Very often I’m asked how product managers should be measured. I have long believed that the only true measure of the product manager is the success of his or her product. While I still believe that, it’s not a very satisfying answer, as it’s not clear what the best way to measure a product’s success is. Is it revenue? Profit? The number of users? Page views? All of these indicators can be useful but they don’t really provide the big picture.
Recently, a business metric has been gaining traction across a number of different industries, called the Net Promoter Score (NPS). You can read all about it if you like at www.netpromoter.com. It’s a very simple metric. You ask your customers how likely they would be to recommend your product, on a scale of 0-10. Those that rate 9 or 10 are considered “promoters” (they’re out there telling their friends how much they love your product, and are actively evangelizing for you); those that rate 7-8 are lukewarm or neutral; and those that rate 0-6, the “detractors,” are not likely to recommend your product, and may even be actively warning their friends about your product. If you take the percentage of promoters and subtract the percentage of detractors, you get the NPS. This essentially tells you if you have more people cheering for you or against you.
Quite a few companies already track this metric, and those that rate very highly won’t surprise you – companies like Apple, Amazon and eBay.
I very much like this metric because it puts the focus on the product and the overall customer experience. If, as we like to say in this business, it’s all about creating happy customers, then this is a measure of exactly that.
Yes, in theory you could have 100% very happy customers but you go out of business due to losing money on every customer, but for a single metric, I believe this keeps the focus of the company on creating happy customers, which is what fuels growth. And in terms of profitability, there is no more cost-effective sales or marketing program than your own customers doing the sales and marketing work for you, so I have long believed that a great product with happy customers lowers these other (often very significant) costs, which contributes to profitability.
This leads to the concept of good revenue and bad revenue. For example, let’s say the company is approached by a big potential sponsorship or advertising partner, that covets your user base and believes they can effectively sell their product on your site. This could be a good thing or a bad thing, depending on how it’s done.
If it’s done poorly, the short-term revenue might be nice, but if it hurts your customer experience, it will be reflected in the NPS, and your business will grow more slowly, or worse. On the other hand, if you can work collaboratively with the advertising partner, if it’s done well, it could be either neutral to the customer experience or even contribute to the experience, which will help your business grow more quickly.
This is why “specials” are so dangerous. They represent bad revenue, and hurt your company’s ability to deliver products that create happy users.
You can compare your NPS across companies and even across industries, which is interesting, but to me this is most useful as a way to measure your own progress towards improving your products and services. So if you don’t already measure your NPS, consider doing so as soon as possible. Then you can start watching how the changes you make to your products impact this score. Make sure you’re always moving in the right direction, and consider the impact on the NPS of everything you do.