NPS Sucks

Net promoter score is terrible - it's become useless for SaaS. We discuss the problems with it, and how to fix it.

• (00:00) - Introduction
• (01:39) - The old framework: Net promoter score
• (04:47) - The problem with NPS
• (06:21) - It's self-correcting
• (07:29) - A metric that can be gamed nicely
• (09:35) - Promoter today, detractor tomorrow
• (10:15) - A honeypot for promoters
• (11:35) - Are the teams using it? And what is it needed for?
• (11:56) - OK, NPS sucks. Now what?
• (12:28) - If the focus is retention & satisfaction, listen here
• (24:13) - For word of mouth - listen here

Also mentioned in this episode:

• Earned Growth Rate from HBR
• NPS isn't a leading indicator of churn from Gainsight

PS: NPS was developed in the 90s by Bain & Co -- before SaaS really came around.

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:00:00] Toni: hey everyone, this is Toni Holbein. You are listening to the Revenue Formula. In today's episode, we are going to talk about why NPS is kind of a shitty metric to track
[00:00:11] and we are telling you what to do instead. Enjoy.
[00:00:14]
[00:00:19] Mikkel: All those buttons we need to push. Wow.
[00:00:23] Toni: Mikkel, how much
[00:00:23] time has it been Since,
[00:00:25] since we were here in the studio last
[00:00:28] Mikkel: 160 hours, 24 minutes and some seconds. And I know this to be a fact because I forgot to turn off my
[00:00:37] Toni: stopwatch. No, no, no, no, no. That's not what happened. What happened is that you set a countdown
[00:00:41] Mikkel: cause
[00:00:42] Toni: you just, you just couldn't wait.
[00:00:44] Mikkel: No, exactly. I was so excited.
[00:00:46] Toni: And then,
[00:00:47] Mikkel: how much time is
[00:00:47] Toni: during the weekend you like looked at this, it's a little bit, you know, some people have a Christmas calendar
[00:00:52] Mikkel: Yeah, yeah,
[00:00:52] Toni: yeah. yeah. You have just a countdown.
[00:00:54] Mikkel: No, that's true. And the thing is, I'm going on holiday. How will I function? I'm just gonna, you know, sit on the beach thinking about podcasting and be like, Aw,
[00:01:02] Toni: no, but you will, you will then try and get your motivation up by sneak peeking on your phone, seeing the counter, you know, rundown. It's like,
[00:01:10] Mikkel: When am I back, when am I back?
[00:01:11] Toni: wait for it.
[00:01:13] Mikkel: This is how committed we are. This is how committed we are to this show. But we also have a lot of fun while learning. I think that's the beauty of it.
[00:01:20] Toni: I don't have
[00:01:20] any fun yet. This is all just
[00:01:22] Mikkel: This
[00:01:22] is really the longest onboarding program I've ever had. When you think about it, I could, I could switch now from marketing to revenue operations if I wanted to. And I'd be a pro. I'd be a pro.
[00:01:31] Toni: Maybe This is what the, this podcast should be called.
[00:01:33] It's just the longest onboarding you'll ever
[00:01:39] Mikkel: No, exactly. But I mean, um, Yeah. And I think also what's important is to take stock as you onboard. How satisfied are you actually with the job and all that stuff, right? I'm nailing it. Those segues? Uh, we called it employee satisfaction and we used the ESAT points whenever, you know, we had to make, uh, A decision we knew would hurt a
[00:02:00] Toni: people. Literally call it e nps, by the way.
[00:02:02] Mikkel: Yeah, yeah. It's a thing. So how, how likely they are to recommend a job there. Cool. Um, but that's actually, uh, what we're gonna get in today. Uh, today we're gonna talk about nps. So net promoter score. There is a few problems with it, how it's being used, and, uh, fortunately enough, we're gonna get into some alternates, to fix it.
[00:02:22] That's it today. Yeah. And, um, So the thing is, I was obviously researching this, uh, as I like to do because I, it's onboarding, right? I need to learn stuff
[00:02:32] Toni: I see
[00:02:33] Mikkel: talk. Yeah. It's my homework. And um, one of the things, and also just what I've experienced myself is you usually have a dashboard in every conceivable room at a SaaS company, and then you have something that's focused on the customers and there's always NPS blown up.
[00:02:48] And then a lot of focus on, you know, the NPS score. It's so important. You know, we, uh, we think it has an influence on our ability to retain customers. That's just not true. That's not what you use it for.
[00:03:01] Toni: Yeah. I think we should, you know, going back a little bit in time here, uh, so who invented this thing?
[00:03:07] Obviously it's a big analyst house to sell reports, eBooks, and consulting hours. Uh, Gartner. I think it was Gartner.
[00:03:16] Mikkel: Yeah, I think so.
[00:03:17] Toni: Gartner invented this in the. I wanna say in the eighties or something like this. It's, it's pretty old actually. And, uh, yeah, they invented it to actually figure out what is the likelihood of, uh, word of mouth, right?
[00:03:31] Kind of the likelihood that some of your consumers, right. This is actually a consumer play. Some of your consumers are, you know, how likely are they to bring up, you know, the, the new toothpaste they just bought? In a conversation somewhere else, you'll be like, you know what? Toothpaste from that brand,
[00:03:49] Mikkel: Totally, totally recommend.
[00:03:51] But you know what's so funny? We live in this very innovative space of tech and SaaS and what do we do? We go back to the nineties and find a kickass framework to measure word of mouth. That's it.
[00:04:04] Toni: But also we haven't come up with anything better yet. So, you know, I was like, well, until we get to the solution, of course.
[00:04:09] But you know, this whole, measuring word of mouth digitally, I mean, it's like, I'm sorry. It's, um, uh, you know, I'm a big fan of all of those, um, uh,
[00:04:19] attribution software. Yeah. Uh, kind of guys. but that piece, they're all claiming they can kind of do it, but they they can't, they simply cannot.
[00:04:26] Mikkel: Yeah. But then you have the self-reported, which this kind of leans a bit into, right?
[00:04:30] The nps. But Yeah, so I mean, I also know we have a few stories around, um, basically gaming. NPS as a metric. Yeah. So there's, there's all kinds of, you know, it's, again, there's a way to define nps, but then there's also a way to execute it.
[00:04:47] Toni: So what I, what I like about nps, obviously it's kind of, it's a tangible number.
[00:04:52] We like
[00:04:53] Mikkel: Yeah, yeah.
[00:04:53] Toni: and that number gives you, uh, something good, something bad. Uh, you
[00:04:57] Mikkel: your age. Yeah, exactly.
[00:04:59] Toni: and, uh, but what's bad about it, like your age, is, uh, you can't really do anything about it. No, so it's very not really actionable. Um, you know, the result that comes out of it.
[00:05:09] obviously you, you see the. This number is bad. This number is good. Yeah. Um, and you roll this number up to the board and they're like, this is not good guys. You need to kind of make it better. Um, uh, but it's really unclear actually for the leadership team and even for the CS team, for the product team. What, what do we actually need to do in order to improve it? Yeah. Right. And then, you know, once we've done it, uh, can we then actually see NPS grow? and it's, it's, it's very fluffy. Those two things in between and, and again, many, many times there Seen as, as churn predictors or, you know, leading indicator to churn.
[00:05:47] It's not what it was invented for at all was word of mouth, you know, it is net promoter
[00:05:53] Mikkel: Yeah.
[00:05:53] Score,
[00:05:53] Toni: you know, promoting your, you know, product, not retaining your
[00:05:58] Mikkel: And I think just to underscore it, we're gonna put in a source for this episode. We don't want to get into the nitty gritty of that, but there's no data so far, at least to back the claim that NPS equals retention. Yeah. It's just, it doesn't exist.
[00:06:12] Sorry.
[00:06:12] Toni: Well, so just to maybe to phrase that a little bit differently, there is data. That backs that NPS and churn are not correlated.
[00:06:20] Mikkel: Mm-hmm. Yeah. True.
[00:06:21] Toni: Yeah. and, you know, Gainsight, Nick Mehta's, uh, companies, uh, basically kind of, you know, put this out and, and I think that's, that's pretty interesting.
[00:06:28] Right. And then, you know, there are some more theoretical things. Um, you know, at least the next one here that I really, that I really kind of don't like about it, it's two degrees self-correcting. Um, so if you, let's just say you measure the NPS of a cohort. It's like, Ooh, cohort.
[00:06:45] Mikkel: Yeah. Now it's
[00:06:46] Toni: now, that must be, that must be more scientific than just nps, right?
[00:06:51] So, but you know, if you measure the NPS of a cohort, what's gonna happen? Um, your NPS is gonna go up, which is, which by the way, it's a good thing. So the higher it is, the better it is. And the, the reason why it's gonna go up, whatever you do, is because the people, and there's a little bit of, you know, correlation maybe in here, but the people that don't like you, they will, they will just leave the cohort.
[00:07:13] Yeah. Yeah. You know, eventually they will leave and you will be stuck or left with, you know, some happy folks and you ask them how happy are you and, you know, how likely are you kind of to promote this thing? And they're gonna say it's gonna be great. Right. So that's why it's also, you know, self-correcting or, you know, you know, gets better over time.
[00:07:29] Right.
[00:07:29] And the, the one that, that I ran in, myself, Not that I came up with this, um, but it's, uh, you can game it really nicely.
[00:07:39] Mikkel: Mm-hmm.
[00:07:40] Toni: So, uh, for people that maybe don't know, every, every, um, so it's, it's a one to 10 kind of, scale. And if you select, I wanna say eight, nine, and 10, uh, it's positive if you, get a, I think it's six, seven.
[00:07:58] Mikkel: 8.
[00:07:59] Yeah. It's 6, 7, 8 is neutral. neutral.
[00:08:01] Toni: So nine and 10 is positive. And then, you know, one to five is negative. Yeah. So it's obviously leaning in one direction. Mm. Right. And, um, many people don't know this, uh, obviously, and, uh, many people that take that NPS also don't know this. And, when they say like, ah, how likely are you?
[00:08:18] I'm, you know, I kind of like this thing, but you know, maybe it's six out of 10. Yeah. Uh, means you, you're not net promoting anything. No. Uh, you, you know, in this score you can come up with a zero, which is fair by the way. It makes total sense. at least kind of in, in that, to that degree. The problem is though that, uh, one way of gaming it, I've seen that, you just color code the scale.
[00:08:40] Mikkel: Yeah, yeah, yeah, yeah.
[00:08:44] Toni: So you basically make everything up until six red Yeah. everything kind of up until, you know, eight is, um, is gray or something like that. Yeah. Or yellow or whatever. And then only nine and 10 is green. Yeah. So you end up with, you know, you could have asked the same questions that is like, uh, uh, do you, do you, do you like us?
[00:09:03] Are you neutral or, or do you, do you not like us? so basically kind of almost you, you create a c sta set right? Customer satisfaction out of it. Not a net net promoters score in that sense. and that's like, It's, it's, you know, this is not, this is not the way this is being, should be being
[00:09:18] Mikkel: used. No, no.
[00:09:19] I also received one, uh, at some point from my bank and the email, they sort of sent it out with an email, but the email they sent out, the subject line was tell us how great your experience was with the bank. So it was just already their bias towards like certain words. Yeah.
[00:09:35] I, I think the other, the other hilarious thing is actually, so.
[00:09:41] I'm gonna go on holiday with kids and uh, they could totally ask, would you recommend.
[00:09:45] Toni: you're gonna go on holiday now?
[00:09:46] Mikkel: sorry, sorry. But so they could totally ask, are you gonna recommend this hotel child-friendly hotel? I'm gonna go like, well, it kind of depends to, to you Toni. Sure. Because you have kids. But to Bart on the team, he doesn't have any kids.
[00:09:58] Like, no, I would definitely not recommend going there because it's gonna be mayhem. Right. And I think NPS also doesn't account for that fact that you can, you know, both be a detractor and a promoter at the same time.
[00:10:11] Toni: And another, another interesting way to game this whole system.
[00:10:15] Um, so people probably know this, you're on your iPhone and you get a popup like, Hey, how do you like this app? Yeah. You get like a, I don't know, one out of five or something like that. And um, obviously what people did then is, so the app developers, what they did is like, depending on what you then rated, then only they ask you, okay, do you wanna, do you wanna leave a comment on the app store?
[00:10:37] Yeah. You know, it makes sense as a tactic. Makes sense. The thing is people are doing this with their nps as well. It's like, do you like us? Yes. No. Yes. Oh, here's an nps. Yeah, no. Okay. Bye. You
[00:10:51] Mikkel: like a honey pot for bad.
[00:10:53] Toni: But it's, you know that that is just stuff where it's clear that you're just, You're just kidding yourself, basically.
[00:10:58] Yeah. Right. Um, and then, you know, once you have all of that bad behavior, you know, piled on top, by the way, one other one, you just stop sending the survey to people that rated you badly. It's like, nah. Oh five, no, we're not gonna include you anymore. I mean, there, there's so
[00:11:14] Mikkel: or you make it weighted right? It's like if you give, uh, one, then it's really bad.
[00:11:18] If you give a nine, then it's really good and no one is ever really gonna give a one or two. It's gonna be few.
[00:11:23] Toni: And, um, and all of that gaming stuff basically kind of led to, you know, NPS being kind of really difficult to even benchmark. Yeah. Right. Even, even on the benchmarking side, it's, it's starting to be like kind of useless because everyone is just tweaking it.
[00:11:35] Yeah.
[00:11:35] Um, and I think people are tweaking it because the teams themselves are actually not using it. Yeah. Because they ran into the same thing. It was like, ah, it's kind of not actionable. So what do they need it for? The investors. Yeah. Uh, so it's basically the board. And then, you know, when they, when they go on the, on the street to kind of, you know, fundraise I say like, Hey, our NPSs 50.
[00:11:54] Yeah. Um, and uh, yeah,
[00:11:56] Mikkel: I mean, we haven't even gotten into the whole, like the state of mind or seasonality or peak usage of your software impacting stability. And so there we could probably just do the entire episode talking about why it's a terrible thing. Yeah. But. Let's maybe shift into what do you do then?
[00:12:13] Right. Solutions. Yeah. So are so tough.
[00:12:15] Toni: Yeah. Um, yes. So I think the first thing is just to get clarity on what is it that you're actually trying to achieve. Is it that you wanna measure and or drive word of mouth?
[00:12:27] Mikkel: Mm-hmm.
[00:12:28] Toni: Or is it that you wanna measure and drive retention? Yeah. and as we've learned, those are two different things for that specific score.
[00:12:34] Right. and let's just kind of maybe dig into the first one. Uh, the retention and satisfaction, uh, of your customers. Yeah. Right. you know, there are probably like a, a couple of other things you could do is just, you know, uh, our, our best practice and depends a little bit on the size of your product.
[00:12:49] Actually, you know what it do actually doesn't even depend on how many customers you have and leaving and the size of ACV and stuff. The main important, the most important thing, uh, for your product managers, uh, or for maybe even revenue operations or for, you know, whoever is kind of working with this, talk to people.
[00:13:05] it's starting to be my, main advice for every single person on the planet that works in b2b, by the way. talk to people. Yeah, yeah. You know. And number one, kind of, what could you be talking about? Well, number one. Do an exit interview. Yeah, someone churn, someone cancels, whatever it is. Try and book a call. 10 minutes, five minutes. Make it super simple. Have you can have it unstructured. And this is say, Hey, tell me what's, you know, why, why do you not like this? Uh, or you can have it structured and say like, Hey, those are my five questions or my 10 questions I ask all the time. Uh, try and make an effort and don't just send a survey That's usually.
[00:13:44] Usually that doesn't really work. I mean, someone is like leaving you and is like,
[00:13:47] Mikkel: it's also difficult cuz you can't ask follow up questions sometimes for understanding and stuff like that. So.
[00:13:51] Toni: and I think that's almost the important pieces you wanna understand. Yeah. You really understand what's going on.
[00:13:56] And the reason why I'm saying it doesn't even matter if you sell a hundred k tickets or one K tickets. Jump on the phone and talk to them. Try and figure it out and they will, they
[00:14:08] have broken up with you anyway. They will be, Likely very candid with you. Yeah. They will let you know. Brutally honest.
[00:14:16] They will let you know why. Um, and especially, and it hurts a lot, but especially call up the ones that rage quit. You know? All caps. Yeah. Something like that. And they will tell you, um,
[00:14:28] And you know, in the end he will sympathize this up and be like, oh, this is our, you know, service team. It's like, Hey, I had this problem.
[00:14:35] I tried to find a button, blah. Um, reached out, got an answer back a week later. For which browser are you using? I mean, You know, and,
[00:14:45] And it might be kind of those things, right? and that's then the story. And then you can take that. Yeah, you can, you, you are literally gonna learn something here and then you can say like, okay, this happens all the time.
[00:14:55] Let's try and fix it. Right? And, uh, from each of those interviews, you're gonna learn something that, basically gonna crush all of those internal, you know, bs. It's like, oh, what should we do? We could, uh, maybe hire more service folks. We can maybe kind of build this feature. We can maybe do all of these things, but what should we do?
[00:15:14] We don't know. Yeah. Well, when you talk to them, it will be super crystal clear, uh, because you take that anecdote, you take that story, uh, and maybe even those stats around it, you will take them into the management meeting. It's like, Hey, What people are hating the most are those three things. Yeah. So guess what?
[00:15:30] Those should be the three things we are attacking. And what's even better about that is it's not necessarily that, you will come out and be like, oh, we need to hire more service folks. It could just be like, Hey, you know, we are, we are having, we are responding to slowly. Yes, maybe, you know, hiring service folks is the right thing.
[00:15:46] And it could also be. We ask too many stupid questions or we ask them to fill in this questionnaire to kind of get on the call and then we ask the same question anyway, because our systems are integrated. I mean, there might be so many different things that are at odds here and talking to people will give you a really nice understanding.
[00:16:04] It's this thing over here, this is where it's a breaking, and that's where you need to start and attack it.
[00:16:09] Mikkel: So I think there's two interesting I mentioned. One is the rage quitter. It's not about convincing them to, you know, reconcile the relationship. It's about understanding why they quit. Right. I think it's super important to make that clear that they will have to be two separate conversations if you wanna remedy their relationship to some degree, which is normal, right?
[00:16:26] Toni: Yeah. We're not talking about a, rescue squad. So in and, and telco subscriptions when you
[00:16:31] Mikkel: quit,
[00:16:32] Toni: You literally get a call from that telco. They're trying to kind of get you back and uh, and if you play this game really well, they'll give you like a crazy discount. By the way, not sure if anyone tried this, but they have a specific team with like infinite discounts.
[00:16:45] Yeah. To go out and retain people. This is not, this is not the tactic here. I mean, if
[00:16:50] Mikkel: yeah, yeah,
[00:16:50] Toni: what It
[00:16:51] turns into, good for you. But that's not, that's not the tactic here. Um,
[00:16:55] Mikkel: I think the other reflection was if you then start doing it and wanna distill that, those insights and learning onwards, I think is also super important to be clear on, hey, this person I'm gonna talk with was this.
[00:17:05] The core ICP that, you know, has a good retention rate and so forth. Just to have that nuance in there as well. Cool.
[00:17:12] Toni: Another one, you know, Talk to them when they are, uh, at the highest endorphin level possible. Kind of talk to them when they close win. Um, have a post, uh, you know, contract signature call with them, which is not the salesperson or someone else that was involved in this kind of a third party entering.
[00:17:29] And, um, and ask them why they're bought in the first place. Yeah. Um, and you know what, that will give you an hint also why people are quitting, uh, because maybe they're not actually achieving what they're bought in the first place. And obviously you don't wanna do it like this one customer quit because of, you know, we had this enter interview.
[00:17:46] You kind of, you wanna find it out in general. And it's gonna be awesome for your, um, messaging. It's gonna be awesome for your website. It's gonna be awesome for your sales stack. It's gonna be, you know, it's gonna be awesome for so many other things as well than just the, uh, you know, retention word of mouth side.
[00:18:01] It's really also, yeah, I hesitated on this one a little bit, but actually, you know, I had this conversation with. You know, Antonio sales rep and he really convinced me. Yeah. It's like, oh, hesitation. Okay, how can we remove that even, you know, by, by using it on the website to kind of, you know, kick those, uh, those objections already there.
[00:18:17] Yeah. Right. So can totally recommend that. And again, it doesn't matter if you have a hundred K ticket or 500 euro ticket, you just do it more randomly with a smaller tickets, kind of call these guys up, see what's, see what's going on. Then um, you know, maybe you take this one on the survey side.
[00:18:33] Mikkel: Yeah. So I mean in, um, in retail it's actually super normal to do surveys. Um, so they will, they will do a couple of things, right? They'll have the standard, you know, you post, there are three buttons when you leave the store, how happy, satisfied are you kind of with the experience, right? So
[00:18:48] Toni: the the literal airport thing?
[00:18:49] Mikkel: Yeah. So the airport thing, right. But they will also do, a couple of other things actually. So they will do, uh, mystery shoppers. So they will hire people to go and do certain things in the store to relay back what was the experience, right? Um, think about, uh, think about, for example, McDonald's, right?
[00:19:07] They will ask you if you order a menu, Hey, do you want the large, right? And if they don't do that, The sales reps, they're gonna, you know, lose out on revenue. So it's super important to them to maintain that level of standard. Right. But then they will also go out and do, uh, way deeper surveys with, you know, the, so if you're in a specific city, let's say Brooklyn or whatever, they'll go out to your immediate, you know, Tam or Sam, some, whatever your, your area.
[00:19:33] And start digging into behavior of where are you shopping and why, what do you think of this store? Why aren't you going there? Like, what's the, the reasoning behind it? there's really a lot of insights in, in that area as well. So this is not necessarily on the, you know, retention side. A lot of it is about the acquisition, which is really important.
[00:19:52] So it is, it is obviously different from, from the whole SaaS Schpiel. Yeah. Don't know if that fits into our episode though.
[00:19:58] Toni: I think we were flying until, um, mystery Shopper. No, after Misery Shopper actually, yeah. Put it anyway.
[00:20:04] Mikkel: we just cut it. I had a good one. I just forget. That's, that's what it is.
[00:20:07] Toni: yes. Um, and then, you know, lastly, obviously you can, uh, look at some, obviously some, some numbers, some data, like, you know, let's not forget about that. And that can be usage, it could be retention, it could be by cohort, by segment, and so forth. I mean, you can, it's endless stuff that you can look at.
[00:20:24] Yeah. Um, I think what, a good learning is from the whole PLG crowd is, think about your product also as a funnel. Yeah. Um, and they don't like it because it's a flywheel and you know, all of that wonderful stuff, but, Your product is just a fucking funnel. Yeah. Um, and, uh, uh, think about what people need to achieve in order to move through the steps down the funnel.
[00:20:46] Um, and uh, in your case it might be You know, onboarding completed obviously, and maybe implementation before. Uh, but it's also like, are they clicking the button often enough? Are they logging in on a weekly basis or is it just monthly? And, you know, when they log in, what do they do? And um, you know, figure out what this, and I think in PLG world is, uh, you know, the aha moment.
[00:21:08] Yeah. then they call it the eureka moment, which I don't understand actually anymore. So, you know, maybe forget about that. Uh, but then there's something they're called habit forming. Yeah. Uh, where then suddenly, um, this thing, that you're, the, the product that you're using is starting to become part of your.
[00:21:23] Daily, weekly, monthly, whatever, habit. Yeah. Um, and that then, becomes much harder to break afterwards. Right. Kind of undoing a habit is really difficult. Forming a habit is, uh, is, is really powerful. Um, so that's kind of how they're thinking about it. And if you kind of structure the, let just so, uh, the, the, the usage cycle
[00:21:43] Mikkel: Mm.
[00:21:43] Toni: you know, like a funnel, you will see how customers move through the funnel and then ideally hit this late stage of, Hey, they have formed a habit, they can't go anywhere. It's gonna be really difficult. and then lastly, obviously, you know, create some kind of, offboarding signals. Yeah. Um, so in for, uh, MailChimp, it was, download, the email list.
[00:22:08] That was their signal. Yeah.
[00:22:10] Mikkel: makes sense.
[00:22:11] Toni: You know, It's like, uhoh,
[00:22:14] Mikkel: not good. Yeah.
[00:22:15] Toni: You shouldn't be hitting this button. Yeah. Um, and uh, and the social media management company I worked at, we had kind of a, because all of the APIs were public and we obviously were pulling those in.
[00:22:25] Mikkel: Yeah.
[00:22:25] Toni: We could, we monitored all our customers, uh, postings.
[00:22:29] Yeah. Um, obviously because we were also posting, you know, the software was posting on their behalf. Um, and we monitored for, uh, postings being done by non-native apps or ourselves. So if, if Hootsuite suddenly popped up on one of our customers channels, like Red Flag, uh, we need to do something about, because then we knew they were in a trial, right?
[00:22:51] Yeah. Um, and so forth. Right. There might be a couple of other things. and that is kind of the, the very last stage of a funnel where you should just, you know, when they're moving into this Yeah. You need to figure out how to fix this.
[00:23:01] Mikkel: Yeah.
[00:23:02] I, I also know if you were on the classic sales led motion, one of the things that, and I don't think many people are actually doing it, but you buy a piece of software to have a specific impact.
[00:23:13] Right. Whether it's efficiency or something else doesn't really matter, but there's usually a very specific impact you wanna drive. And then actually having that and being able to follow up on a, on the customer success or experience side. Yeah. And actually track are we, are we actually delivering against that impact that the customer needed?
[00:23:31] Toni: Gainsight,
[00:23:32] they're obviously the CS thought leader. Um, and obviously, you know, whenever they're thought leading something, they're product building as well. Um, and um, one of the things that they actually have is, I forgot what it was, it's kind of something, probably success criteria, something like that's called, and there's always two or three Yeah.
[00:23:48] Mikkel: Yeah.
[00:23:49] Toni: Per customer that they want you to put in. So what does the customer want to achieve? Yeah. and then actually they, uh, check in with their customers on a regular basis. are you achieving, you know, those three top things, right? And if not, you know, then let's create a success plan. Yes. Um, of how we can get you to, to achieve these things, right?
[00:24:07] So, all kinds of very technical advice in this thing. Um, this is all on the retention side,
[00:24:12] Mikkel: by way.
[00:24:13] Toni: way. So since we are nps, and it's not about retention, it's really about word of mouth. Um, and you know, number one, you know, how, how can you get more word of mouth? Well, you know, make it super easy for people to be able to pitch you.
[00:24:25] Mikkel: Yeah.
[00:24:27] Like,
[00:24:29] Toni: you know, that's, that's, that's a good one. Yeah. Um, you know, teach them ideally on the website and so forth, it's almost like minimum viable positioning or something like that. Yeah. You know, make it easy for people to be able to understand what you do and then, you know, pitch it to someone else.
[00:24:42] Mikkel: I think Leah kind of said it when we talk with her, right. If, if I cannot pitch it, how can there be word of mouth? Yes. It's, it's that simple actually.
[00:24:49] Toni: Yes. Um, and then obviously, uh, whether it's in the product or somewhere else, Create ways to share easily, make it super easy for someone to share your stuff. And, and again, this is obviously then a little bit of a digital play because it's a button.
[00:25:07] And then, ah, now we can track it and put in the, email address here. You know, a lot of folks are doing incentives for. Uh, just showing up for a meeting
[00:25:16] Mikkel: Mm-hmm.
[00:25:17] Toni: Right.
[00:25:17] There's, oh, you know,
[00:25:18] $50 gift card and blah, blah, blah. You know what? Do the same thing for
[00:25:22] Mikkel: Mm.
[00:25:22] Toni: uh, or start with that instead, you know, it's probably better.
[00:25:25] Which then basically, Helps you to, you know, if you do a referral or three referrals, then you get, you know, something in return. Yeah. We actually did this with our, uh, revenue letter recently and it's Yeah. You know, working quite nicely actually.
[00:25:39] Mikkel: Yeah. We're
[00:25:39] Toni: Um, and you know, this, this is, those are ways how we can try and, basically push people to refer Yeah.
[00:25:46] Or nudge them rather, and, and provide a little bit of an incentive thing around it.
[00:25:51] Mikkel: But I think the cool thing, so if you, if we take the simple example of our, uh, revenue letter that we send out weekly, right?
[00:25:58] I think the cool thing is not just that we're acquiring. New subscribers. That's, that's great. Right? It's like 10, 15% of something, of the, the acquisition. But the cool thing is it's a strong signal. Someone was actually willing to recommend it and we can track it, which is the most important piece, right?
[00:26:13] Uh, and I think that's super powerful. Like we, so at home we're using HelloFresh, it's equivalent in US is Blue Apron and they're doing crazy referrals. They will literally give away, I think one or two weeks of food. Right. So they're just taking, literally eating the CAC, uh, that way by just, you know, great.
[00:26:33] By just giving it, giving away like that. So it's also a compelling offer and they can track it, right? They can literally track,
[00:26:38] Toni: No, but that's also, um, so, so obviously, you know, these referrals are for free, right?
[00:26:43] Yeah. Um, so you can. Either go in and check what you're paying per MQL.
[00:26:49] Mikkel: Mm-hmm.
[00:26:50] Toni: Check what you're paying per sql, check what you're paying per opportunity. Yeah. Check what you're paying per one, uh, customer to a degree. You can tap into those buckets and finance the referral. acquisition incentive off.
[00:27:04] Yeah. You say, okay, for us, you know, on LinkedIn it cost us a hundred dollars to get an MQL SQL, whatever. well that's kind of your budget now for, you know, driving referrals. and in that case it might even be better because, the selection, that targeting has been done by someone that already knows what you're doing and then referring to someone that they know really well.
[00:27:26] So, you know, that's, that's how you should potentially, be thinking about it instead.
[00:27:32] Mikkel: Yeah. Okay.
[00:27:34] Toni: Then one crazy last thing. Yeah. Because, you know, we have still like a couple of seconds here on the clock before you need to reset it for 160 hours. Um, it's uh, something that hbrs, so Harvard Business Reviews is calling earned growth rate.
[00:27:52] Obviously these guys are just coming up with like random stuff all the time. Um, and it really is basically in your net retention plus, new revenue that you got from referred. you know, refer referring sources, basically. Yeah. Through referrals. Yeah, I think that's the best way to say it. and I'm gonna dive into, you know, the, the way they calculated it, uh, funny thing is, we, uh, did this actually five or six years ago already.
[00:28:17] We called it, we weren't, we weren't as cool as, uh, as, uh, HBR here. They call it EGR, earned growth rate. Yeah, we just call it NRR plus. And the way that happened, by the way, is we started incentivizing the CSM team to do, you know, to hit the NRR target. And that's also one of the reasons why I would not say that people should be incentivizing, but they were basically kind of coming with like, Hey, we're doing all of these other things
[00:28:44] Mikkel: mm-hmm.
[00:28:44] Toni: I should be incentivized for all of that as well. Yeah. It's like, and you know, amongst other things, what they did really nicely and successfully. So they tracked people that, uh, switched their jobs. Yeah. Like their counterparts switch jobs to somewhere else, and then we're like, Hey, you know, do you wanna actually also buy it there? And we basically, we basically kind of then allowed them for, not for financial reasons, but for compensation reasons.
[00:29:10] To count that stuff into their net retention rate. Yeah. That they were comped on. So NRR Plus. and the same thing actually for referrals. So if they got us, you know, referrals coming out of this, when they asked someone, do you know someone, um, and money was coming out of this, they could kind of put this against their net retention target.
[00:29:26] So it was pretty powerful and it was extremely powerful because it was always like a, a full on deal that was closed. Right. They basically could. Reverse the churn. Yeah. that's kind of, uh, that's why they're really eager on doing it. Yeah. Um, obviously when you're reporting to the board, you can't call some of that stuff, uh, you know, net retention rate.
[00:29:44] Yeah. But now we can call it EGR. Yeah. So that's fantastic. Um, yeah, that's it.
[00:29:52] Mikkel: So,
[00:29:53] I mean, conclusion wise, right? There's two outcomes we discussed here. It's either retention, which you need to do separate of nps, or there's referrals where you can totally do nps, but there's also other things you can do.
[00:30:06] Toni: that's absolutely it.
[00:30:08] Mikkel.
[00:30:08] Mikkel: So Toni, by the way, I had some time to think
[00:30:13] Toni: Got it. And
[00:30:15] Mikkel: if I get Chris Walker, I need you to get Jacco Van Der Kooij winning by design. This, I I need you to get him. I would love, I would love to get him on
[00:30:26] Toni: this. Okay. Okay. Okay. Okay. If I get Jacco, you get , Hillary Clinton
[00:30:31] Mikkel: come on.
[00:30:32] Let's start there. Let's start there. Then we go. Then we go Clinton. Yeah, I'll see her on it.
[00:30:40] Toni: Or, you know, what? If, if she passes, Maybe Obama
[00:30:45] Mikkel: I don't think he has too much in his schedule. Anyway, I'll reach out to him.
[00:30:49] Toni: Okay. Uh, wonderful Mikkel.
[00:30:51] Mikkel: Thank you Toni.
[00:30:52] Toni: Thanks everyone.
[00:30:53] Bye-Bye.
[00:30:53] Mikkel: Bye.