I wrote a version of this post way back in 2016. It created a lot of discussions and was more controversial then — that NPS was a great core metric. We’ve all evolved a lot since then. We’ve gotten great at measuring both NRR and GRR. And almost everyone does some sort of regular NPS survey. And most segment it across customer size or other segments.
Back then, I wrote that when I was a SaaS founder, I thought Net Promoter Score (“NPS”) was a somewhat dumb, Big Company metric. There were a bunch of things I didn’t like about it:
- NPS is backward-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.
Customer Summit, High NPS Moment.
These criticisms of NPS are and were all true. But what I also saw was NPS, measured consistently, has big benefits. Now I work with and have invested in 35+ SaaS companies. 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.
- A downturn in NPS keeps you honest. If NPS drops, it is often tied to outages, to an overstretched CS team, to a big competitive push by another vendor. When you see it go down, it can shake the team out of a bit of complacency.
- And most importantly, it can be a rallying point for the whole team. The whole team can influence NPS. You can’t always ship that big missing feature, or spend $100m in marketing. But everyone can do something to make customers happier. Challenge the team to via NPS, and watch them rise to the occasion.
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.
And pair it with driving up NRR, and you’ll see the economic benefits of this hard work.
The power of involving your customers in your roadmap is ????. We wanted to make @GainsightHQ easier to manage and deploy (esp for small cos) and created a #CustomerSuccess Ops Council to help guide us. This group took our Admin NetPromoter Score from 31 to 73 in 7 quarters. ???? pic.twitter.com/I6HV6y4pmX
— Nick Mehta (@nrmehta) April 4, 2023
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
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..
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: https://www.ocmfgroup.org/resources
Peace,
Phil
http://www.getklever.com
http://www.ocmfgroup.org
Approved
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
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 https://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.
I realize this was a year ago, but FWIW I really like Promoter.io and think their solution may work well for you.
Great post, does anyone have any more detailed success metrics they can share? So if you NPS went from -20 to 50, what revenue growth occurred with this change?