Over the past five to ten years, Private Equity Firms and Venture Capitalists have increased the attention they pay to customer satisfaction data. There’s now a greater appreciation for the negative impact churn has on customer lifetime value (CLV) and the company’s overall business prospects, as well as the growing proof that high customer satisfaction is a valuable determinant of a company’s potential for long-term success.
As a result, we’re seeing investors place a much stronger emphasis on customer satisfaction and strongly encouraging companies in their portfolios to invest in customer feedback programs such as Net Promoter Score® (NPS) and voice of the customer surveys.
In this video we explore why this has been a terrific trend to witness:
When you look a bit deeper and understand the numbers behind it, it suddenly doesn’t seem all that surprising. In a report from the Economist Intelligence Unit, the results were pretty clear: companies that prioritize investment in customer experience have better revenue growth (59% vs. 40%) and higher profits (64% vs. 47%) than companies that don’t.
As investors in private and public companies show greater interest in customer retention and expansion, companies that already have investors (as well as those that are hoping to gain investors) are rapidly employing customer satisfaction programs to reduce churn, strengthen their business prospects and increase their valuation. So what should your company focus on to stay on top of the game?
Watch Our Interview With The Head Of Customer Success At A Prominent VC Firm
The Importance Of CS In A VC/PE FirmPrioritize Customer Retention Marketing
There is now widespread recognition among shareholders that a strong focus on customer loyalty and retention will increase the value of their investment, thereby enabling them to generate higher returns.
Where once new customer acquisition was king, the pendulum has definitively swung more towards retention marketing – the notion that retaining, growing, and leveraging your existing customers can produce a return on investment (ROI) that’s greater than allocating dollars entirely on strategies that drive new customer acquisition.
For more on the value of customer loyalty and moving marketing resources towards existing customers, read Customer Retention Marketing: Make Your Company Recession Proof.
Adopt the Net Promoter Methodology
Venture Capitalists and Private Equity Firms have a lot to consider when selecting a company in which to invest. However, these investors are also realizing that new business acquisition, referrals, and up-sell / cross sales only tell part of a company’s story. The rest of the story comes from the customers.
The Net Promotor System remains the gold standard in evaluating where you stand on retention and loyalty. Known as the “how likely are you to recommend question,” NPS has been adopted by thousands of companies worldwide as a strong indicator of customer behavior and a tool for aligning your entire organization around the important activities that promote a customer-centric culture.
Establish Multiple Listening Posts
Venture Capitalists are now coming to us to dig deeper into customer sentiment of their portfolio companies.
We work with their portfolio companies to develop a well-rounded Voice of the Customer program that combines quantitative and qualitative data. This gives our clients a more holistic view of where customers stand and how the company can adjust its operations to better retain, grow, and strengthen relationships with existing customers.
Our Voice of Customer consulting services combines a number of different customer feedback programs. In addition to Net Promoter Score, we may suggest Customer Satisfaction surveys, a Customer Advisory Board or a Defection Analysis Program to encourage honest, unbiased feedback on how you’re doing, what you do well, and what you can improve upon.
Be Transparent with Customer Survey Data
Many of our clients are sharing the third-party data we provide to their Board of Directors, which includes partners from investment firms. With these metrics, companies are able to demonstrate to investors and potential investors the organization’s true value and potential for long-term success.
Let’s face it: private equity and venture capital firms invest with an eye on the exit. Whether it’s a year down the road, five years or ten years, their ultimate goal is to monetize their investment for as much as they can get.
When looking to invest, these firms must make judicious decisions about where to spend their money based on where they believe they can get the biggest payoff. Companies should do all they can to demonstrate they are doing the right things to solidify their position and potential in the market.
Validated customer satisfaction data can go a long way to reducing investment risk, thereby appearing more attractive to Venture Capitalists, Private Equity Firms or even potential acquirers.