The One Statistic That Matters Most To Warby Parker’s Founders: Net Promoter Score, which is a measurement of customer satisfaction

The One Statistic That Matters Most To Warby Parker’s Founders

RICHARD FELONI STRATEGY  MAR. 6, 2014, 4:57 AM

image001-1

Warby Parker co-founder and co-CEO Dave Gilboa.

David Gilboa founded the innovative eyewear e-commerce company Warby Parker with his Wharton Business School buddies Neil Blumenthal, Andrew Hunt, and Jeffrey Raider back in 2010. Since then, the brand has sold more than half-a-million frames, an impressive number for an online startup competing against the near-monopolistic Luxottica prescription eyewear corporation.

Millenials have connected with Warby Parker because its glasses not only are fashionable but also have a charitable aspect. For every pair purchased, one is donated through a partner to a needy person. And at $95, a pair of men’s glasses from Warby Parker is affordable. A similar pair from Ray Ban can push $200.

Above all, the company’s success boils down to one statistic, Gilboa told Business Insider:

The metric that we track most closely, what we think is the best leading indicator for the health of our brand, is Net Promoter Score, which is a measurement of customer satisfaction. We’re very proud that our Net Promoter Score has consistently been in the high 80s or low 90s since we launched.

The consulting firm Bain & Company created the Net Promoter System 15 years ago as a way of labeling customers based on the simple question: “How likely is it you would recommend us to a friend?” The scale runs from one to 10.

According to Bain:

“Promoters” [answered 10 or 9] are loyal enthusiasts who keep buying from a company and urge their friends to do the same. “Passives” [8 or 7] are satisfied but unenthusiastic customers who can be easily wooed by the competition. And “detractors” [6 to 0] are unhappy customers trapped in a bad relationship.

The final score ranges from 100 to -100, and is calculated by the equation:

Percent of Promoters – Percent of Detractors = Net Promoter Score

Warby Parker declined to share its most recent NPS statistics, but a year ago the company reported a score of 91, up from the previously reported score of 88.

For some perspective, Satmetrix released the latest NPSs of its partners (of which Warby Parker is not one) on Wednesday. Costco leads retail with a score of 82, and Apple’s laptop division leads tech with a score of 72. It is necessary to keep in mind, however, that these are massive corporations with millions of customers, and Warby Parker is only in its fourth year.

So even though Warby Parker’s score is unlikely to remain so high as the company continues to grow, its NPS is a solid indicator of a loyal fanbase that will serve as its foundation.

Warby Parker is poised for a strong year. In 2013, Warby Parker hired 83 employees and raised over $100 million. The company has not announced any plans to go public, however.

The focus on NPS and building a culture around loyal customers is a strategy similar to the one Zappos CEO Tony Hsieh used to bring his site’s annual revenue past the $1 billion mark in 2008.

As Gilboa said, “I think the best businesses are always thinking about not ‘how much margin can we squeeze out of our customers’ but ‘how can we provide more value to our customers’.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: