What does a Net Promoter Score really say about an MSP?

‘Market leading’ scores have been referenced as key factors that informed acquisitions and private equity investments, but what does a high score really say about a managed services business, and are they open to abuse?

Customer feedback has become more crucial than ever. Customer reviews are now baked into almost every buying decision we make, be it booking a holiday, trying out a new restaurant or making a purchase on Amazon. Reviews undoubtedly influence the decisions consumers make, and a low rating can have a devastating impact on any businesses large or small.

A survey by Podium found that online reviews impact the buying decisions of 93 per cent of consumers, with 68 per cent claiming that they would be willing to pay up to 15 per cent more for a product if they are guaranteed a better experience.

Net Promoter Scores (NPS) first became popularised in the 2000s. In a 2003 article in the Harvard Business Review titled "The One Number You Need to Grow", the scoring systems' founder, Frederick Reichheld, argued that customer loyalty is the most important factor in growing any business.

Reichheld's argument is that a customer who enjoys working with you and is loyal to your brand will continue to drive your top line growth through buying more from you over time, but more importantly, will evangelise on your behalf and bring in new business at no additional cost to you.

He argued that a customer recommending you is "one of the best indicators of loyalty", because they are willing to stake their own reputation on that recommendation.

Net Promoter Scores are designed to measure just that. Customers are asked one simple question: On a scale from 0-10, how likely are you to recommend [insert company name/product] to a friend or colleague?

Those who answer with a score of 0-6 are considered detractors who are not likely to recommend you, scores of 7-8 are "passives" while those who score a nine or a 10 are considered "promoters" and are extremely likely to recommend you.

An NPS score is calculated by subtracting the number of detractors from the number of promoters to give a rating that could fall anywhere between -100 and 100.

NPS scores have increasinly become important for the vendors that operate through the channel. The notion of "customer experience" has become so important for vendors such as IBM, Cisco, Dell, HPE and others as they try to transform themselves into software companies which generate business through recurring revenues models.

When Cisco acquired Duo Security back in 2018, it highlighted its "industry leading" NPS of 70-plus.

Meanwhile, back in 2014, Nutanix came out claiming that it had "blown away" the competition with an NPS of more than 80.

HPE pointed to its improved NPS score of 68 after it had revamped its systems and processes in 2019.

IBM has even baked NPS into its IBM Partner Ecosystem to allow partners to share their feedback on how the vendor can improve its partner engagement.

What's in a score?

MSPs across the UK are now also paying close attention to their Net Promoter Scores.

Earlier this year, networking aggregator FluidOne acquired SAS Global Communications, and pointed to the firm's NPS as a factor behind the decision to buy them.

And when Beech Tree Private Equity invested in Manchester-based BCN Group, it highlighted the MSP's "sector leading" score of 89.

But what do net promoter scores really tell us about an MSP's quality of service?

Speaking to CRN, Russell Horton, the CEO of FluidOne which boasts an NPS of 81 on its company website, said that he only started to measure the company's score when he joined the business in 2018.

He believed that adopting the score would give a good benchmark to compare FluidOne against its much larger competitors in the carrier space.

At that time, FluidOne found that it had a much lower score of 36, which he said acted as a wake-up call for the business.

"We realised we had been complacent. We thought we had a good service and our customer satisfaction scores were high, but then we started to do NPS and we realised that not everyone was giving us a nine or a 10, and quite a few of our customers were ‘passives' and not ‘promoters'," he said.

"I went and met all of the passives, and from that we began to make changes over the course of two years. We changed how we answered the phone, I changed resources, I changed the set-up in sales by including service relationship managers and service excellence. We changed the technical teams for our bigger clients so they could go straight through to the second line rather than the first line."

"Our whole line of service had come from the customers, and we only did that by following the NPS survey and ringing up everyone who was giving us a low score and asking how we can do better. So, actually, it's not about the score, it's about the process."

Just a point in time?

But while the NPS system helped FluidOne to transform its business, other MSP bosses said that, although useful, the scoring system has its limitations.

For Vince DeLuca, CEO of Sapphire Systems, NPS merely captures a "point in time" of how a customer feels about your service.

"We're really trying to map the lifecycle of a customer, and we see NPS as a core element of doing that. But NPS can't be everything in and of itself when you're mapping different touch points across that lifecycle and getting pulse from the customer on if they're achieving their goals or not. But it certainly is a core and important piece."

"NPS is a useful datapoint, but that's all it really is," added Rye Austin, the COO of Microsoft MSP Core Technology Systems.

"If you continued to drive your services improvement just based solely on NPS, then you would be missing a lot."

"We look to have conversations with customers about where their business is going, where IT supports that growth and how we align what we're doing for them to support their business. You're not going to get that from a simple score."

Rigging the game

MSP bosses also said that an NPS can vary wildly depending on how the survey is conducted. Sending an NPS prompt to customers after every single ticket would produce a more accurate score than if an MSP carefully selected happy customers to complete an NPS survey.

Another way an MSP could inflate their score would be by providing customers with a rating range of 1-5 instead of 1-10, which would likely produce more flattering results.

Businesses could also mislead customers by recycling a high score that they achieved many years ago and advertise it as their current day NPS.

Horton said that it's important to ask questions about how the NPS data is collected by asking if it is a "relationship" NPS score or a "transactional" one.

"Not all NPS scores are equal. NPS can get a bad press because people do relationship NPS, when they just go and ask 20 customers if they can do them a favour and fill in an NPS survey because they say their commission depends on it.

"We don't do that. For us, we send an NPS off every single ticket to the person using the service, not to the person who manages the sales relationship."

While a high NPS can suggest that customers are happy and are likely to recommend you to others, there are other factors that often prove more important to the CEO of a managed services business.

"What's more important is, what are your customers or clients not saying?" said Xperience Group CEO Iain O'Kane.

"Client satisfaction is important and attractive in a company if you're making acquisitions, but what's more important from a financial side is whether there's attrition in that base," he added.

"This might sound a little bit ruthless, but the reality is, if your attrition levels are high then it doesn't matter if you're scoring highly in other areas. So for me the best measure is your attrition rate."

While NPS has its limitations, Austin from Core said that tracking your score can be a good way of spotting positive or negative trends among your customers, so if anything's amiss you can fix it quickly.

"It's a metric we tend to use more for internal reflection," he said.

"It gives you an early warning if something is happening with the customer and if they've got some disgruntlement that you're not aware of. It's one of those collection points that you can very quickly feed through to management team.

"We look at NPS not just as a general tracker overall but also by customer and analyse trends and look at feedback that we get. It has caught a few things for us in the past."

COO of reseller turned-MSP Celerity, Craig Aston, added that not tracking an NPS score would be detrimental to any channel business.

He said that some public sector tenders now give the option for you to input your NPS, which will be taken into consideration in the final decision on which provider is awarded a place.

Another benefit is the high response rates for NPS scores because of how quick and easy they are for a customer to respond to. Aston said that Celerity's NPS surveys get response rates as high as 75 per cent, which is might higher than what the company tends to get with long-winded customer feedback forms sent after an issue has been resolved.

"The old-fashioned, long-winded customer satisfaction form has disappeared in our business. We struggled to get people to fill them in. We find NPS much better because it's so much quicker."