Why That $7-Million Super Bowl Ad Was a Waste of Money

How to Use Your Net Promoter Score and ‘Earned Growth Rate’ to Measure True Customer Success

SEO without an optimal user experience is worthless. So is spending seven-million dollars on advertising, if you lack the inventory, eCommerce capabilities or support staff to deliver on your (widely publicized) promises. This is the thesis of?a February 8, 2023,?Forbes?article?by customer experience futurist Blake Morgan, published four days?before?the Super Bowl. According to the author of?The Customer Of The Future, your Super Bowl ad budget should’ve gone to CX — and she’s right. Your?earned growth rate, a metric developed by the creator of the popular (and “gamed and misused”) net promoter score (NPS), is what matters most because, as Morgan argues, the latest research is clear that “customers acquired through?word of mouth marketing?are better customers than customers acquired through traditional advertising.” So what?is?the earned growth rate? And how can we improve ours?

In 2023, a 30-second Super Bowl commercial cost more than ever before; fortunately,?Super Bowl LVII?was also the second most heavily watched of all time, with more than three quarters of viewing households tuned in. But was this enough to earn more than you spent — and maintain your new customer relationships? Probably not, if you’re lacking a well thought-out CX strategy. Probably not if running a Super Bowl ad is, as Morgan described it, “trying to trick customers” via “unwarranted hypnosis.”

The truth is:?

• More than seven in 10 consumers?will go out of their way?to support a brand that delivers optimal customer service
• Companies that provide the best CX?outperform their competitors?by almost 80%
• It costs 2,500% more to gain a new customer than it does to please, keep or even upsell an existing one
• The success rate of selling to existing customers is?up to 14 times higher?than that for new customers

And, as Morgan explains, “it's not just the sales; it's also the referrals.” While nine in 10 consumers?will never again do business with a brand?that breaks their trust:

• Customers who have a?positive?experience are nearly four times?more likely to recommend you?to their friends
• 92% of consumers consider peer reviews and feedback from other users to be?the most credible source?of potential purchase information
• Referred customers “spend more money” and are four times?more likely to refer?more?new customers

According to Morgan, who pulls no punches, “Customers acquired through traditional advertising cause damage to your brand. These customers cost you money.” And while I wouldn’t go that far (if your ads are compelling, consistent, authentic, empathic, personalized, and predictive), I have spent the last year-plus at CEI issuing warnings about the increasing sophistication of consumers and the weakening powers of even the newer forms of online advertising.?

How to Measure Customer Success: NPS Score + Earned Growth Rate

Morgan posed the right question: “[W]hat if companies spent money on actually reducing stress for customers?”?Imagine what you could’ve done (or still can do) with that $7,000,000.?And how could you have (or will you) measure performance?

Let’s talk about that new metric first.

The net promoter score, or “Net Promoter System” (NPS), was invented by Fred Reichheld, who introduced “the one number you need to grow” in?Harvard Business Review?in 2003, the year I graduated from college. “Since then, NPS has spread rapidly around the world” and is now used by two thirds of the Fortune 1000.?

In the past 10 years, the organizations that lead in NPS have reported median shareholder returns?500% greater than their similarly sized competitors. Of course, as Darci Darnell, Maureen Burns and Reichheld pointed out in the very same?HBR?18 years later, success with NPS “motivated more firms to track their Net Promoter Scores—and some to report them to investors.” Unfortunately, this has proved problematic:

Self-reported scores and misinterpretations of the NPS framework have sown confusion and diminished its credibility. Inexperienced practitioners abused it by doing things like linking Net Promoter Scores to bonuses for frontline employees, which made them care more about their scores than about learning to better serve customers. Many firms amplify the problem by publicly reporting their scores to investors with no explanation of the process used to generate them and no safeguards to prevent pleading (“I’ll lose my job if you don’t rate me a 10”), bribery (“We’ll give you free oil changes for a 10”), and manipulation (“We never send surveys to customers whose claim was denied”). No details are provided about which customers (and how many) were surveyed, their response rates, or whether the survey was triggered by a specific transaction. Reports rarely mention whether the research was performed by a reliable third-party expert using double-blind methodology. In other words, some firms have turned Net Promoter Scores into vanity statistics that damage the credibility of NPS.

As a result, Reichheld et al. went back to the proverbial drawing board to develop a new “complementary metric that drew on accounting results, not on surveys.” Earned growth rate, the researchers realized, would be “far more resistant to gaming, coaching, pleading, and the response biases that plague the results of non-anonymized surveys.” It would also “reinforce the effectiveness” of the original KPI, providing “clear, data-driven” connections across and among:?

• Customer success
• Repeat and expanded purchases
• Word-of-mouth recommendations
• Positive company culture
• Business results

So, What Exactly?is?Earned Growth Rate, and How is it Measured??

Earned growth rate measures revenue?growth?generated by returning customers?and their referrals.?The earned growth?ratio, meanwhile, is a related KPI measuring the ratio of earned growth to total growth.

Basic customer accounting continually tracks costs and revenues for each customer over time, patterns of defection, reductions, and price discounts, along with segment identifiers including tenure. It also captures the reason each customer joined (for instance, whether the customer was “earned” through referral or reputation or “bought” through advertising, promotional deals, or commission sales), along with that customer’s acquisition and onboarding costs.

This data forms the basis for your CLV, or customer lifetime value, which?projects?“the value you can?expect?to gain” based on “probabilities and higher math.” Earned growth, on the other hand, quantifies?actual?customer value by measuring?results?— and “can help every team learn how it is performing.”

As the KPI’s creators explain, earned growth comprises two elements:

1. NRR, or net revenue?retention
2. ENC, or earned?new?customers

How to Combine Customer Experience KPIs NRR and ENC to Create Earned Growth Metrics

To determine your earned growth rate, begin by calculating your NRR as follows:

1. Organize your revenue by customer
2. Tally current year revenues from existing customers (who were also customers the year before)
3. Divide this amount by the previous year’s total revenues
4. Express this figure as a percentage

Next, you have to “ascertain why new customers have come on board,” isolating your ENC, or the percentage of new customers earned through referrals, from new customers gained via other methods (like really expensive Super Bowl ads).

Since, as of late 2021 at least, “few firms” could quantify their ENC, Reichheld and team “pioneered a solution that is proving effective,” simply by adding a “relatively painless step” to your customer onboarding process:?asking them the “primary reason” they gave you their business.?

Then:

1. Sort your customers into two categories: “earned,” e.g., from a referral; and “bought,” e.g., a Super Bowl ad or sponsored social media post (most organizations have found?earned?new customers “far more profitable” than bought customers, “many of whom are revealed to be money?losers?over their life cycle”)
2. Use a set of expected customer responses, along with an open-ended “other” response, from which you can gather additional information to help you finetune the categories and options over time

Finally, to determine your earned growth rate:?

1. Add your NRR and ENC together?
2. Subtract 100%

Of course, if you want to compare your results to those of your competitors, you’ll need them to follow the same earned growth rate framework.?

The Future of Customer Experiences KPIs

Indeed, “[b]y developing auditable statistics, brands will be able to validate significant investments in providing superior customer service.”?

Yet, for whatever reason — and in spite of Reichheld’s decades of work — it seems investing?directly?in your customers through experience improvements still requires more justification than paying for a Super Bowl ad, even though 96% of consumers “don’t trust ads.”

Reichheld’s “strong recommendation to regulators” is to make?earned growth rate?“a formal?GAAP?metric with precise reporting rules.”

In the meantime,?work on developing your own customer categorizations, survey questions, and data collection and analysis processes?— and keep using whichever?customer experience KPIs that have been working for you. That is: as long as you:?

• Don’t buy Super Bowl ad spots
• Spend more time and resources on customer experiences than product pitches
• Follow my seven steps to customer success
• Incorporate CX into?everything?you do

Quoted and/or sourced (in order of appearance):? Forbes Blake Morgan Fred Reichheld Darci Darnell Maureen Burns 尼尔森 ?Shep Hyken Qualtrics Catherine Thurtle Moira Dorsey Bruce Temkin Emerald Studio ON24 Demand Gen Report Invesp Rob Markey Inc. Magazine Kat K. Health Partners Plans

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