If a channel partner brings you 20% of the revenue but is also responsible for 80% of your detractors, what do you do? Sometimes a channel partner that brings substantial revenue can also bring hordes of detractors that affect your company’s long-term profitability. In most cases that is not evident until is too late and you face massive customer losses. A properly implemented Loyalty practice based on NPS, Referrals and Usage (RUN™ ) can help.
Over the last year I have assisted several companies in deploying a loyalty practice centered on the net promoter score – NPS, complemented by two other core metrics: Referrals and Active Users. I call that the RUN™ score and it is a powerful triangulation to understand how your business is performing and what can you expect in terms of future growth. There is a strong correlation between NPS, Referrals and Active users and future revenue growth.
Customers base their recommendations, not only on the specific features of the product being used, but also on the many tangible and intangible aspects of their experience. That is the reasons why I urge companies to always use NPS and other metrics in a comprehensive way, capturing data at the different stages in the life of their customers. When we buy something, we value the whole experience: the pre sales phase, ordering process, delivery of the goods or services, post sales experience, the first use experience and the experience 60 days after. When we are asked if based on our overall experience we would recommend a product or service, we are taking into account the whole experience, and most companies fail at recognizing that.
When there is a channel partner, we must recognize the important value that channel plays in the overall experience of our customers. Four out of nine companies that I provided advisory services for in 2009, found that a single channel partner (or up to 3 in one case) was responsible for keeping down their NPS scores. In one extreme case, one partner responsible for 20% of the revenues drove a -60% NPS score (average NPS in the USA is 5%). When discussing the results with the leadership team, I explained that even when they thought they were selling a single product and hence an overall NPS metric would be enough, the reality is that from the customer’s point of view, they were selling different products as the experience with the channel partner accounted for the overall experience and each partners offered a different experience.
When confronted with data, some channel partners dismissed the metric, leaving the companies with the decision of walking away from +20% of their current revenue source in order to protect future revenue growth and protect their brand.
This is not an easy decision when a company is facing a tough economic environment. But it is easy to prevent this from happening if we structure proper loyalty practices, where we 1) define core metrics for success: NPS, Referrals, Active Use. 2) We measure those at the relevant points in the customer life cycle. 3) We make sure that our channel partners understand the importance of offering a superior customer experience and 4) we reward the channel accordingly.
Any leader that went through a successful deployment of a NPS practice will say that a critical element for success was to tie compensation to offering a successful user experience as measured by NPS or Customer Satisfaction. We need to expand that to our channel partners and compensate them not only for reaching a sales quota, but also for offering a superior customer experience.