The Secret to Keeping Customers Happy for 20 Years – Lesson From President at SurveyMonkey (Video + Transcript)

At SaaStr Annual 2018, Tom Hale, President of SurveyMonkey, talked about SurveyMonkey’s success in customer satisfaction. He talks about NPS, how to understand it and utilize the data from your NPS to improve your product(s) and customer happiness.

Also, don’t miss out on discounted prices for SaaStr Annual 2019 tickets.

Transcript

Tom Hale, President of SurveyMonkey:

Everybody. I had a choice between sitting in chairs without someone else or sitting behind this really, really important TV talk show host desk. I’m not going to interview anybody, but I do have some content for you guys. We’ll try and keep it light and brisk and moving quickly. I will hang out a little bit afterwards if people want to talk some.

Today I’m going to talk about NPS, and I’ll explain what it is if you don’t know, and how important it is for SaaS businesses at three stages of development, because I’ve been through all three, and I’ve used NPS differently. The first stage is kind of the startup. I’m going to spend the least amount of time there, because I think most people understand that validating your product and getting customer feedback is how you succeed at a startup. But we’re going to talk about scaling and then business model transition, so those are going to be kind of the topics.

I have experience using NPS as a management tool at companies that have been B2B, B2C, consumer, prosumer, and now at SurveyMonkey in a combined B2B and BCC freemium model. In each case I’ve used NPS as a tool to really drive customer centricity and to make really important decisions, like what to build or where to invest or how do we transform our company, how do you drive growth? I think it all starts a little bit with being curious, which I think we can all acknowledge that being curious is good. It’s an unalloyed good, and it makes business sense, and asking questions to discover insights, the why, is actually really important to disrupt any industry.

Companies that have been founded, they’ve been built up, mostly because they ended up asking the right questions and sort of cottoning on something that was really important. You can see some stats up here about why everyone agrees that curiosity is a great business asset. In fact, curiosity about customers, who it turns out end up paying your salary or driving your growth, is sort of like the obvious most important thing for you to focus on. Especially as the pace of change and the amount of competition is increasing, you just gotta be really good at this.

This seems obvious. I’m just going to look at you guys and see if I’m seeing nodding heads. Is it obvious that you should be curious about your customers? Okay, yes, right? We’re all here. We’re like the leading edge of the software SaaS industry, right here in this room today, and you know what? It is not obvious to the bulk of America. We recently conducted a survey, this is within the last four or five months, asking how many businesses really, really believe that customer centricity was really important, and it was about one in three. So if you’re a customer of those companies, I’m really sorry for you, because that’s just so obvious to me that you should have a real … you should be curious about your customers, and NPS is one of the ways that you do it.

But for a SaaS business, wow, it’s even more important. Why? Well, if you’re a startup, you need to know who your customer is and why they stay with you. If you’re scaling your business, you need to know what’s driving your retention or, obviously, the lack of retention, and customer interest and NPS are a great way to understand that. And if you’re transitioning your business, maybe from one product to multiple products or a business model transition, you need to manage that risk, and I’ll tell you some stories about that.

Anyway, NPS is a critical metric. First off, we’ll talk about what NPS is, but this is, and if you don’t know, the most widely used metric in the business world for measuring customer satisfaction. A couple years ago, it used to be like, well, we have CSAT, we have NPS, we have other ways of asking the question. Maybe this has been said before, but I think NPS won. It’s actually won, and there’s a lot of reasons, but I’m going to highlight three. One, the question is framed in a way to cover the entire experience, end-to-end customer experience, E-to-E. It’s not just features or functionality, but it actually surfaces the opportunities in your sales experience or your marketing experience or your service experience. Maybe your site isn’t stable. That’ll show up in your NPS, and you’ll be able to figure out what’s affecting your business. So that’s end-to-end customer experience.

Two, it’s actually across every industry. In fact, in every industry the NPS leader tends to outgrow the competitors by a factor of two. You know, this is a good thing. I think we should outgrow your competition by a factor of two. Promoters, and we’ll talk about what NPS means in a second, but promoters provide three to eight times the lifetime value of detractors, because why? Well, they cost less, they stay longer, they retain, and they refer friends. This is why NPS is good for your business.

The third thing is that with about two-thirds of the Fortune 1000 using NPS methodology as a way to measure customer happiness, there’s a benchmark of data, so you can know, are you doing well? Are you doing great? Are you doing poorly? You will actually have a metric that you can measure and understand how you’re performing. In fact, all advertisements aside, SurveyMonkey has the biggest cache of NPS data in the world, with the best benchmarks.

Now, if any of you were at Dreamforce, you probably saw Benioff interview Ginni Rommety, CEO of IBM, and said, “How do you drive growth at scale, IBM, enormous business?” And she said, “Net Promoter Score.” So if that’s not evidence enough for why you should care, these are some reasons why. Let me give you an example. This is a personal experience. A company had just been acquired, and we had a great Net Promoter Score program. We knew exactly what were the delighters for our customers. We knew what frustrated them. We had recommendations about what we should do. We tried to get buy-in in our organization, both the acquiring organization and the existing organization, to get priority behind these things. And what happened? Any guesses?

Audience: Nothing.

Nothing. I heard it over there. Nothing happened. Why? Because what we prioritized was anything that drove growth, and we would say, “Oh, this drives growth, and this would be good for customers, and the NPS data would tell us that, but we’re going to do the stuff that drives growth.” Our new executive team wanted the ROI and financial upside more than they wanted customer happiness. So what did we do? Well, for the first time in this company’s history, we married the NPS data with the financial data. We were able to look at three things that transformed our organization’s commitment to investing in the customer experience. One, promoters renewed at twice the rate of detractors. We had this, we had the correlation. We had all the renewal data, and we had all the NPS data, and we bound them together, and we said, “Look at this. This cohort of people, otherwise known as promoters, renew twice the rate of detractors.”

This was interesting: promoters demanded half the discount when they talked to our sales accounts. And promoters, obviously, bought more products for us. We were a multi-product company. These things seem kind of obvious, but they weren’t measurable up until this moment. Suddenly we could go to our executive leadership and say, “Hey, look, if we lift NPS by 10 points, it’s worth $10 million.” And then we could stand up against a growth investment and see that this was something we needed to put down. If there’s one takeaway I want you guys to have, it’s this, is that if you can figure out how to get the quantification, the financial quantification of customer happiness, one, you have a better chance of getting that stuff done, and two, you have a really good chance of driving growth, because those two things tend to align.

Let me give you another example. This is a company I was most recently at, and we were doing a big business model transition. It was a subscription-based business, and it was going to a two-sided transaction marketplace. This was a big transition. We had $500 million of revenue in subscriptions, and we were going to turn it into a billion dollars of transaction revenue, but there was a sort of a magical point in between those two points, which was choppy seas. And we were a public company, so holy cow, this was high stakes. We could totally blow it here.

And so what did we do? Well, this is an example of using NPS, not just to drive growth but to minimize risk. What we did is, we looked at the NPS of our customers and measured it as we were making this four-quarter transition between subscription and transaction, and were able to look and say, what’s our tolerance level for risk here, in terms of degradation in our NPS? Now, this is kind of an interesting use case.

I actually haven’t run across a lot of people using NPS this way, but it was really, really powerful, because we were taking some risky moves, and the pace of those risky moves, if we moved faster, it was good for the company. If we moved too fast, it could be catastrophic for the company. If we moved too slow, we weren’t being competitive, but if we moved too fast, wow, our customers might abandon us. So we used NPS to help us manage it, and it was really, really a powerful thing. That’s a really interesting use case of kind of a early warning system. The world moves fast. NPS, it matters.

Okay, so what is NPS, you guys? Who in this room uses NPS in their business, show of hands? Looks like about a third. Maybe you guys are the two-thirds that didn’t actually say you were customer-focused in our survey, I don’t know. Interesting. Here’s what we know. NPS is really great, because it helps you predict where churn is. If you have detractors, it’s really, helps you identify who’s going to churn. Advocacy really helps drive … this is would you recommend this product or service? It’s a good predictor of customer growth. And purchasing questions were the predictor of RPU. This all makes sense. We all know who the NPS leaders are. Does anybody? Shout out some names, NPS leader.

Audience: Apple.

Apple, oh my God. NPS in the ’70s, crushing it. Premium price point, too, really interesting. High price, high NPS. Who else?

Audience: USAA.

USAA, absolutely. Tremendous customer service operation. Netflix. Amazon, right? Absolutely driven by customer. Who are some laggards? We don’t have to name names, but let’s call out industries.

Audience: Airlines.

Airlines. United. Sorry, oh I didn’t say that out loud, did I? Who else?

Audience: Cable companies.

Cable companies. Yeah, you guys know all this stuff. For those of you who don’t know, how do you calculate the NPS? This is pretty straightforward. You basically ask a single question: how likely are you to recommend your product, service, whatever to a friend or colleague? And the customer responds with a score between zero and 10. It is usually asked either in a survey or online form. Very few people ask this on the phone, but some people do. There’s a second question, which is usually open-ended, but sometimes there’s actually a rating question, like how would you rate us on the quality of our support experience? How would you rate us on the quality of our documentation? How would you rate us? And those things could correlate with NPS, and they become what are called the drivers, open-ended or driver questions.

You calculate the score by taking the 9s and the 10s, you ignore the 7s, the 8s, you subtract the number of 6s through zeros. Net Promoter Score, promoters 9s and 10s, detractors zeros through 6, the percentage is the net. Pretty straightforward. If you don’t know that, I’m surprised you’re here. Maybe it’s the wrong … the other room’s down there, you can get to that one.

Okay, so once you’ve got that, this is basically something, kind of basics of NPS that most everybody should know. What I’m going to give you is a little bit of my point of view on what I think are maybe the most important parts to be thoughtful about. The first one is to be really thoughtful about how you calculate NPS and then how you think about it, how you collect it. There’s two considerations I think are really important. One is, should it be RNPS, Relational NPS, or TNPS, Transactional NPS? What’s the difference? Relational NPS, generally conducted like once every six months or once every year, you’re asking a broad base of customers and prospects. You’re trying to determine, hey, there’s a bunch of customers in different states. They might be early, they might be long. You’re trying to get, what’s our overall relationship with our customers?

Transactional NPS, you ask right after a transaction. Hey, thanks for this awesome support experience. Please give us your, would you recommend this service experience to a friend or colleague? Rate us on zero to 10. Transactional NPS, relational NPS. Some say relational NPS is better for B2B SaaS. Some people say Transactional NPS is better for e-commerce sites. I say phooey, both are good, so I think it’s a false dichotomy. I think you should ask both. At SurveyMonkey, we do both, and we ask it in various spots along the customer life cycle. We ask it in a relational way probably once every six months, increasingly now, one a quarter. We ask it a transactional way after purchase, after a service experience, after an upgrade, after an attrit, and we collect that data and we can analyze it. So it’s really important to know. I think you should do both.

And you should be really clear about who you’re asking, because hey, if you’re an enterprise SaaS business, and you have the buyer, and that’s different from the user, and that’s different from the administrator, geez, you want to make sure you keep those scores separate so you can understand the dynamics of the Net Promoter with each one of those. So be thoughtful about the who.

It’s also really important to be thoughtful about where you ask it. Quick quiz: what do you think is higher, the average NPS for the same product at the same life cycle in Brazil or the same product, same life cycle in England? Brazil, uniformly across hundreds of thousands of NPS questions that we have asked, Brazil is about 25% higher. And I hate to say it, if anybody’s from the UK, apologies, about 10% lower. So you have to have that context. Not all NPS scores are the same. There are differences by geography, differences by role, by personality. You have to be thoughtful about that.

You have to be thoughtful about the cadence. Who responds to 100% of the NPS questions that they get asked? I saw one person right there, that’s really funny. You raised your hand, good for you. Thank you. No, you have to be really thoughtful. You know, you can get to survey fatigue if you over-ask. You gotta be careful. How frequently should you be analyzing your data? Well, you should probably be analyzing, I think, really once a month. Not actually the case. Most companies don’t do it, but it’s really important at the pace of the businesses that you guys are in. They need to move quickly. You guys need to be looking at this data quickly.

All right, last thing, NPS is longitudinal, which is just a fancy word which means you’re looking at the trend over time. It’s important to have benchmarks. How are you doing against your competition? How are you doing against your industry? But it’s actually more important about the trend. Are you going down, are you going up? That means it’s really important that you collect the data consistently. What does this mean? It means that once you set up an NPS methodology, you probably shouldn’t change it, so be thoughtful about it before you set it up. Okay, great, that’s tip number one.

Moving on, tip number two. Who loves taking surveys? Right. I mean, it turns out, actually we do it all the time. I mean, many people probably came here in an Uber, and at the end of an Uber, there’s kind of a survey, rate your drive. This is something that actually is part of our culture now. It’s part of our culture to provide feedback, but I think no one wants to take a 40-question survey, and some people are willing to give you 30 to 45 seconds of their time to give you a rating, particularly if you didn’t use the really, really strong pine-scented air freshener in your car. These are things that our culture really needs to understand, that you gotta be careful with the experience of the respondent. It’s pretty important to recognize what level of investment your customer’s willing to give you and to calibrate that.

If you’re Uber, it’s about 30 seconds, and maybe 10% of the time. If you just spent a million dollars on our enterprise software product, I’m going to guess you’re going to give us a little bit more. Maybe we can ask you 20 questions or something like that, and we could probably ask that pretty frequently. So calibrate that level of investment.

If you’re thinking about it, quick guess: what percentage of survey responses come from mobile devices in the US today? Any guess?

Audience: 70. 80.

80%. Obviously, a mobile software company right there. Anybody else?

It’s about 38%, so man in the front row, give him a cigar. 38%, but the thing that’s important about that is, over the past 12 months that’s gone up by about seven points. Now, outside the US, what do you think the percentage is?

Audience: Higher.

Yeah, it’s amazing. It’s about 75%, and in Japan it’s close to 88%, for us anyway. That’s our data. Thinking about that, the mobile survey experience, really critical to get right and really critical to recognize that you have even less time and less attention on a mobile device. You probably have the 30 to 45 seconds that the Uber app is going to give you, so be very careful.

All right, this is important. Why? Because the classical NPS question is, “Rate us on a scale of 1 to 10, would you be likely to recommend us to a friend or colleague? Give us a zero to 10. Why?” Open text. How do people feel about open text on mobile devices? They don’t, is the answer. What you do is you get less data there, so this is where the driver questions, which you know, their nice little mobile sliders work really well. So think hard about how you set this up.

All right, third advanced tip: analysis. Find the so whats and the now whats. Again, about a third of you said you track NPS today. We do it today. It’s on our wiki. It’s a daily thing. We talk about it. It’s an OKR. Anybody know what an OKR is? An objective key result. It’s a company strategy for us. NPS is one of the metrics, one of the five things that we track as a company. It’s really important to look at that number and break it down by customer segment. You want to break it down, obviously, by the promoters, because their feedback is going to be different from the detractors. You gotta do that. You gotta break it down by geography. You might want to break it down by account. Which accounts have high NPS? Which accounts have low NPS?

Who uses Gainsight in this room, by the way? Just a couple. If you guys are interested in doing account-based NPS, it’s a fantastic solution, recommend it well. If you are going to be using an open form field for your NPS, make sure you have a really good text analysis tool, because you’re going to try and do basically analysis of what people are thinking, the why of your score. Why was this a 10, and why was this a zero? By using those open text answers, you need a good tool that’s going to surface something. It can’t just be a word cloud. It has to be more sophisticated.

And that’s what’s going to give you the insights, the so whats, the so whats, but that is like table stakes, because if you don’t have the now whats, meaning what are you going to do about it, what are you going to do to improve that customer experience, you’re not doing it right. What are you recommending that you do differently? And then the third thing, of course, is the financial benefit. Go back to that sort of point I want you guys to take away, is you need to be able to tie a point lift in NPS to some increasing growth, retention, lower cost of acquisition, and that’s key.

You drive that analysis, you say, this is the insight, that’s the so what, this is what we’re going to do about it, and by the way, we should have some data about what’s more important, so we’ll do that first, we’ll do something else later. That’s the now whats, and then a financial quantification. That’s how you do it. How do you quantify? What’s the value of a retained customer? This is easy. In our business, the value of a retained customer is about 420 bucks, so we know exactly if we retain a customer what it’s worth to us.

Or what’s the cost of having to reacquire or acquire a customer through a non-organic channel? We know what our cost of acquisition is. I’m sure you guys do too. If you can do that in an organic way, because someone said, “Hey, how did you do that?” Oh, I did it with SurveyMonkey or whatever. You will get a lower cost of customer acquisition. We are very fortunate. About 20% of our customers come to us through paid channels, 80% through unpaid channels, free channels, organic channels. That is a result of us having, among other things, an NPS in the 50s. Works out well. All right. If you can’t quantify this, you will fail in your NPS efforts, so it’s really important.

And then the last thing is, once you’ve got that, you have to go cross-functionally. One of the biggest mistakes I’ve seen people make is that their NPS becomes, “That’s the NPS crew over there. Let them deal with it. Yeah, they’re tracking this, they’re in charge of it.” And no one listens. You’ve gotta get your partners, you gotta get a cross-functional buy-in. We do it tops down. Hey, we have five goals. NPS is one of them. It’s everyone’s job. Figure it out. Okay? Last thing is to take action. I’m going to talk a little bit about some of the tips and lessons on that, and then I’m going to wrap it up real quick.

Okay, lessons learned. We talked about the value of a thoughtful data collection strategy, having a good survey design. We talked about driving a connection between your NPS and financial scores. We know that. Mostly for SaaS companies, turns out renewal rate, really important. So what do you do? Here’s a great strategy. Turns out, if you want to have a high NPS, over-deliver for your customers and then don’t monetize heavily. Turns out that’s a great strategy, and by the way, it’s not a bad strategy for entering a market as well. It’s called disruption. It’s what most people do. But it is really powerful to think about pricing and monetization through the lens of customer centricity, because in some sense what you’re really saying is, how can we get the right ratio of monetization to customer promotion? That’s an important one.

Two, crush it on customer service. USAA was called out as an NPS winner. If you would go above and beyond in customer service, I guarantee your NPS will be higher than your competitor who does not. Three, make NPS central to your customer success motion. At SurveyMonkey, we look at each account and have an NPS score by each account, by product, so we can know, wow, this account is doing well with that product, but not with this product. Let’s sic some customer success resources on them to make sure that we get the NPS back up. There’s lots of tools here. Most of them are integrated with Salesforce. That’s really the tool that you use here. It’s great for driving Transactional NPS.

Little things. A business that we own called Wufoo, in its early days, they used to … Everyone says it’s important for you to say thank you when someone gives you an NPS score. Thank you for rating me, thanks for your feedback, I’m sorry that we sucked on this, thank you very much. You send a note that says thank you, right? You gave me some feedback, I say thank you. Great. These guys would write a hand-written note, and they would put it in something called the US Postal Service. I don’t know if you’ve heard of this. It’s amazing. You can fold up a piece of paper with some writing on it, or maybe it’s just a card. You put a thing on it, it’s called a stamp. You put it in the mail, and someone gets it. And if it doesn’t blow their mind, I don’t know what will. These guys created fanatical loyalty, because they had personal letters from the developer saying thank you. Amazing. Love this. Hard to scale, but a really, really powerful kind of early company example.

Get back to your detractors. Someone says, “Hey, you know what, Tom? I tried to use your product the other day, and it was a complete diSaaSter.” And you know what I do? I pick up the phone. I go into our customer database, I find out who that person is, I pick up the phone. I call them, I say, “Hey, I just wanted to let you know. I’m the president of the company, I just wanted to let you know, I really heard what you said, and we’re on it.” The thing is, is that maybe that customer buys again, maybe that customer doesn’t, but you know what that customer does do? Tells everybody that they to that holy crap, somebody at this company that could be a nameless, faceless person is actually a human being and contacted me. Again, can’t scale it. The way I did it is, I just did like 10 calls on Thursdays between 7 a.m. and 10 a.m., and I just pounded through the most important 10 that I could get through. Had a good time doing it, learned a bunch each time.

All right, moving on. Keep it simple. Simplicity matters in your products, enough said. Apple, there’s your example. Have a differentiated product or service. Turns out Tesla’s a huge winner in the NPS sweepstakes. They’ve got great luxury brands, tech lean forward, electronic car leader, very differentiated product. Their NPS is … does anybody know?

Audience: 97.

Yes, oh my God, off the charts. Why? Well, because you know what? They have really nailed the differentiation, and they go to the customers who really care about that differentiation. Great. Categorize the feedback, make sure you get that feedback to your key account managers. Popularize your NPS. Broadcast it within your organization. Make sure that everybody sees it. Even better, make it a KPI or in some cases a bonus accelerator, and take action. Tag users with cases, resolve the case, send an email to every one of those affected customers.

Who does that today? In Salesforce, there’s a customer comes in, it’s a customer issue. NPS score gets recorded, data gets recorded against Salesforce, and then when you close the issue, they get a notification that says, “Thank you very much. Your issue’s been closed.” Who does that, show of hands? You guys ought to look into doing that. It’s pretty easy to do. It’s not a huge, difficult thing to execute in Salesforce, or maybe between Salesforce and Jira, or between Salesforce and an NPS system. It’s pretty straightforward.

Let’s see, what should you watch out for? Crappy communications. If you don’t talk about NPS, no one’s going to care about it, so be on your game when you’re telling your employees how important NPS is. Two, if it’s too manual, no one will do it and no one will care. Automate it. Three, work hard to get that buy-in, and four, this is the most important thing, get that financial tie-in. All right, wrapping it up.

All right, so this industry, by the way, is a pretty good size industry. There are lots of businesses that make their living off of selling NPS-related products or services to companies who have learned to care about this. It’s a big opportunity. Two-thirds of companies don’t do this today, let’s go get them. But the fact is, you need automation. You need software to manage this, and it’s a process that if you automate it, you will automate customer satisfaction and customer experience surveys. You’ll be able to engage with that feedback at scale. You’ll be able to keep track of it. You’ll be able to look at it on an account or by-customer basis. You’ll reduce the time. You should tie it in with your CRM system, for sure.

You should categorize and segment all this feedback, so that it’s tagged. Use software to do that. Scan the responses. Put them into buckets. Bring the themes. Talk to your product guys about the themes, your product gals about the themes. And then when you do that, start to have an email touch on the backend of it. I mentioned the one case where, hey, we resolved the issue, automatically send the email. You can see that. We saw that previous company. When we implemented that, we got a three-point lift in NPS in the space of about a month, so it actually really works. And this is what we call people-powered data. This is taking a data-driven, automated approach to a people problem, which is hey, how do you feel about my company? And you gotta do it in an automatic way.

And that, my friends, is it for today. Thank you guys for listening. That’s my Twitter handle. I’m also thale@surveymonkey.com, if you have questions. Then I’ll sit off to the side here, if you guys want to talk live for a couple minutes. Thank you very much. Appreciate it.

Published on October 9, 2018

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