KEVIN COLLERAN: There are many ways to measure progress in the first 18 months of a startup, from top line revenue and profits to number of orders or customer/user growth. Depending on the company’s line of business some of these will be more relevant than others. While all of these are extremely important to track, there’s another metric that is forgotten much too often – the customer Net Promoter Score. The Net Promoter Score, or NPS, is a simple way to measure customer satisfaction by frequently asking once easy question: “How likely is it that you would recommend [your company] to a friend or colleague?”
By using a scale of zero to 10 and keeping the question consistent and the responses simple, business owners can divide their customers into three categories – Promoters, Passives and Detractors. The final NPS score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
Founders should continuously track and benchmark their customer Net Promoter Score over time. No startup will have long term success if the NPS is struggling, so it’s an extremely important number to optimize. Many founders focus so much attention on revenue and profit growth that they forget all about what really matters – long-term customer satisfaction. Happy customers, especially in crowded markets with many other competitors, are crucial to building a successful company. There are plenty of ways to optimize the finances of a business in the near term to show quick growth, but if the NPS suffers as a result of these growth tactics, the long-term damage significantly outweighs the short term gain.
Many startups do not even think to measure customer satisfaction, specifically Net Promoter Score, until long into the company’s life. This is a tragic mistake. Many aspects of a business can be optimized and improved quickly but a consistently negative NPS can be impossible to recover from. It is never too early for a startup founder to obsess over customer satisfaction. Only happy customers can create long term successful businesses.
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