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"Research is a process where you can spend a lot of money and come up with zero. Isurus guides me quickly through the key decisions, helps me avoid the pitfalls, and makes sure I walk away with high-value implications."

-Vice President of Marketing, Enterprise Content Management System Provider

Jeana McNeil

Jeana McNeil
Vice President

Is NPS a useful indicator of a target acquisition’s value?

A recent Wall Street Journal article called attention to the “cultlike” following that NPS has garnered among CEOs in recent years.  Their analysis found that in earnings calls by S&P 500 companies, “NPS” or “net promoter” were cited 150 times by 50 different companies.  It was also mentioned in 56 proxy filings from 2018. The WSJ articles goes on to question whether companies have put too much emphasis on the one number system that is Net Promoter.

When evaluating an investment target, you’re likely to discover a trove of NPS results in due diligence.  The adoption of NPS extends well beyond the S&P 500. Organizations of all sizes and across industries use NPS to measure the health of their customer base and improve customer experience, with the hope to ultimately increase revenue and profitability.


In light of the WSJ article and other criticisms of NPS, how much should you rely on it as a useful indicator of the target’s value? 

Why did NPS become so popular?

While NPS has its detractors—pun intended—the system has important merits.  Net Promoter grabbed attention as a metric that correlates directly to revenue growth and shareholder value.  

NPS also gained popularity because it resolved problems with previous customer satisfaction measurements.  Before NPS, companies relied on a collection of metrics to gauge satisfaction and loyalty. Because the collection of metrics was hard to communicate simply, they were often combined into a single number “Customer Satisfaction Index”.  While the index provided one number, it was hard to communicate and use.  The index required managers to unravel the index to the component level to understand shifts in customer perceptions and to identify improvements.  Against this historical context, the simplicity of NPS is very appealing.  One question is simpler. It feels more actionable because it is easy to understand.

5 recommendations to evaluate NPS data quality and validity

While NPS is used effectively by many organizations, the WSJ article makes a valid point that Net Promoter shouldn’t be adopted or used without critical analysis.

So, what does this mean for commercial due diligence? If your target acquisition provides NPS data, use these five recommendations to evaluate the data before you rely on it as a meaningful indicator of the customer health or business value.

#1 Representativeness

Who took the survey?  A good place to start is to ask whether the NPS data are representative of the customer base, or skew toward specific customer segments/profiles. If so, consider how might that skew impact the NPS results.  Data heavily skewed toward long-term customers can result in a higher NPS. Conversely, data skewed toward accounts in Japan can drag the NPS down due to cultural differences in how “likelihood to recommend” is interpreted across cultures.  If skewed, weight the data to see how a more representative sample effects NPS.

#2 Sample size

How many customers provided data for the NPS?  In addition to representation, take a look at the number of customers who provide data—the sample size.  A criticism of NPS is that it is “noisey”.  The Net Promoter is less stable than a traditional survey metric because it is derived by subtracting Detractors from Promoters.  Smaller sample sizes exacerbate the extent to which NPS can fluctuate due to noise rather than real changes in the customer base. 

#3 Trend over time

Is the trend over time erratic?  In addition to the most current results, review the NPS trend over time.  Due to the noisiness of the calculation, NPS can fluctuate over time simply due to small sample size.  Changes in the composition of the data (mix of customers surveyed each wave) can also cause fluctuations.  Examine the NPS in historical context.  If it fluctuates from one year to the next, the current year’s score may reflect noise in the data rather than reality in the customer base. Conversely, a steady progression of improvement indicates a consistent measurement methodology and/or effective customer experience management.

#4 Relevance

How relevant is the NPS for the category? Is “likelihood to recommend” an appropriate question?  Fifteen years ago, I worked with a major US online dating brand that had just launched in the UK.  Very few Brits used online dating at the time, and some social stigma existed around the category.  The client had just learned about Net Promoter and wanted to implement it.  We found that even when consumers liked the brand a lot, they hesitated to “recommend it to a friend” because of the social stigma associated with online dating at the time. People were a little embarrassed to discuss it with friends, and therefore “unlikely” to recommend.  One can imagine many consumer products where customers are reluctant to “recommend” a product or service.  This effect is also relevant for B2B categories. For example, a bank may keep confidential the cybersecurity vendors it uses and therefore be unlikely to recommend when asked.

#5 Manipulation

Can employees manipulate the Net Promoter data, and are they incented to do so?  Every car buyer has been counseled by their salesmen to give “only 10 and Yes” responses to the follow-up survey that determines a significant portion of compensation.  The same behavior can occur when employee or executive compensation are tied to Net Promoter results.  It is important to understand to what extent the target’s staff are incented to manipulate results.  If a strong incentive exists, consider it a red flag to look at other metrics and gather objective/independent data.

If your analysis of the target’s existing NPS data raises questions, consider an independent assessment of the health of the customer base rather than relying on data provided by the target.  Depending on your resources or timeline, options range from a set of targeted in-depth customer interviews or a more comprehensive survey to assess Net Promoter and other indicators of customer health and future revenue contribution.

Joe Radwich

Joe Radwich
Vice President

Insights for the Next Recession

Over the past six-months economist have increasingly sounded the alarm about the recession just around the corner. Does market research have a role in helping companies prepare for this possibility? We think the answer is: Yes.

Business publications and financial pundits offer varied advice on the best strategies for surviving and thriving in the next economic downturn. A recent article in the Harvard Business Review advocated taking a long-term view, avoid costing cutting and focusing on growth opportunities. On the other side of the spectrum some strategic advisors recommend building up a large financial reserve and avoiding taking on any additional debt. And some recommend a two-pronged approach.

Regardless of your world view on how best to prepare for recession, a few things seem inevitable. In a general economic slowdown:

  • Customers and prospects face greater budget constraints
  • New investment decisions receive more scrutiny and take longer
  • There are fewer sales opportunities

Collectively these trends make it hard to find and win new business.

Primary research insights can help companies focus on the market segments with the most opportunity, identify the outcomes prospects are willing to invest in, and optimize their upper funnel activities.

Identify Segments of Opportunity

When fewer sales opportunities exist, marketing and sales resources need to focus on the segments most likely to buy, especially if sales and marketing budgets are cut.

Segmentation research can identify the segments:

  • Willing to invest in solving the pain-points your offering addresses
  • Where your value proposition resonates
  • That recognize and value your competitive differentiation

With these insights’ companies can better target sales and marketing resources to areas of the market most likely to provide a return on investment.

Empower Internal Champions

When budgets shrink, indirect competitors grow.  Companies become willing to live with the status quo longer. Their current solution may no longer meet their needs, but when it comes to justifying investments it’s easier to defend the need for an existing product, than to advocate for a new solution.

Competition for budget also increases in economic downturns. When faced with a shrinking budget, functional leaders rarely make across the board cuts. Instead they prioritize their investments. Some areas may be unaffected by a shrinking budget, or even have their budget increased. Other areas may be slashed altogether.

Understanding the strength and nature of these indirect competitors helps identify the full scope of barriers you face. This not only helps position your offering; it can also help put your internal champion in a better position to sell the solution to the other stakeholders in the decision.

Align the Upper Funnel to Triggers

The number and nature of the triggers that prompt a prospect to investigate new solutions narrows during economic downturns. When the economy is strong, companies and functional leaders find it easier to think and act strategically. They tend to be more open to new ways of doing things. They explore solutions and vendors that they may have to grow into.

Economic downturns place rational and irrational pressures on functional leaders. In turn, their outlook becomes more tactical. This influences how they react to messaging, sales presentations and processes. Rightly or wrongly they focus on the near-term, and tactical, pain-point or jobs-to-be done. And on price.

This makes them less receptive to high-level messaging. They also have less patience for sales processes that bring prospects through an extensive discovery process that drifts away from what the prospect identified as their core need.

Identifying the tactical needs that trigger interest enables you to incorporate them into messaging and sales processes. This helps reassure the prospect that their tactical needs will be met, which may open the door to a wider conversation.

Better Fishing

In economic downturns it can be tempting to reduce the budget for market and customer insights at a time when they may provide the most value. When there are less fish in the stream, success requires knowing where the fish are more likely to be, and the bait that will attract them.

Joe Radwich

Joe Radwich
Vice President

Six reasons customers churn in B2B markets

When B2B vendors see an uptick in churn, stakeholders generate multiple, sometimes conflicting, hypotheses about the causes: It’s because of a recent price increase. New competitors entered the market. Competitors offer a service or functionality that we don’t. Customers don’t recognize the value the company provides. While it is important to take fast action to stop the bleeding, you don’t want to invest time and resources in a perceived problem only to see little change in customer attrition.

Product failures and price increases are the most common drivers of churn. Absent obvious causes, companies struggle to respond to increased customer attrition. Isurus’ research in B2B markets shows that outside of product failures and price increases, the market dynamics behind customer churn generally fall into six broad categories.

  1. Competing Priorities
  2. Convenience Seeking
  3. Latent Value
  4. Management Change
  5. Mainstream Convergence
  6. Upgrading

This list provides a framework for B2B marketers and product managers to systematically analyze the dynamics behind customer churn. Armed with a clear sense of churn causes, the company can invest time and resources efficiently to address the problem.

1. Competing Priorities

It’s not you, it’s me. No one wants to hear this break-up line, but it happens even in B2B markets. A customer is satisfied yet forced to end a relationship because of across-the-board budget cuts. Their budget pressure may stem from functional level needs or broad corporate initiatives. It may simply be that costs increased dramatically, but budgets stayed flat.

Budgets are spread thin by an increasing number of activities, service providers, and line items. For example, the number of traditional and digital marketing channels has exploded. The marketing team may have to rob Peter to pay Paul to cover all relevant channels. In some industries regulations lead to higher compliance costs and cause cost-cutting in other areas.

Vendors that serve mission-critical needs are less impacted in this scenario. The vendors that offer the “nice to haves” often absorb budget cuts. For example, as real estate and construction costs increase, commercial contractors may look for alternative business insurance carriers, even though they are happy with their existing carriers and coverage. Hospitals’ costs for labor, insurance, technology, and infrastructure typically outpaces revenues: The budget squeeze flows down to medical supply wholesalers who feel the pressure from the purchasing department.

In the above examples, the customer didn’t value their marketing firm, insurance carrier, or wholesaler any less. It’s the relative value that changed: They faced budget pressures, and other areas of the business had priority from a funding perspective. When forced to switch from a vendor they are happy with, most customers recognize they will have to live with a solution that is good enough.

2. Convenience Seeking

Customers will leave a vendor they are happy with to gain efficiencies or make their lives easier. The clearest example of this is when customers streamline their vendor portfolio. They move to suppliers that provide multiple products, better geographic coverage, or work with a preferred channel partner.

Sometimes this is a conscious effort. Other times it just happens. As Microsoft adds features to Office 365, the software firms that provide project management, collaboration, and other supplemental functionality feel the crunch. The individual tools in Office 365 may not be as robust as stand-alone solutions, but they come bundled with O365 which makes it easy to use them. Here again, most customers recognize that they give up something by switching vendors but believe it is worth the gains in convenience or streamlined operations.

3. Latent Value

Customers lose sight of the full value a vendor or product can provide. Organizations often pigeon-hole vendors into the need for which they use it most often. As their needs evolve, customers don’t always consider if an existing vendor can address the need. Instead, they look for a new solution. Another scenario is that a new solution enters the organization in response to an external event: A stakeholder saw a product at a trade show or heard a sales pitch. This external event can ultimately lead to budgets being split between solutions or in some cases a migration to a new vendor.

In another example of lost value, after an accounting firm cleans up the books and tax accounts, the client reverts to managing its accounting with internal resources. Or, after a rebranding exercise, a customer cut ties with their advertising agency believing they have the road map in place and just need to follow the plan. In both cases the problem isn’t that the customer doesn’t value what the vendor provides, it’s that they aren’t aware of the additional value the firms can provide moving forward.

4. Management Change

A change in management often results in a change of vendors. A new CXO may place different value on the products vendors provide. For example, the previous leadership valued a component manufacturer for thought leadership and ideas it brought to the customer. The new regime believes innovation should come from within and feels low-cost, commodity suppliers are good enough. Even if they value the product, new leadership can still prompt a change in vendors. A new VP of Sales may bring in the CRM/SFA they are most comfortable with, or the VP of Strategy may bring in the consultants they worked with at their previous firm.

5. Mainstream Convergence

Higher churn rates in fractured technology markets can indicate mainstream convergence on a platform or approach. For example, online backup drove churn rates among tape-backup solution providers before it became a significant competitive threat. Once online backup gained acceptance, there was no going back, and churn among tape-backup solutions increased. In other instances, as technologies and applications become mainstream, the larger technology vendors (Microsoft, Oracle, SAP, Salesforce, Etc.) begin to offer comparable solutions. They are often not as robust or user friendly as the vendor solutions that created the marketplace. But they can be good enough and convenient for customers to use.

6. Upgrading

Fast growing customers bring an additional set of churn dynamics. As a customer grows, the vendors they started with may not be robust enough to meet their expanding needs. Growth also exacerbates the churn dynamics previously outlined: They need suppliers that provide more products and wider geographic coverage. New senior managers come on board and start to consolidate vendors.


Churn in your market may be driven by a combination of these factors or something different altogether.  The first step is to objectively determine the specific reasons churn is rising. Gather input from internal stakeholders and directly from lost/lapsed customers.

Some churn drivers are unique to specific accounts or small segments of accounts. Other drivers occur systematically and typically have deeper implications for your product or market.

If customers leave to divert budget to competing priorities, adding new features to your product is unlikely to reduce churn. A Good-Better-Best product bundle may be the best response. If customers need to streamline their vendor portfolio, demonstrate why it’s worth the extra effort to use your solution. In emerging technology markets churn can indicate the direction the market is moving away from your approach and have major implications for future strategy.

When faced with increased churn, use a systematic framework to take the wider view of possible market dynamics to ensure you focus on the right problem.

Joe Radwich

Joe Radwich
Vice President

Look beyond product for drivers of B2B satisfaction and value

Customer experience, by definition, incorporates all aspects of a company’s offering and cuts across organizational boundaries. Yet, B2B vendors continue to focus on the product as the main driver of customer satisfaction and value. Research by Isurus and other leading consultants shows how a more inclusive analysis of customer experience reveals more accurate and actionable results.

Follow the breadcrumbs

Take this example from a recent Isurus study. The product team at a manufacturer of industrial generators was shocked when it received lower than expected product quality scores on its voice-of-the-customer survey. The ratings didn’t fit with their understanding of their competitive differentiation. The company is generally considered a leader in its category, and objectively, its equipment is in the top tier of vendors. A commitment to delivering quality products impelled the team to act on the findings. But how?

Fortunately, in addition to exploring product attributes, the customer survey evaluated a broader set of company characteristics such as customer service, warranty, channel delivery, and installation. This data allowed Isurus to evaluate the full range of factors that influenced perceptions of product quality. The analysis revealed a key insight: when service techs returned after the initial installation to make adjustments to the equipment, the product quality score was lower. The customers assumed something was wrong with the product.

After a little more digging, the company found that two groups of contractors made more post-installation visits than average – newer contractor partners, and contractors with less commitment to the channel-partner relationship. With this knowledge, the company could tackle the right problem. The product didn’t need fixing; the company needed to reduce errors in the installation process. The company focused on improvements to training and customer support and increased engagement with its channel partner program and its contractor resources.

Beyond functional value

Bain & Company’s recent study of the Elements of B2B Value provides further evidence that non-product attributes drive satisfaction.

Source: Bain Insights – Elements of B2B Value

In this research, commercial insurance buyers rated 36 different elements of value ranging from threshold conditions such as cost, to aspirational elements such as helping the customer achieve its corporate vision. Cost and Availability received the highest ratings overall. Taken at face value this result suggests that insurance companies and brokers could differentiate by providing a wide set of low-cost policies. However, a regression analysis showed that Responsiveness and Knowing the Customer’s Business are the strongest drivers of loyalty – two elements steps away from the core product attributes. While Cost and Availability are the most important factors in their buying decisions, they are expected by the market and do not differentiate vendors – customers do not use vendors that they cannot afford or do not have the products they need. Isurus sees this dynamic so frequently in our research that we counsel clients to minimize the threshold factors they include in their customer surveys.

A framework to treat product myopia

It was only possible to uncover the insights outlined in the above examples because the customer surveys included a wide range of attributes related to the customer experience. Vendors and product teams live and breathe their solutions. They invest millions of dollars in the development, enhancement, and expansion of their offerings. When you’re this close to your solution, it’s easy to lose sight that factors outside of the product can be significant drivers of business value and satisfaction.

To mitigate this myopia, Isurus uses a framework of three categories of attributes: Capabilities, Company Traits, and Tactical Outcomes. We recommend that VOC programs incorporate attributes from across three categories.

  1. Capabilities: The features and qualifications most directly tied to the product such as features and functionality, quality, delivery, ease of use, cost, etc.
  2. Company Traits: The behaviors, values, and traits that relate to the higher-level value a company provides, which remain true even if the specific product/service offering changes. The type of attributes in this category includes responsiveness, partnership orientation, innovation, integrity, etc.
  3. Tactical Outcomes: The outcomes the customer expects the solution to accomplish – the job to be done. Examples include reducing the steps in a process, providing sales reps with real time information, reducing waste, etc.

The degree to which each of these categories are explored varies by market. For example, it’s more important for a commodity provider to understand the company traits that provide value – they cannot differentiate themselves on product. Conversely for vendors in an emerging technology market, it is important for them to understand the outcomes the customer is trying to achieve – additional features and functionality don’t make a difference if they don’t align with the customer’s business processes and goals.

The benefit of using a framework to guide the VOC program design is to ensure non-product attributes are measured and evaluated as potential drivers of customer satisfaction and value. A framework provides a reference and brings structure to the metrics selection process. Data that represents the full customer experience is much more likely to identify the true drivers of satisfaction and provide insights that lead to competitive advantage.

Jeana McNeil

Jeana McNeil
Vice President

Make better strategic investment decisions: Reduce decision bias in M&A due diligence

PE firms and corporate investors compete intensely for investments to expand their portfolio or augment their existing solutions.  In the due diligence process, decision makers face the dual pressures of accuracy in a high-stakes decision, and the need to work very quickly. Unfortunately, the time-pressure of makes these decisions vulnerable to the cognitive biases.

due diligence decision bias

The steady drumbeat of behavioral economics research in recent years highlights the prevalence of biased decisions, even among the professions we liken to Dr. Spock –the statisticians, economists, physicians, and computer programmers of the world.  M&A decision makers — Corporate Development and Private Equity investors – are also at risk. The pressure and tight timelines for M&A due diligence exacerbate the potential for biased decisions.

Investment teams use experience and sector knowledge to evaluate acquisition targets and expedite the decision process.  Experience and sector knowledge are generally assets; however, they also become liabilities.  Research shows that a high degree of experience may lead to:

  • Overconfidence bias: Experience causes the investment team to rely too much on what they think they already know, rather than carefully examining new data or the unique aspects of a particular deal.
  • Confirmation bias: Rich knowledge of a sector leads decision-makers to pay more attention to data that confirms their pre-existing view of the world, and overlook data that doesn’t support it.
  • Affect bias: Investors apply their experience to make an initial assessment of a prospective investment. If that initial assessment is positive – “I like this company”—new data is evaluated through that lens. When evaluating something we like, we minimize its risks/costs and exaggerate its benefits. When we dislike something, we do the opposite.

What can be done to mitigate against these and other decision biases in due diligence?

One answer is look to external partners: In addition to the requisite legal, technical, or analytical expertise, external partners provide an independent perspective. External partners are less vested in the decision and bring a different set of experiences than the core investment team.  While external partners aren’t immune to bias, their bias will likely be different and leads to a more robust analysis.

How do external providers improve decision quality?  Through Isurus’ work to support B2B software M&A due diligence, we’ve seen benefits from the following approaches in the context of primary market research:

1) Work from a pre-defined framework or analytical plan

The framework provides a checklist. It reduces the likelihood that important data are omitted from the analysis, and guards against too much weight placed on a particular element.  Without a pre-defined framework, stakeholders may struggle to agree on which data are needed, or brainstorm an excessive set of questions that stray from the main objective.  The framework can be modified for a particular market or scenario, when there is a strong rationale for doing so.

2) Listen to external partners’ point of view

Investment teams are skilled analysts. They dig into data, eager to form conclusions. In the case of primary market research results, the investment team should elicit more from their partner than just the data: Request their interpretation, conclusions and recommendations. External market research partners are less likely than the internal team to overlook data that contradicts a pre-existing opinion, or to weigh one piece of information too heavily in the analysis.

3) Encourage discussion of different interpretations of the data

When Isurus presents research findings, it is not uncommon that members within the investment team draw different conclusions from the same data point. Juxtaposing different interpretations often reveals useful nuances about market dynamics, growth potential, or considerations for the post-acquisition transition period. Research read-out sessions are particularly useful when the meeting is structured to encourage Q&A and discussion amongst the team.


For further reading on this topic, read “How Cognitive Bias Undermines Value Creation in Life Sciences M&A

Nobel laureate Daniel Kahneman writes in Thinking, Fast and Slow that “Confidence is a feeling, which reflects the coherence of the information and the cognitive ease of processing it. It is wise to take admissions of uncertainty seriously, but declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true.”  When confidence in a decision is abundant, it pays to confirm that data are at the root rather than emotion or bias.