Getting to Initial Scale

I Was Wrong. NPS is A Great Core Metric.

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Jason Lemkin

When I was a founder, I thought Net Promoter Score (“NPS”) was a pretty dumb, Big Company metric.  There were a bunch of things I didn’t like about it:

  • NPS is backwards looking.  It doesn’t tell you much about your prospects, the future, or your most recent customers.  I wanted to see the future.
  • NPS isn’t tied to upsells, churn, or revenue.  I didn’t want a metric that was abstracted away from revenue.  I cared much, much more about our net negative churn rates per segment (and that the metrics here were always improving), than some abstract NPS score of 42.
  • NPS can lead to celebrations of the past … and even worse, mediocrity in the present.  Customers can like an old product that is no longer competitive.  (“You’re never getting that copy of ACT! out of my hands!”) NPS doesn’t give any credit for innovation in the future.  I saw Big Companies celebrate their NPS scores, even knowing their products were on the way to obsolescence as new entrants were displacing them.  That was the exact opposite of the sort of culture I wanted.
High NPS
Customer Summit, High NPS Moment.

And yet … now I work with 20+ SaaS companies more closely.  And many track their NPS monthly, and carefully.  And … I love it.

What it turns out I love about NPS:

  • >> It keeps a SaaS start-up honest <<.  This is my favorite NPS “feature”.  Different teams and different executives can have heated debates on your product quality.  Engineering thinks it’s good enough.  Customer Success thinks everything has to improve – now.  Or we’ll lose all our customers.  Sales thinks we need 3-4 more features to win deals.  Who’s right?  NPS is.  It’s the voice of the customer.  If you have a High NPS score, you’re doing something right here, no matter the feature gaps or other issues.  If it’s low — take action, my friends.  Stop being so proud of yourself.  Your customers aren’t.  This is so, so important.
  • It does a good job of predicting net negative churn in bigger accounts.  If your NPS is high, then at least for larger customers … I pretty much know the upgrades are coming, the net negative churn, the expansion deals,  Like clockwork.  If your customers love you … you’re gonna sell them more.  Even if you aren’t yet.  You’ll figure that part out.
  • It works, better than I’d expect, on a relative basis.  Share your NPS with your CEO friends.  Figure out why theirs is higher than yours.
  • It builds confidence.  Struggling at $1m, $2m, $3m ARR?  If your NPS is super high, and going up … well … it’s gonna be OK.  It will.  Break through to $10m ARR, and life will get better.  The cavalry will come.

Screen Shot 2016-03-29 at 10.20.06 AM

I was wrong.  Track NPS as a core, monthly metric.  Share it with everyone.  And importantly — use it for a cross-functional discussion across Sales, Support, Customer Success, Marketing, Engineering, and Product.  It’s the one metric all of them directly impact, and all of them are equally responsible for.

Published on March 29, 2016
  • Sabrina Bozek

    Jason, I have to agree that your insights are spot on and refreshing to hear! NPS gets such a bad rep in B2B because a lot of SaaS companies only look at the overall score and do little to dig deeper.

    – Customers are groups of people, so look at the NPS on an account-level to really understand customer success, and segment the analysis to be role-based– are they a Decision Maker or End User? Your follow-up conversations will look different depending on this key piece of info!

    – Link revenue to NPS and get a true measure of how much $ is at risk of churn or prime for upsell, again looking at accounts and segments. Best way to measure ROI.

    – Re: Churn — Silent accounts are far more likely to churn faster (we have the research if you’re interested to see the correlation), so if you see an account go dark, it’s likely because they’re past the point of anger to tell you how to fix the problem. They’re moving on unless you prove your commitment to them.

    – Sharing the data across the company is the only way to improve operationally and become proactive.

    Your survey deployment & reporting system should be built to do this for your team and sync into Salesforce for ease of sharing across the org. There’s no reason to live in Excel sheets and Pivot Tables to get this kind of analysis — too many errors and so little time!

    – Sabrina
    sabrinab@waypointgroup.org – For anyone interested in the research mentioned above

  • Alexey Orap

    Jason, do you have any recommendations about how to actually measure it (tools, process..)? We have a few hundred enterprise customers and asking them to answer NPS questions each month would be simply annoying. And asking just a few of them at a time would not give statistically reliable score..

    • I realize this was a year ago, but FWIW I really like Promoter.io and think their solution may work well for you.

  • Jason,

    Nice to see you talk about this often forgotten measure.

    Perhaps the most powerful way to align groups in a company around a customer (or partner) is the Time to Customer Value. It is a particularly good set of behaviors for a startup, and would be really good to keep focused on as you grow to a $100M company or bigger.

    https://getklever.com/2016/02/23/klevers-law-time-to-customer-value/

    As for your NPS comment, a group of practitioners, companies and associations got together to create an open standard for Customer Support and Customer Success metrics that is free for anyone to use, copy and modify under a Creative Commons license. The idea is to make sure we have a balance between listening to our Customers, Employees and the Business, and applying what we learn. There has to be a clear line of sight between the objectives of the organization and what each person can affect.

    There are five categories of measures, and within that, suggested measures for executives and suggested measures for managers.

    The high level recommendations? For executives your Customer category should have
    1) A relationship component (like NPS or Secure Customer Index).
    2) A transactional component like Csat or Customer Effort Score 2.0
    3) A ‘learning’ component like the % of ‘serviceabiliity’ suggestions made by customers that are accepted.

    More details at: http://www.ocmfgroup.org/resources

    Peace,

    Phil

    http://www.getklever.com
    http://www.ocmfgroup.org

    • Gretchen DeKnikker

      Approved

  • Alignable

    Jason,
    Great post. Big believer of NPS and we used it as one of our KPIs at Constant Contact. When I co-founded Alignable we started seeing our SMB members providing guidance to each other about the brands they should use or avoid. We turned it into the SMB Trust Index where you can actually see the NPS scores across the brands SMBs are talking about. You can see the brands and their NPS scores here:

    https://www.alignable.com/small-business-insights/smb-trust-indexsm-q1-2016-results

  • Willian Becher

    Great post Jason!

    Using NPS is surely a great way to understand how your product is end-to-end by collecting feedbacks. It is fundamental to measure the NPS by segments, understanding which plan, which type of client, which type of user is succeeding and which is not.

    At http://loyalnow.com we are investing a lot of energy in developing an ideal tool for SaaS businesses, including referral capabilities for promoters for example.

    With the rise of the SaaS business, it is very important to understand the problems your customers are having to reduce churn.

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