Dear SaaStr: Do Net Promoter Scores Really Matter?
I used to not believe in NPS. But I was wrong.
Why? The fundamental reason is if you talk to any software/SaaS business truly at scale, you’ll hear one common theme — they get 80%+ of their new customers from word-of-mouth. You can see here, even at $1B+ in ARR, HubSpot’s number one source of new customers was … word of mouth:
NPS is the proxy for that. If you have a 50+ NPS, that means your customers are all going to recommend you. It means you are full of “promoters”.
Which means once you get 100, then 500 or 1000 customer … there will be enough super happy customers to get a word-of-mouth engine going.
It takes time here, often a few years for enough happy customers to refer you enough other happy customers to really matter. But once this engine starts to hum, it’s the greatest force in customer acquisition in the universe.
Word-of-mouth as your #1 lead source is the key to growing faster-than-average, most cost-efficiently. And to building a self-sustaining revenue engine.
The other great thing about NPS is it is super actionable. If your NPS is 20, set a goal of 30 by the end of the year. Or 40 to 50. Or whatever. And you can rally the whole company around this goal.
You can see here, across all of Gainsight’s customer base, the median is 35. You have to at least do that. And ideally, be better than Just Average: