ShoreTel’s Key Metric: NPS

ShoreTel’s Key Metric: NPS

By Dave Michels February 5, 2013 3 Comments
Dave Michels
ShoreTel’s Key Metric: NPS by Dave Michels

ShoreTel was one of the few UC firms to grow market share in 2012. How they did it is no doubt a long, complex discussion. However, one of its key tools, Net Promoter Score (NPS), deserves some recognition. ShoreTel recently announced an NPS of 63, up from 50 in 2012. NPS scores above 50 are indicative of “World Class companies.” NPS as a tool is embraced across a wide variety of firms, though not all publish their results.

NPS is a simple, yet powerful concept. It was popularized in the mid-2000s after the publication of “The Ultimate Question: How Net Promoter Companies Thrive in a Customer Driven World,” by Fred Reichheld. It involves polling customers a single key question: “How likely is it that you would recommend ‘company/brand’ to a friend or colleague?” Customers respond with a figure between 0-10, with 10 being the high score.

The results get grouped into three categories: Promoters, Passives, and Detractors. Promoters are loyal enthusiasts and respond with a 9 or 10. Passives are considered unenthusiastic, but satisfied with responses of 7-8. Detractors are unhappy, potentially damaging customers with responses between 0-6. To calculate a company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors. Net Promoter scores indicate customer loyalty and satisfaction. A NPS in the 70s or higher is considered quite high, and some firms (and industries) score very low. A negative score, which is common, indicates more Detractors than Promoters.



Source:NetPromoter.com

Behind NPS is research that showed those who promote a business or brand to friends or colleagues represent a 23 percent premium over average “satisfied” customers in terms of wallet share, profitability, revenue, and relationship growth. Detractors are worth 13 percent less than average, and in most cases actually cost money. A Bain study showed a Dell Promoter generated $328 and a Detractor cost Dell $57. The promoter effect is now even further amplified by social media.

Promoters are great customers, they spend more, generate more, are less price sensitive, increase spending faster, and the customers they refer tend to become promoters too. So the deceptively simple task of creating more promoters is the recipe to growth and profitability. By segmenting customer satisfaction, NPS enables measurement of evangelical customers. High NPS scores are consistent with strong commitment toward customer satisfaction, typically driven by the top along with efforts to align employees and products with customer requirements throughout the organization. In other words, a framework and culture that collects, evaluates, and acts on customer feedback. At ShoreTel, for example, compensation across the firm is tied to NPS.

"We believe that our high customer satisfaction is a competitive advantage so we are obsessive about providing an outstanding solution backed by great customer support,” said Kevin Gavin, ShoreTel CMO. “We use NPS to measure our customer satisfaction and we're very happy that our NPS score is in the World Class range."

It isn’t just classic ShoreTel, either. M5, now known as ShoreTel Sky, also adopted NPS as a customer loyalty measure back in 2008. It was cited as one of the characteristics that led to ShoreTel acquiring M5 in 2012. ShoreTel Sky has extremely low customer churn and higher average revenue per user - at least compared against other public measures. ShoreTel Sky has its own NPS value of 49. The score is third party validated, and publicly displayed on its website.

Net Promoter Scores are a particularly powerful concept for UC because traditional product comparisons are so difficult. A customer that implements solution A will never know if it was better than Solution B. Testimonials are also difficult because each customer has unique requirements and values. However, gauging customer loyalty reveals if the solution effectively met and even exceeded expectations as well as a vendor’s ability to resolve problems if they occurred. It is too bad that more UC vendor NPS scores are not easily viewable for comparison.

NPS is used across multiple industries for growing, expanding, and benchmarking businesses and industries. ShoreTel believes its score of 63 is industry leading. Some Net Promoter results are published in Satmetrix Net Promoter industry benchmarks. Current NPS star performers include:

  • USAA Banking, 83
  • Amazon.com, 76
  • Trader Joe’s, 73
  • Costco, 71

According to Satmetrix, companies with the most efficient growth engines operate with an NPS of 50-80. Many firms, and some entire industries, have negative Net Promoter Scores, which means they are regularly creating more Detractors than Promoters. “These low scores explain why so many companies can’t deliver profitable, sustainable growth.”

NPS is an impressive gauge for loyalty for any business or industry. The results can be exciting or terrifying, but an excellent and reasonably efficient measure of success.  

 

3 Responses to "ShoreTel’s Key Metric: NPS" - Add Yours

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anne rogers 2/6/2013 5:04:14 AM

Interesting idea. I wonder what percentage of customers need to be surveyed to consider this a true and valid method - and indeed, whether that was limited to direct end users, indirect end users, or whether it included channel partners as well (a channel partner will always be a promoter after all!).

The most interesting one for me would be to compare direct and indirect end users. It would give an insight into how much the company's culture and service has an impact, as compared to the strength of the product itself (as true a test as it can be, anyway - one can't guarantee that their customer service levels will be obvious/visible through the channel partner).
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Bernard Gutnick 2/13/2013 7:46:48 PM

Dave,
Thanks for the excellent article. I've always believe the concept of NPS is more meaningful than just a basic score. When I use Yelp, (which happens to be a ShoreTel customer..), I tend to read the positive and negative to get a more balanced view.
We actually survey EVERY customer on a regular basis via independent data gathering. It includes all partners in the total, but we do have measures down to the individual resellers - almost 1,000 of them. And there are financial incentives for excellent ratings - which is so cool to see them rewarded for.

Hope to see you at enterprise connect!!
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terri thomas 2/20/2013 5:45:49 PM

ShoreTel has a very passionate and vocal customer base so there is no shortage of collecting a statistically valid data set. We extend surveys invitations to all our customers on an annual basis and our response rate is close to 25%. Our customers are asked to provide an NPS for both ShoreTel and their Partner.

We perform analytics on the NPS data to determine activities most highly correlated to customer loyalty, identify product, service and geographic satisfaction trends, and to share best practices. The end users we survey are direct users of our solution and in many cases are also the decision maker. I hope this answers your questions and thanks for your interest in NPS and our program.

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