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Product Management

Three product leaders to learn from at #mtpcon inside Pendomonium

Todd Olson is CEO and Co-Founder of Pendo, a product experience platform that helps product managers deliver successful products. Before Pendo, Todd served as VP of Products at Rally Software Development which he led through its public offering. Todd joined Rally via its acquisition of 6th Sense, a company he founded and served as President and CTO.

Todd Olson

<p>It’s been nearly 15 years since Bain’s Fred Reichheld first introduced the Net Promoter System (NPS), a simple calculation of customers’ willingness to recommend a brand. By asking a single question, “How likely are you to recommend us to a friend?”, NPS distilled the complex topic of customer satisfaction into a single number. And a decade and a half later, the majority of organizations use this score to benchmark how they’re doing against this goal.</p>
<p>NPS has taken hold because it is a simple, easily comparable metric. But while there’s a lot of good in NPS when it&#8217;s used in isolation, it can become something of a vanity metric. NPS is superficial and its universal compatibility can be used as a badge of pride or shame, as the case may be.</p>
<p>Worse, it isn’t particularly actionable. So you know that you’re low (or below industry average). What do you do with that information? How do you fix it? As it turns out, the score by itself isn’t all that illuminating, but as I always tell people, I’d certainly rather know than not know.</p>
<p>Until recently, I believe NPS wasn’t all that familiar to product managers. But as customer loyalty wanes with disappearing software switching costs, product managers are under pressure to deliver continuous value and delight. Accordingly, it appears NPS has emerged as an important KPI for product management. In fact, a recent survey from my company Pendo suggests that nearly 60% of product managers now use NPS as a critical metric for understanding how users feel about their products.</p>
<p>If NPS is becoming an important metric for product managers, it’s not always applied to yield its fullest potential. Here are four ways to take NPS to the next level in your product organization:</p>
<h3>1. Ask the Question in Context</h3>
<p>One of the limitations of most NPS surveys is sample size and distribution. The average <a href="https://expandedramblings.com/index.php/email-statistics/">knowledge worker receives 121 emails per day</a> and spends dozens of hours a week in meetings. It should come as no surprise that email is not the most effective channel to reach your audience, let alone to solicit feedback. In fact, in a somewhat ironic twist, you risk lowering your NPS score simply through the act of sending yet another unsolicited email.</p>
<p>A better approach is to ask the question in context, directly inside your product.</p>
<p>Take TrendKite, as an example. By executing in-app surveys, its response rates went from 10% to 20%. Or Henry Schein, an $11 billion dental supplies distributor, which saw a <a href="https://blog.pendo.io/2017/05/19/building-customer-loyalty-nps/">10-fold increase in survey responses</a> by asking the questions in-app. The in-app survey also allowed these companies to see the responses in real time. Surveying customers at the highest point of engagement and in real time allowed them to share and learn from the data through interaction, versus merely reading a one-dimensional report.</p>
<h3>2. Combine Quantitative and Qualitative</h3>
<p>The truth is, for most organizations, NPS is not much of an operational indicator. It may answer how your customers feel, but not why they feel that way. And without an understanding of precisely what is driving positive or negative sentiment, there are no specific actions you can take. As a result, you end up fooling yourself into believing you have more visibility into and control over the health of your customer experience than you actually do.</p>
<p>That’s why the best product managers are taking the best of NPS &#8211; simplicity, universality and comparability &#8211; and combining it with behavioral, transactional and other operational data sources to get to the all-important <span style="font-style: italic;">why</span>.</p>
<p>By measuring what users are doing in their applications and understanding their sentiment, product managers are better equipped to determine which aspects of the product are creating or destroying customer value and which features are creating delight or frustration.</p>
<p>This understanding can also translate into significant revenue growth. In a recent survey of nearly 200 executives and product managers, we found that organizations who use in-app feedback along with in-depth product analytics reported 109% higher annual product revenue than those who didn’t.</p>
<h3>3. Segment Your Score</h3>
<p>A primary reason why the Net Promoter Score has limited insight is that it is too broad and all-encompassing. Combining quantitative data with the score certainly helps to illuminate the behaviors behind the sentiment. Another strategy is to break down the score by specific segments.  Of course, the specific segmentations will depends on your business. Users have a variety of attributes that can lead to better insights: role, geolocation, tenure (how long they’ve used your product), and language are just a few.</p>
<p>For example, learning that French-speaking users are 50% less likely to recommend your product is an interesting and potentially actionable insight. B2B product companies may also segment by account, industry, size, revenue and other elements that bring to life the dynamics behind positive and negative sentiment within your user base, and, more to the point, the actions you can take to head off potential churn.</p>
<h3>4. Close the Loop</h3>
<p>In addition to providing a benchmark for user sentiment, NPS also offers an opportunity to engage with your customers. If they’ve had a great experience with your product, a positive NPS score creates an opportunity to find out why. If the product didn’t meet their expectations, NPS will alert you to issues that may need to be resolved. Multiple touchpoints in the customer lifecycle gives your team the feedback necessary to continuously iterate and refine your product.</p>
<p>But let’s say you’ve implemented all of the above, and now you have 1,000 NPS responses. Follow up is critical. Put a strategy in place to collect feedback on a regular basis. As importantly, be sure that strategy includes provisions for follow up. You may start by following up with detractors, especially those who have bought your product. Then, set a goal to engage with at least 10 users per week. Simply listening and responding to their feedback will improve NPS. You’ll also want to engage your promoters. These are your references and advocates in waiting. But you should also engage your neutrals (or, passives, as they’re called in NPS parlance). Think of these users as low hanging fruit. Converting passives to promoters is often the easiest way to give your score a boost.</p>
<p>Above all, remember that your customers took the time to respond to your survey question. Be sure you acknowledge it and do the same in kind.</p>
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