Why referrals are a better B2B KPI than your net promoter score

Since then, NPS has been adopted and widely used by corporations as a key performance indicator (KPI), but there is one key piece missing from many organizations that would make this important metric an even more powerful indicator of performance.

So, what’s missing?

Ironically, the answer to the question, ‘Would you recommend the company, product or service?’ is rarely tracked. Organizations place a tremendous amount of focus on developing, interpreting and reviewing the results, yet spend little to no time tracking the measurable proof – the referrals.

Depending on where one sits within the organization, there are various reasons as to why this happens. If you’re in marketing, referrals just aren’t a focus. Chief marketers are more concerned with tracking the results of their team’s outbound activities and the return on their spend.

In sales, inbound referrals are often coded as rep-generated leads, or no source is given. Why? Because reps have a quota to hit and want credit for creating and closing self-generated leads. Inbound referrals (AKA ‘bluebirds’) are high quality and the quickest opportunities to close.

For customer service, the focus is more aligned with efficiency metrics, and/or the team receives no credit for inbound referrals, even within accounts.

Regardless of what part of the organization reps are in, like everyone else they capture the data relevant to how they are being measured, which often doesn’t include inbound referrals. There is no closed loop, and as a result it leaves a gap in the organization’s ability to link the real impact of NPS on performance. We only get half of the story.

Where companies fall down again and again

The genius of NPS is that it’s a simple and straightforward one-question survey that measures the performance of the entire organization (from marketing to product, sales and through customer service). It encompasses the entire customer experience and journey.

It’s also a great indicator of brand health. The customer feels a connection to your organization, strong enough to put their personal reputation on the line. Think about that for a minute... they’re willing to risk their credibility for a promise that your organization will fulfill, or at least that’s the theory.

This highlights why actual referrals are a more important performance indicator than NPS – the person making the referral (and we know who they are) is one of your most valuable customers. By making the referral, the customer is validating their connection to your brand. And according to the research, that connection means more than just a referral for at least two reasons beyond the obvious.

First, they are twice as likely to pay a premium for your product/services, and second, they are more likely to advocate for your brand (which they just demonstrated with the referral). Not only are they the source of potential new customers, they are also the key people to advocate for your solution or company within the account.

Referees are key to starting and moving the internal buying process... but only if you know who they are by capturing that information, which too many organizations fail to do.

Tracking referrals should be a corporate KPI because it cuts across the organization, and as a result has to be driving it from the top down to eliminate the gaps I pointed out earlier.

Keep in mind, you will also have to motivate reps to capture the information and give them an incentive for asking for a referral. Assign a higher value to referring customers given their importance, and then begin to estimate the amount of inbound revenue in your annual forecast.

Creating a goal in your forecast will drive the active management of referral tracking. As mentioned, these are your most valuable leads, so be proactive versus just letting the ‘bluebird’ leads come in.

For marketers, especially if you are in the tech sector, this presents an opportunity to track word of mouth. The top four most-used and credible information sources for buyers are people-oriented channels (such as peers, influencers and consultants).

Finally, reward customers who put their reputation on the line for you. They see something in your brand that connects to them at a personal level. Find out what that is and reinforce it, because not only is it the reason they’ll advocate for you, it’s also key to their loyalty... but that’s a topic for another post.

Scott Gillum is founder and chief executive of Carbon Design.

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