Brand, NPS Surveys | Customers, Etc.
AirPods are more successful than most tech companies, and other musings.
A few months back, there was a story that compared the estimated annual revenue1 for Apple AirPods against the total revenue of top tech companies. It’s kind of insane:
$12 billion is roughly the total 2020 revenue of Adobe2, which has been growing steadily year over year since 1982. Apple started shipping AirPods in December 2016. The other businesses in that chart have all been working hard to steadily grow their customer base, increasing revenue at various rates. And then Apple releases AirPods and instantly rockets past a billion dollars in revenue. Crazy.
A year ago, as I tried to be productive from home amidst the chaos of my kids suffering through virtual school, I started thinking about investing in a pair of noise cancelling headphones. Just kidding. I didn’t want to buy “noise cancelling headphones”. I wanted the AirPods Pro.
What made the purchase such an easy decision?
The NPS survey conundrum
Back when I was leading the support team at Trello, I had seen talk at a conference3 where the speaker showed how he used Net Promoter Score (NPS) survey results to identify the problem areas most commonly associated with low survey scores. I remember thinking this was a novel way to use NPS in customer support and was eager to try it out.
The NPS survey is extremely simple. It asks a single question on a 1-10 scale with an optional text box for why you answered the way you did:
How likely is it that you would recommend [brand] to a friend or colleague?
Based on a formula that’s applied to the survey scores, you can get a score that helps to measure customer’s perception of your brand. At the time I first learned about NPS, I remember being less interested in the score itself and more interested in the customer comments that might accompany the score.
Around the time I was learning about NPS, Trello’s CEO asked me if I knew our NPS score. No, I answered. We hadn’t sent out NPS surveys, but I was eager to get a system set up so we could regularly identify customer pain points and improve the product. From what I remember of the conversation, his primary interest at the time was just knowing the score at a point in time. I didn’t quite get it. Why was he so focused on the score?
NPS flaws, etc.
It’s easy to pick on NPS. Examples of its abuse abound, whether it’s a call center using NPS to rate agents4 or a customer experience program suffering from survey score addiction5.
There’s also the problem that the NPS question—how likely are you to recommend [brand] to a friend or colleague—can feel out of place in certain business-to-business contexts. “This is a niche tool I use for work—who am I going to recommend it to?”
And don’t forget about potential survey fatigue. How many times do our customers want to see yet another NPS survey from yet another brand before they click the “1” just to make the survey go away?
For any one of these reasons, we might decide against sending out NPS surveys. But even if that reasoning has us holding off on sending out NPS surveys for our early stage startup (or large corporate enterprise addicted to surveys), we would be remiss to ignore what NPS represents.
NPS as a shortcut for brand
I’ll tell you the moment that NPS clicked for me as a concept that’s more than just a survey. I was listening to an episode of the Prof G podcast with Scott Galloway—I can’t recall which one6—and he was talking about why businesses such as Apple and Amazon spend so much on original content. “It’s all about NPS”, I recall him saying. It’s so hard for a company to get you to feel a certain way about their brand. With original content, you associate your favorite new show with the company that delivered it to you. I’m a huge fan of Ted Lasso. Thank you, Tim Cook.
In this context, “NPS” doesn’t really have to do with the survey. It’s more of a shortcut for “how well do consumers trust your brand?” Surveys can help you measure that, but it’s what’s behind the score that’s important, not the survey itself.
In another podcast with Scott Galloway, he mentions that “brand is a shortcut for due diligence,” meaning, we’re willing to spend less time researching a product or solution the more we trust the brand. I already trust Apple with my phone and my computer—how much effort do I really need to spend researching new headphones when I already trust Apple? Hence $12 billion in AirPods revenue.
Brand & expansion
At the investor level, when investors think about NPS, it’s a question of “what brands are so strong that their consumers unquestionably turn over their hard-earned dollars without thinking too hard about what they’re buying?” When Apple decides to launch a product line of wireless earbuds, they can bring that product to over $10 billion in revenue in just a few years because they already have a loyal customer base. Another company could decide to get into the wireless earbud business—perhaps even make a product that’s better than Apple’s AirPods—but without a base of millions of loyal customers, that business is going to have to earn market share much more slowly7.
You have to understand customer loyalty. For start-ups and growth businesses, this doesn’t necessarily mean you need to start inundating your customers with NPS surveys. Get the quotes and testimonials and stories in whatever manner makes sense.
But more importantly, do the foundational work to prove that when you go to your customers asking them for money in exchange for your next innovation, they’ll be eager to sign up.
The $12 billion per year in AirPods revenue is estimated. If you look at Apple’s most recent 10-k and scroll down to page 21, you’ll see the category for “Wearables, Home and Accessories” had an annual revenue of 30,620 million dollars. From the notes, “Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and Apple-branded and third-party accessories.” And “Wearables, Home and Accessories net sales increased during 2020 compared to 2019 due primarily to higher net sales of AirPods and Apple Watch.” At $12 billion, that’s about 40% of total revenue for that category, which seems a bit high, but even if the estimate is off by half, it’d still be $6 billion. How many tech companies would love to have annual revenues of $6 billion per year?
See Adobe’s 10-k, page 63. Their Total Revenue for fiscal year 2020 was 12,868 million dollars.
This is the talk: https://vimeo.com/ondemand/supconfsf2016/181321470.
Customer Satisfaction (CSAT) surveys are going to be a better proxy for agent performance than NPS. See also Customer Effort Score (CES) surveys, which will get at the heart of the amount of pain a customer goes through to get their question answers, which includes both agent performance and self service channel performance.
Jeanne Bliss talks about this topic in her book, Chief Customer Officer 2.0. Chapter 2 has a section called “Pivotal Leadership Shift: Focus on Customers as Assets. Remove Survey Score Addiction.” This blog post of hers also sums up the concept.
It might have also been Pivot, co-hosted by Scott Galloway and Kara Swisher. He talks about similar topics on both shows and it’s hard to keep them straight.
We might view disruption as an exception, but I think for that to work in this example, the disruptive product or company has to be so innovative that even die-hard loyalists will abandon their favorite brand for the new technology. It’s hard to imagine that happening in the space of wireless earbuds to the tune of > $10B annual revenue.