The anatomy of passives and detractors in NPS, why you need to call your churning customers, the only 2 reasons customers churn
If you’re not familiar with Net Promoter Score, we recommend this read to get you up to speed before you dive into this post.
A few years back at a previous job, my (decidedly quirky) CEO showed up at the office one morning with a huge, heavy box. Without even taking off his coat, he eagerly drug it into the area where the Implementation, Account Management and Product teams sat and triumphantly flung it open, revealing a book with a blazing red cover and an all-caps title: “THE ULTIMATE QUESTION.” “We’re going to learn about Net Promoter Score!” he declared and starting doling out copies frisbee-style to the group.
Ever the Type-A student, I read “The Ultimate Question” cover-to-cover and by the end I’ll admit I was pretty excited about NPS. We didn’t really know what our customers thought about our products and services and once we had better insights, the possibilities seemed endless. On the inside cover I excitedly made a list of things we could with all the customer feedback we were going to get. I even proactively volunteered to be part of the team that would be responsible for launching our first survey. And, yes, I know:
After a few weeks of preparing, we finally sent out our first round of surveys and I anxiously refreshed our responses view every 10 seconds. Each new promoter that came in made me feel amazing…but each new passive or detractor was like a tiny cut. And by the end of the survey cycle, it pretty much felt like this:
So we definitely had work to – but I was really struggling to wrap my head around the fact that more customers weren’t promoters. I talked to customers all the time, I knew our product helped them every day! Yet so many customers – even a few I knew personally and believed were very happy – did not score us a 9 or a 10. So what gave?
Like for many others, conducting an NPS survey for the first time was a lesson for me in the extreme importance of seemingly subtle distinctions; while an 8 is almost a 9, in NPS they are decidedly not the same. In short, at that time I didn’t truly understand what it meant to be or have a passive or detractor customer, despite all my prepping.
This week we’re going to look more closely at the anatomy of passive and detractor customers with the help of two excellent posts by Promoter.io. We highly encourage you to read both posts (on passives and on detractors) but here are the basics to get you started.
- Passives: Have you ever wondered why the NPS formula (% of Promoters – % of Detractors) doesn’t include passives in the equation? As author Dana Severson explains, it’s simply because passives don’t move the needle: “Having more promoters than detractors is an indicator of growth. Having more detractors than promoters is an indicator of decline. Having more passives really doesn’t tell you much of anything – maybe other than you’re not doing enough.” Now just because passives don’t move the needle doesn’t mean that they don’t (or can’t) make a difference. But it’s up to you whether the difference they do make is good or bad. In order for you to properly work with and leverage your passive customers, there are some things you should be aware of going in:
- Passive customers are more likely to churn because they are open to alternatives. While not as urgent as detractors, Severson says you must remember this: “Indifference is commonly tied to loyalty (or lack thereof). [Passives] have no problem switching to a different brand if the price or offering is even just slightly better. Being passive (or passively “satisfied”) means that it just doesn’t matter to them.”
- Passive customers are not loyal to your brand. As Severson interestingly points out, “Many detractors are passionate about a brand (perhaps negatively, but that can change); passives often just don’t care.” To earn their loyalty, you need to engage in meaningful discussion and show them that you’re more than just the product or service that they purchased – you’re an experience that’s not easily matched.
- Passive customer are price sensitive. Severson issues an important warning about passives: “Passives generally view competitive products as one of the same, seeing little to no discernible difference in features or benefits. That leaves only one variable for them make decisions on – price.” It’s important to find out if they’re truly only concerned with price, as this will dictate how you engage them.
- Dectractors: It is an unfortunate but very real fact that we are more likely to remember negative experiences than positive ones. But what’s more, we’re more likely to tell others about our negative experiences. According to a survey of over 3,200 random consumers, 75% of them had indicated that they be likely to share a negative experience with their friends and colleagues, while only 42% of them said they’d recommend a product or service that they enjoyed. This is the toxicity of a detractor and the reason why it’s important to focus on your them first when you’re responding to feedback. When working with your detractors, there are a few things you should know:
- Detractors are likely to churn very soon. While this may seem pretty obvious, Severson cautions, “Remember that a detractor is anyone that scores you up to 6 on the NPS scale. While the 0’s, 1’s and even 2’s may seem like obvious unhappy customers with one foot out the door, the less obvious are the ones that score you a 5 and a 6.” And the “very soon” part of this is critical too; you do not have time to waste with detractors. You must respond to them as quickly as possible and address their concerns.
- Detractors speak louder than promoters. Severson puts it pretty bluntly: “What it comes down to is that negative experiences can drastically outweigh the impact that positive experiences can have. That means that for every detractor you have, you need several promoters to advocate for the brand. This is one of the primary reasons why any positive NPS score (anything over 0) is considered a “Good” score by NPS standards. Based on the calculation, it simply means that you have more promoters than you have detractors.” And unfortunately the news gets worse. Psychology Today compiled the results of a few different studies in regards to how humans receive bad information versus good and the studies showed that we care more about the threat of bad things than we do about the prospect of good things. Simply put, one bad experience shared by a detractor is capable of far outweighing one good experience shared by a promoter.
- Over passives, detractors are more likely to be your next promoters. Yup, you read that right! As surprising as that may sound, generally speaking your strongest detractors are not all that dissimilar from your strongest promoters. As Severson explains, “They are both vocal and passionate consumers of your product. The only difference being that, for detractors, there is something missing from their experience.” Detractors want what you have to offer and they desperately want it to match their needs; your job is try to make that happen. If you are able, they are likely your next biggest advocate.
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Customer Success Around the Web
- Why you need to call your churning customers right now: It’s hard to confront failure. When your customer cancels, the last thing you want to do is talk to them. There is real fear in phoning someone up, knowing they are going to criticize you. It’s easy to concentrate on what you do well and leave any terrifying doubts alone. But that same reason why it’s so hard to talk to your canceled customer is the reason why you absolutely must start calling them: you need to learn the truth about your service and you need to know now. This post offers sage advice on how to start these churned customer conversations and also gives useful tips on extracting valuable insights from these difficult discussions. An important read for any team that has avoided talking to their lost customers.
- The only 2 reasons customers churn (and only 1 of them is okay): Churn is the antithesis of growth. When you lose a customer, in order to grow by one customer, you have to first replace that customer you lost, and then add a new customer. And when a customer leaves, they take the revenue they were paying you with them (often to a competitor!); but they also take other things, like negative sentiment, your employee’s morale, ammunition for the competition to use against you in future deals, and much more. What’s even worse than having churn is not knowing why your customers churned. But whatever reason your customer gives you for why they churned or whatever the details uncovered by your internal tracking (or ideally both), it all fits into one of two categories. This post breaks down these two categories and dives into why only one of them is an even slightly acceptable reason for churn. A blunt but necessary read for teams who are still struggling to pin down their reasons for churn.
- The importance of measuring “almost churn”: Churn is a paramount topic in SaaS; smart SaaS companies are obsessed with carefully measuring churn and target decreasing it as one of their core metrics. But maybe even more important is measuring Almost Churn. Why? Well, for every customer that churns there’s at least another one just like them that almost would churn. Maybe they stay out of laziness or maybe they stay because it’s already in the budget. Either way, these at risk customers are certainly only behaviorally loyal – not attitudinally loyal. One simple way to think about it: whatever your churn rate is, define an equal percent of your customers as At Risk, or Almost Churn. This post offers five ways you can then proactively work with these Almost Churn customers to ensure they don’t become Full Churn customers. A quick but thoughtful read.
Word to the Wise
This week’s wisdom comes from three Customer Success experts during a recent Customer Success Meetup that focused on a favorite CS topic: Customer Health Scores. Each of the experts shared their techniques for constructing and measuring this all-important metric; Loni Brown from Entelo, Jeff Johnson from Splunk, and Jon Turri from Raise.me offered several tips and insights to setting up a Customer Health Score program and the intricacies involved. We recommend reading through the entire session overview but Johnson and Turri’s thoughts on the importance of an alerting system based on your Customer Health Score really caught our attention:
“Once you’ve chosen the metrics for your score, you’ll want to add alerts to your system that notify you if and when something happens. If anything should be a fire alarm, you must build it into your logic for alerts. Really think about what those fire alarms are.” – Jeff Johnson
“The CHS Scorecard won’t give you everything, you have to have an escalation process in place. For example, if your NPS for a particular account goes from promoter to detractor you’ll want to have a CSM address the account. This means the overall scorecard could be showing a positive account when there is a problem, so it’s still important to look at every metric on a client’s card to make sure it is in good standing.” – Jon Turri