NPS Score: is it still relevant?

For nearly 20 years the Net Promoter Score has been a core metric for businesses to assess how much customers value their product or service. Invented back in 2003 by Frederick H. Reichheld from the Harvard Business Review, it has helped companies to measure their performance and gauge the growth potential of their products and services. Here is a good overview of all basic things around NPS as this article is not aiming to cover that.

Instead, I want to explore some questions around NPS metric in a context of a SaaS business. Let’s take a look!

Question 1. Which department owns the NPS metric?

When it comes to NPS, the job of a Customer Success team is to collect, monitor and report the score and the customer feedback that comes with it. Together with Customer Support, they are the closest team to your customers.

Although Customer Success teams have a greater influence on the experience customers have with the software, it’s worth noting that NPS score is not a reflection of how good a Customer Success team is (more on this later). The score is given based on a customer’s overall interaction with your company starting from Marketing, Sales and the product itself. For that reason, some may say NPS should be considered as an OKR metric that sits across various departments in a SaaS business. Operationally this can mean an ambiguity and a lack of ownership. So if you care about NPS score and are asking your teams to own it, it’s the Customer Success department that should raise their hands. In the absence of a CS team, NPS should sit within Customer Experience or Customer Support.

Answer: Customer Success team should own NPS within a SaaS business.

Question 2: What is the best way to ask NPS question?

The choice is normally either via email or in-product. In my experience, I’ve tried both and here is what I found.

Email:

Response rate was around 25% which is pretty good for automated emails. We tended to have a lot of positive feedback, which was great. However, I found that the positive feedback was directed towards the actual Customer Success team and less so about the product which is not so valuable. Building strong relationships between CS and a customer is an important part of the job but not the ultimate goal. The ultimate goal is to deliver real value so that a customer keeps using the product more and more.

My theory was that this was to do with the email creating a distance between the customer and the product. Email lands in the customer’s inbox where they normally communicate with other people and are distracted by other conversations. Our cognitive mindset operates differently when going through our emails vs working in software. For that reason, when presented with the NPS question via email, the customer might have subconsciously associated it with the CSM person and the service they were providing, rather than the actual product. As a result, I was keen to move away from asking the NPS question via email.

In-product:

Once the NPS question was set to appear in the actual product when our customers were using it, the picture was quite different. The response rate was pretty good and, as our customer base grew, it became fairly consistent. I found that the feedback was directed at the actual product, and the people from the team were mentioned less frequently. The constructive feedback from our detractors was more honest and useful since the personal connection of answering email was removed. It provided more actionable insights on how to improve the product.

Answer: Show the NPS question in-product if you want to focus customers’ feedback on the software, rather than the service.

Question 3: What score is good?

There is a lot of information out there about NPS benchmarks. Most of it echoes this:

• Anything above 0 is a good territory. A negative score indicates a lot of issues.
• 0–30 is a good range, although an improvement is needed.
• Above 30 indicates that your company is doing well and has more happy customers (promoters) and unhappy ones (detractors). 30–40 is also quoted as a good target for SaaS specifically.
• NPS over 70 means your customers love you and you have a world-class product on your hands.

Let’s take a look at this.

Here are benchmarks for various industries.

Here is technology / software NPS score benchmarks for 2020 where an average score appears to be around 50–60.

Here are the NPS scores from some leading software:

Microsoft — 45

ZOOM — 77

WordPress — 73

GoogleDrive — 50

Mailchimp — 50

Dropbox — 32

Asana — 42

It’s great to be aware of the industry benchmarks and monitor scores for the leading software, but it’s your own company trends that will tell a clear story.

Here are my learnings.

Once we started measuring NPS in-product our sweet spot score was around 65. In months where retention was not good or technical difficulties arose, it dipped around 30. Although still considered good in terms of benchmarks, the downward trend signalled the issues within the product and services that needed attention. Once acted on and resolved, we were back in our 60s. The lesson is to not fool yourself with the vanity benchmarks that would suit a positive narrative and focus on what your company NPS trends mean for your company specifically.

Answer: Study benchmarks for your sector but keep an eye on your own benchmarks and trends even closer.

Question 4: How relevant NPS score is REALLY?

There are certain SaaS KPI metrics that indicate a clear view on what is happening with the business and the stage you’re at.

Continuous % ARR growth = well done, you’ve found the product market fit.

Sustainable % churn rate = you’ve built a sticky product and a solid service around it.

>100% Net Revenue Retention = your business is maturing and entering proper growth.

When NPS is moving in the right direction, what does it really mean?

As a much softer and more holistic metric, I believe it does indicate the overall health of the business and its growth potential. But I would treat it with caution though and be wary not to turn it into a vanity metric. Ultimately, the hard metrics (New Revenue, Churn, Retention etc) will give you a much clearer view of the state of things, whereas NPS trends will signal issues. A detractor score should help you locate your unhappy customers that require attention.

On the opposite, a promoter score doesn’t automatically guarantee a retained customer. This is where it gets really blurry. In my experience, I have witnessed NPS promoters cancelling their contracts and singing praises to the product as they did that. If you ever had a customer leaving a 5* Capterra review at the same time as they were leaving the service (“Your product is great but I’m taking my business elsewhere”), you’ll know what I mean.

Right, does it really matter then?

Any form of collecting customers’ feedback should be considered. Collecting NPS scores in-product is a great way to do so at scale. It is likely to indicate product gaps or validate perceived value. I wouldn’t take it as a gospel though.

Answer: NPS is still relevant but it’s by far not the whole picture, but rather a part of it.

Here are my takeaways about NPS metric in a context for SaaS.

1. Customer Success should own NPS within a SaaS organisation.
2. Collect NPS score in-product and not via email.
3. Set your own benchmarks against industry standards.
4. Treat NPS as a soft metric to bring “colour” to your company’s hard OKR metrics such as revenue growth rate and retention.