Net Promoter Scores

Saul briefly mentioned a metric called the Net Promoter Score (NPS) in a post a while back. AT&T had a big push for NPS improvement a couple of years ago. During that time I was able to take a course that touched on it. I came across some notes from that course a few days ago. I promised myself I would write a post before I tossed them.

Here they are.

Internally oriented firms typically disappoint customers and shareholders

The situation plays out like this:

  1. Poor understanding of customers and competition. Which leads to . . .
  2. Unfocused competitive position. Which leads to . . .
  3. Me-too customer value. Which leads to . . .
  4. Excessive customer turnover. Which leads to . . .
  5. Market share instability. Which leads to . . .
  6. High cost retention and acquisition. Which leads to . . .
  7. Sporadic business unit profits. Which leads to . . .
  8. Accounting maneuvers to drive financial results. Which leads to . . .
  9. Stagnate shareholder value. Which leads to . . .
  10. Pressure for short term results. Which leads to . . . me not investing in that company.

Customer centered firms typically fully satisfy customers and shareholders

  1. Strong market orientation. Which leads to . . .
  2. Passion of customer satisfaction. Which leads to . . .
  3. Encouraging customer complaints. Which leads to . . .
  4. Addressing sources of dissatisfaction. Which leads to . . .
  5. Understanding the day in the life of a customer. Which leads to . . .
  6. Improving customer satisfaction. Which leads to . . .
  7. A lower cost of customer acquisition. Which leads to . . .
  8. Improving marketing productivity. Which leads to . . .
  9. Improving market performance. Which leads to . . .
  10. Growing earnings and shareholder value.

So what does this have to do with the NPS score? Well the geniuses have figured out that all of the above can be detected with one number, the NPS score. This number is so powerful that major companies are pushing surveys down to try to find and improve this number. Like all numbers, it can and is manipulated. However, in general, it will tell you who has got what going on.

There is a sister number, the E-NPS score. This is the Employee Net Promoters Score. Typically if you do not see these in alignment, you should have some suspicions. It has been noted that most people want to provide good quality goods and services. Most want enough money to live. The few that don’t become executives. If the E-NPS is low and NPS is high, there is the possibility that the NPS is being manipulated. Of course this is not a hard and fast rule, just like the yPEG and GAAP earnings there are always exceptions, but they help build a picture.

Cheers
Qazulight

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The top 2 net promoter scores that I know of are NTNX and PSTG, PST very close but slightly in the rear. Other companies we follow have what are considered very good or excellent Net Promoter scores, like Arista, but Arista scores something like a 10 or 20 last time I saw, with NTNX and PSTG around 60 or something insane like that.

We all saw what happened with NTNX, but then again NTNX is now part of basically a world wide duopoly. PSTG has much more competition with substitute products, even if not quite as good. Does not mean PSTG won’t also thrive consistent with the Net Promoter number.

Tinker

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with NTNX and PSTG around 60 or something insane like that.

NTNX claims a score of 90. Its in the investor presentation deck.

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Add Tesla to that short list Tinker - 97.

https://npsbenchmarks.com/companies/tesla_motors

UA= negative 8
RH= negative 9
PAYC - 56
2U- 72
Mongo- 84

I’m surprised RH scored so poorly (we love their customer service- they exchanged a table for us twice free of charge and were on time!); and PAYC seems to be quite sticky.

Now if TSLA could just figure out how to mass produce cars so they could have a windfall from semi’s …

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If NTNX says 90 then PSTG was 88 or 89. Both off the charts. I forgot what the perfect score was. 90 it is then. Arista was Still around 10 to 20 and that was considered a fine score - at least in the old world, which would be pre Nutanix and pre Pure.

Tinker

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WOW :open_mouth: ! Tesla is #1. Quite pleased to see an early stage company like Mongo at 84!

Yes, Tesla has changed the way you buy and enjoy cars. But jeepers! 97! We have found our Alabama Crimson Tide football team of the corporate world.

Tinker

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Other companies we follow have what are considered very good or excellent Net Promoter scores, like Arista, but Arista scores something like a 10 or 20 last time I saw, with NTNX and PSTG around 60 or something insane like that.

Hi Tinker,
Nutanix had a net promotor score beyond insane. It was 90 according to Bert’s write-up in September.

The company had a net promoter score of 90 last quarter, one of the highest ratings I have seen in terms of IT vendors for that metric. (Net promoter scores relate to user satisfaction, I have linked to an infographic which depicts just how much of an outlier a score of 90 is.)

Saul

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If NTNX says 90 then PSTG was 88 or 89. Both off the charts. I forgot what the perfect score was. 90 it is then. Arista was Still around 10 to 20 and that was considered a fine score - at least in the old world, which would be pre Nutanix and pre Pure.

Hi again Tinker,
This is from my notes on Pure. I think it was from a Seeking Alpha news blurb but I don’t really remember.
Saul

Feb 2018 – Net promoter score (NPS)
Pure has recently announced that their Net Promoter Score (NPS) has increased to 83.5.

Wikipedia defines NPS as :
An index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. It is used as a proxy for gauging the customer’s overall satisfaction with a company’s product or service.

Pure’s increased NPS means that they rank in the top 1% among all B2B brands in terms of customer satisfaction. The industry average is only 16 points, so the fact that Pure ranks more than 65 points above it proves once more Pure’s dedication to their customers.

Or maybe it proves that their product is just so valuable, and above what the competition has, that customers just love it, and that’s why they’d recommend it to friends.
Saul

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WOW :open_mouth: ! Tesla is #1.

Totally different animal! Nutanix and Pure are B2B, and that says that businesses that buy their products love them and would recommend them to other businesses.

Tesla sells to individuals, and we all knew that the people who buy Tesla’s love them (they tell us all the time), so that’s not news, and it’s not comparable to a B2B rating.

Saul

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WOW :open_mouth: ! Tesla is #1. Quite pleased to see an early stage company like Mongo at 84!

Yes, Tesla has changed the way you buy and enjoy cars. But jeepers! 97! We have found our Alabama Crimson Tide football team of the corporate world.

Tinker,

While I can believe it, anytime you see a number that it way out there, check the number. As a cross check the first easiest cross check is the E- NPS.

Tesla Motors eNPS At a Glance

Hispanic or Latino employees and employees who have been at the company 5 to 10 Years provided the highest scores when answering the question, “On a scale from 1-10, how likely are you to recommend working at Tesla Motors to a friend?” Based on 21 ratings, Tesla Motors ranks 4th place versus its 4 competitors and is right below General Motors.

Compared to other companies in San Francisco, Tesla Motors falls into the Bottom 45% of companies. The last rating was provided today.

https://www.comparably.com/companies/tesla-motors/enps

Pure Storage looks like this.

Where This Score Ranks Pure Storage’s eNPS

In the Top 15% of 1777 Similar Sized Companies in the United States

In the Top 30% of 471 Nearby Companies in San Francisco

2nd place versus 5 competitors.

https://www.comparably.com/companies/pure-storage/enps

Just like in the NPS an E-NPS gives one a competive advantage. The employees actually work for less money and produce more.

Cheers
Qazulight

4 Likes

If NTNX says 90 then PSTG was 88 or 89. Both off the charts. I forgot what the perfect score was. 90 it is then. Arista was Still around 10 to 20 and that was considered a fine score - at least in the old world, which would be pre Nutanix and pre Pure.

Tweet of interest from Pure Storage Technical Director:
https://twitter.com/8arkz/status/980924643950211072?s=19

“Joining @PureStorage has been my greatest career move. Love the tech, culture, people and creativity everyday. AIRI is definitely a game changer and the thoughts run wild with what is possible with that platform.”

This link at first glance appears to be the guy’s blog:
http://www.purepowershellguy.com/

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Or maybe it proves that their product is just so valuable, and above what the competition has, that customers just love it, and that’s why they’d recommend it to friends.

I’m no longer on the inside of a company where the IT decisions get made, but I’d venture that Pure’s score is driven more by their business model than their products. They have what they call “evergreen pricing” which is a powerful customer glue. It’s also a strong moat because it’s very hard to emulate if it was not incorporated to your business from the get-go.

The core product, large-scale flash storage is not hard to copy. Their storage management software is a bit more difficult to emulate, but I think it could be done without getting crosswise with respect to IP infringement. But, the promise of continual update and upgrade is very compelling. For a set subscription rate the customer is guaranteed to always have the latest storage technology with zero interruption or disruption to their platform. That’s extremely hard to compete with, and it makes their customers who used to perform upgrades with a forklift very happy.

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I’d venture that Pure’s Net Promotor Score is driven more by their business model than their products. They have what they call “evergreen pricing” which is a powerful customer glue. It’s also a strong moat because it’s very hard to emulate if it was not incorporated to your business from the get-go.

The core product, large-scale flash storage is not hard to copy. Their storage management software is a bit more difficult to emulate, but I think it could be done without IP infringement. But, the promise of continual update and upgrade is very compelling. For a set subscription rate the customer is guaranteed to always have the latest storage technology with zero interruption or disruption to their platform. That’s extremely hard to compete with, and it makes their customers who used to perform upgrades with a forklift very happy.

Nice analysis Brittlerock, Thanks.
Saul

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