Net Promoter Score (NPS)

What is Net Promoter Score?

Net Promoter Score is like a happiness meter for your customers.

Detailed Explanation

Net Promoter Score (NPS) is a measure that businesses use to understand their customers’ happiness. It’s like asking your customers a simple question: “Would you tell your friends to use our product?” They answer on a scale from 0 (no way) to 10 (absolutely). If they score 9 or 10, they are “promoters” who love your product. If they score 0 to 6, they’re “detractors” who might be unhappy. Everyone else is “passive”—they’re okay but not raving fans.

categories of promoters, passives, and detractors.
This is how the Net Promoter Score is calculated

Why Net Promoter Score Matters?

For SaaS CEOs or CMOs, the NPS acts as a compass, pointing towards customers’ true feelings about your product. A high NPS signifies that your customers are happy, leading to higher retention rates, more referrals, and ultimately, more revenue. On the other hand, a low NPS could be a warning sign of customer dissatisfaction and potential churn.

Potential Misunderstandings

A common misunderstanding is that NPS is a complete measure of customer satisfaction. It only measures the willingness to recommend, not overall satisfaction or loyalty. Therefore, it should be used as one of many tools to understand your customers, not the only one.

Frequently Asked Questions

  1. What’s a good Net Promoter Score for a SaaS company?
    There isn’t a definitive answer to this. It can vary by industry and company size. But, as a rule of thumb, a positive NPS (i.e., any score above 0) could be considered good, while an NPS of 50 or more is excellent.
  2. How often should we measure NPS?
    It’s best to measure NPS continuously, like after customer interactions. That way, you can track changes and react quickly if the score drops.
  3. Can NPS predict churn?
    Yes, a decreasing NPS can be an early warning sign of increasing churn. But remember, it’s just one indicator. Also look at other metrics like user activity and customer feedback.