Published by Eric Gregg - 04/24/20

Staffing Firm NPS® Correlated to Revenue Retention and Account Expansion

Staffing Firm NPS® Correlated to Revenue Retention and Account Expansion

At ClearlyRated, we spend a lot of time talking about Detractors and Promoters—generally speaking, dissatisfied and satisfied clients as indicated by the Net Promoter® Score (NPS®) methodology. And with good reason: your staffing firm’s reputation hinges on how your clients experience working with you, and getting a clear measure of your service quality is good business, especially in an industry as competitive as ours.

But there is a more pointed story that your firm’s Net Promoter Score tells—and it’s about revenue. Specifically, your NPS can tell you how likely your clients are to continue working with you…or to take their business elsewhere.

In order to understand how hiring managers make decisions—and what staffing firms can do to impact those decisions—we analyzed the actual buying behavior of more than 4,500 clients of staffing firms over the course of four years and tracked them alongside their firm’s NPS scores during that same time period.

What we found was dramatic.

Detractors are less likely to order from you in the following year

Detractors (clients who rated their staffing firm between a 0 and a 6 on the NPS scale) were 40% less likely to order from the firm in the following year than Promoters (those rating their firm a 9 or 10).

But that was really only part of the story. Detractors who did continue to work with their staffing firm decreased their spend by just over 17%, on average, the following year. It’s safe to assume that lost revenue represents budget that the client has taken elsewhere (i.e. to competing firms).

What we’ve found is that Detractors typically “audition” other providers, diverting more and more of their spend from their initial organization, looking for a solution to their perceived service failures. As you might expect, once they find that solution, they often leave their original firm entirely.

Promoters, on average, increase spend the following year

On the other hand, Promoters are 40% more likely to re-order from firms they enjoyed working with the following year. What’s more, they increase their spend with those firms by an average of nearly 11%.

In other words, our research shows that the higher a staffing firm’s NPS, the more likely their clients are to increase their spend in the next calendar year—and the less satisfied clients are (i.e. the lower a firm’s NPS), the more likely they are to decrease spend or depart.

Identifying Detractors has never been more important

Especially in the current economic climate, this information can make a huge difference in how your firm weathers the next six months—or the next several years.

We already know that one of the best ways to survive an economic downturn is to do everything we can to retain clients we already have. After all, the cost to retain a firm is a fraction of what is required to land a new account.

Yet, we also know that the staffing industry historically struggles with client retention. The average firm churns 20 or more clients for every 100 in a typical economic year. During a recession, these numbers are likely to be even larger.

Learn more about the Cost of Client Churn in Staffing >>

Like you, your clients are responding to the current situation by examining their spend and vendor relationships with a microscope—and looking to determine which services are useful, which are not, and why.

And for an industry with that averaged a -2% Net Promoter® Score in 2019—meaning on average, clients are more likely to be Detractors than Promoters of their staffing agencies—hiring managers are likely to identify their staffing firm as a place that they could make a cut.

In average times, 39% of staffing clients who leave their primary firm for a new one do so because of service failures. And as we’ve said before, service failures are a matter of client perception—and even great firms have some unsatisfied clients—but what differentiates the good from the great is how firms respond to those perceived failures.

Learn more about ClearlyRated’s Best Practices for Recovering from Service Failures >>

And the first step to responding well to a Detractor is knowing that they’re dissatisfied in the first place. After all, you can’t fix service-related issues that you don’t know about.

Ultimately, by investing in, and measuring, your clients’ experience today, you can help make sure that you avoid revenue loss down the line—and we’re here to help.

Interested in learning more about your firm’s NPS? Contact us here.

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