NPS vs. CHS
Net Promoter Score (NPS) has been the undisputed king of customer satisfaction metrics over the past two decades. Garnering its pedigree thanks to its roots in a blue-chip management consulting company, it has a proven track record of success, thanks to countless effective implementations.
Now, in the age of the subscription economy, which includes SaaS, one would think that it would continue to be the golden age of NPS. However, cracks are emerging in NPS’ predominance. The new metric getting all the buzz, especially in SaaS, is the Customer Health Score (CHS).
What is CHS?
CHS is a compound metric derived from individual metrics such as:
- Product Usage
- Level of Customer Success compared to expectation
- Level of communication with Support
- Customer Satisfaction Score (including NPS)
The goal of CHS is to predict if a customer is going to churn or downgrade (also on the flipside, if a customer is likely to upsell or renew).
Implicit in the emergence of CHS is the feeling that NPS is not a comprehensive metric that can reflect customer churn. Let’s explore why that might be the case.
Perceived Shortcomings of NPS
Overall, many practitioners feel that NPS is a lagging indicator of customer churn, which inhibits timely action to save the customer from cancelling. They say NPS does not directly account for how much the customer is using the product, and how much customer is working with you to get more from the product. In addition, the following shortcomings are mentioned:
- An NPS Survey is Not Comprehensive – i.e. Not all customers take part in NPS surveys and have NPS scores.
- An NPS Score Depends on the Role of the Respondent – i.e. Executive vs. Manager vs. Associate. One needs one score that represents all the customer in total.
- NPS is Not Continuous – i.e. Not all customers have scores updated constantly over time to make them actionable.
At the same time, there are many advantages to this metric that are in favor of NPS, including:
- It is simple and elegant
- It is universal – Making it directly comparable across companies
- It has a proven track record – Thanks to over two decades of use in companies large and small.
– They’re only one-two questions, and calculating the score is easy
How to Make NPS More Relevant
While NPS has the inherent advantages listed above, it needs to evolve with the times to stay relevant. To do that in the age of SaaS, here are some ideas to consider:
- Find a way to make NPS represent the customer as a whole, rather than a role within a large customer account. One idea to consider is averaging scores across different roles.
- Make the survey continuous across time, so that it shows the growth or degeneration of customer sentiment
- Make the survey comprehensive – i.e. make sure all customers take part
Services like AskNicely are definitely part of the solution to keep NPS the leader of customer satisfaction metrics because they address the proposed solutions listed above to keep NPS stay ahead of the curve. And really, who says NPS and CHS can’t coexist, without NPS having to yield ground to CHS?