other customer data to perform segmentation analysis. For example, ask yourself if your customers are equally happy across:

  • Geographies
  • Industries
  • Tiers
  • Sales channels
  • Product lines
  • Lifecycle stages

In all likelihood, there are “hot spot” segments living in these dimensions where NPS scores are especially high or low. This, coupled with analysis on qualitative response comments, can help pinpoint systemic issues that can be fixed.

“Subscription Economy”® is the registered trademark of Zuora, Inc.

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