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Here’s Everything You Need To Know About Net Promoter Score (NPS)

Here’s Everything You Need To Know About Net Promoter Score (NPS)

Net promoter score in SaaS measures customer loyalty based on their likelihood to recommend a product or service, scored on a 0 to 10 scale.

What Is Net Promoter Score (NPS)?

Net Promoter Score is a widely adopted customer satisfaction metric in the SaaS industry. It gauges customer loyalty by asking customers how likely they are to recommend the product or service to others on a scale of 0 to 10.

This metric was developed by Fred Reichheld, a partner at Bain & Company, in 2003 to help businesses evaluate customer satisfaction and identify key areas of improvement. 

How Are Net Promoter Score Respondents Categorised?

Respondents of a Net Promoter Score (NPS) are categorised into three groups:

Promoters (9-10): These are loyal customers who are enthusiastic about the product or service and are likely to recommend it to others. They are valuable brand advocates and SaaS companies should actively reach out to them for positive reviews.

Passives (7-8): These customers are satisfied with the offering but are not particularly passionate about it. They are less likely to actively recommend the product. However, they may not discourage others from trying it. Engaging with passives and addressing their needs can help convert them into promoters.

Detractors (6 and below): These are your unhappy customers who are dissatisfied with the product or service. They are unlikely to recommend it and may spread negative remarks. Addressing their concerns and improving their experience is crucial to reduce the churn.

How To Calculate The Net Promoter Score (NPS)?

The NPS score is calculated by subtracting the percentage of detractors from the percentage of promoters:

Let’s understand this with an example: Suppose a SaaS company conducts a survey and receives responses from 200 customers regarding their likelihood of recommending their product to a friend.
Out of these 200 respondents:

  • 120 customers are promoters (who rated 9-10) or 60% of the total respondents.
  • 20 customers are detractors (who rated 0-6) or 10% of the total respondents.

Promoters% – Detractors% = NPS
60% – 10% = 50

Therefore, the NPS for the company is 50.

According to Fullview, the average NPS benchmark in SaaS/Computer Software stood at 41, as of 2022.

When Should SaaS Companies Conduct Net Promoter Score Surveys?

SaaS companies can leverage customer journey insights and product usage analytics to identify active users to gather NPS feedback. 

There are two primary survey types to consider:

Transactional NPS Surveys: These surveys are sent out after specific interactions or transactions, such as after a customer uses a feature, completes a purchase or contacts customer support. These surveys are focussed on particular touchpoints.

To manage transactional NPS surveys effectively, SaaS companies should monitor the frequency of user actions. For example, if a user uses a feature too often, they won’t prefer answering a survey each time. 

Relationship NPS Surveys: These surveys measure overall satisfaction, customer engagement and brand advocacy. The initial survey should be sent after the user transitions to a paid plan or reaches their activation point. 

How Companies Can Improve Net Promoter Score (NPS)?

Improving Net Promoter Score (NPS) involves a combination of strategies focussed on enhancing customer experience, product quality and overall satisfaction. A few approaches that can help are:

Understand Feedback: Analyse NPS survey responses to identify recurring pain points. Understanding the reasons behind the ratings given by customers is crucial for making meaningful improvements.

Enhance Product Features: Continuously evolve and enhance the SaaS product based on user feedback. Prioritise features that align with customer needs and bring tangible value.

Optimise UX: Improve usability and offer intuitive navigation within your software. Make it easy for users to accomplish tasks and access support if needed.

Proactive Customer Support: Offer exceptional customer support tailored to individual needs. Quick resolution of issues and assistance can significantly impact customer satisfaction.

Educational Resources: Provide tutorials and training materials to help users maximise the value of the product. 

Address Pain Points: Focus on resolving specific pain points highlighted in feedback. Prioritise these areas to show customers that their concerns are heard and acted upon.

Incentivise Referrals: Encourage satisfied customers to refer others by implementing referral programmes or offering incentives for successful referrals.

Measure & Iterate: Continuously measure NPS and other customer satisfaction metrics. Use these insights to iterate on strategies and improvements.