User retention is key to the livelihood of any company. It can be five to 25 times more expensive for a SaaS company to acquire a new customer than to retain an existing one. But how can you tell if your customers are truly happy with your company? Measuring your Net Promoter Score (NPS) is a good benchmark to understand your customers’ satisfaction with your service.
NPS is a straightforward metric that takes the pulse of your customers to help determine whether your customers are so thrilled with your service that they refer your company to another person, whether they are currently satisfied but could be willing to switch to another platform, or whether they are unhappy to the point of deterring others from using your product.
How Is Net Promoter Score Calculated?
To calculate NPS, start by asking your customers one question: On a 10-point scale, how likely are you to recommend [the product or company] to a friend or colleague? The respondents to this question are grouped into three categories:
- Promoters answer 9 or 10 and are seen as loyal customers who will continually use your product and refer others.
- Passives answer 7 or 8. Although they are currently satisfied with your product, they may be willing to consider a competitor’s offering.
- Detractors answer 0 through 6 and are considered unhappy customers that could negatively impact your growth or reputation.
Disregard the number of passive respondents to calculate your total NPS:
Net Promoter Score = % of Promoters — % of Detractors
The range can vary from the lowest score of -100 (if every respondent is a detractor) to the highest score of +100 (every respondent is a promoter). For example, if you surveyed 100 customers and 50 percent were promoters, 30 percent were passives, and 20 percent were detractors, your NPS would be 30 (50 percent minus 20 percent).
Analyzing and Understanding Your NPS Score
You should try to do more than just take your NPS score as a one-time high or low numeric value. As a best practice, measure your NPS score on a regular basis to identify trends in how your business is performing.
If you see an increase in promoters over time, then your business is addressing your customers’ pain points appropriately and this may be reflected in revenue growth. On the other hand, if you’re seeing an increase in the number of passives, that could indicate early risk of customer churn, which significantly impacts the growth of SaaS companies.
Looking at the distribution of your respondents across the three categories can help you identify opportunities for improvement, too.
Consider engaging your promoters to generate more positive reviews for your service. Potential customers are trust social proof—more positive reviews can help your organization look more credible in the eyes of a wary consumer. Your promoters are also a good group to explore opportunities for upselling additional services or for beta testing product updates.
Prioritize reaching out to your high-scoring detractors (those that answered 4, 5, or 6) to move them back into the passive category. If you are able to follow up and ultimately resolve their complaints in a timely manner, they will be more willing to give your business a second chance.
Additionally, if you are seeing the same type of complaint from your detractors, it could be a sign that your product missed the mark in solving your customers' pain point.
Respondents in the passive category are in no man’s land, but have the potential to take your company to a thriving community of promoters or down an unhappy road of detractors. You should be working to make your passives into promoters by learning why they aren’t enthusiastic about your product.
Perhaps they aren’t aware of the full capabilities of your product and could benefit from additional education, or maybe they had a poor customer service experience and your customer success team can handle the relationship better in the future.
Ultimately, your NPS score is a measure of the long-term loyalty of your customers. Identifying why your users are or are not satisfied is a great way to tackle customer success and product initiatives that directly reflect your customers’ needs.