This blog was originally published here.
We all know that one crucial factor for the success of a SaaS business is its cumulative revenue growth. While very often SaaS companies focus on revenue growth by means of customer acquisition only, retention and expansion revenue is also important for a sustained growth. In this context, SaaS businesses must consistently take measures to improve customer retention. The most sought-after and renowned metric to do so is the Net Promoter Score. This article discusses how to use NPS to grow SaaS businesses.
Correlation between growth and customer experience in SaaS
In one of its research on SaaS organizations, McKinsey came up with some interesting results. The research analyzed a subset of 75 companies that fell into three revenue ranges: from $10 million to $20 million, $20 million to $50 million, and $50 million to $100 million.
Here are the results of the research:
- Companies in the top quartile of growth maintained lower net-revenue churn than mean performers.
- The net-revenue performance of the top-quartile-growth performers was driven most significantly by advantages in gross-revenue churn as opposed to revenue expansion (upsell/cross-sell) within existing accounts.
- Companies that excel at lowering gross-revenue churn emphasize several key customer-success best practices throughout their organizations.
This study gives some deep insights into why customer experience and customer success are crucial for SaaS businesses to thrive. It also reinforces that customer churn can bring a massive negative impact on revenue. We have addressed this subject in an earlier post, discussing how customer success can bring a substantial increase in revenue and growth of a SaaS business.
In this article, I will present a methodology that SaaS businesses can use to leverage NPS for growth. Let’s start by understanding the customer journey of a SaaS customer and correlating it with the NPS feedback.
Correlating SaaS customer journey to NPS
To be able to make effective use of the NPS feedback, SaaS businesses must map it with their customer journey. By conducting the surveys based on each of the phases that comprise this journey, SaaS organizations can quantifiably determine which part of the journey is broken and what needs to be done to fix it. With such an objective approach, it becomes easier to improve customer experience and hence fuel company growth.
I believe that there are, essentially, five phases in the customer journey of a SaaS customer.
1. Awareness
The first phase of the customer journey is when a prospect is becoming aware of the brand, whereby he is looking out for a solution to his problem. He browses through and researches various solutions by different means – either over the web or by checking with his friends and folks. He zeroes down on a few viable solutions based on his requirements.
This is a phase where the SaaS business does not know much about the prospect. So, SaaS businesses must ensure that they make it easy for potential customers to reach them. Clear information about the product, testimonials by existing users, advantages of using the solution, and the USP of the solution must be accessible to the prospects.
Questions that SaaS businesses must ask themselves in this stage:
- How friendly and intuitive is the website?
- Do you use social media effectively to spread awareness about your product?
- Is your website showing up in the relevant search results?
2. Consideration
This phase is where the prospect begins to evaluate various options that he has finalized in the previous step. In this stage, he will sign up for a free trial or create a free account to check whether the solution meets his requirements and expectations. He understands whether the product adds value, resolves a pain-point, and is agreeable to his expectations.
SaaS businesses must look at providing a great value addition in this phase because a user’s experience here will determine whether they turn into customers.
This stage is also where SaaS organizations can send out NPS surveys to customers. Based on the feedback, they can gain actionable insights into easing the process through which potential customers can reach them.
Questions that SaaS businesses must ask themselves in this stage:
- How many steps are required for a customer to create a free account?
- Is a cheerful, well-written welcome email available?
- Do we have a product tutorial?
- Is the product intuitive?
3. Purchase
In this phase, the prospect is converted into a customer. He has found substantial value in the product and is willing to pay to use it further. Moreover, he engages other employees in his organization to purchase it.
Conducting an NPS survey in this phase is imperative for businesses as they understand the ease and convenience of the purchase process.
Questions that SaaS businesses must ask themselves in this stage:
- How many steps are involved in the purchase process? Are some of them redundant?
- What channels can customers use to pay?
- Is the purchase process secure?
4. Onboard
In this process, the paying customer now sets up the product for use and invites other members of the organization to use it further.
Again, an easy and seamless onboarding process creates a good experience for the customer. This can result in further referrals. To get a holistic picture of the customer experience, you must collect feedback from the all users, and not just the buyer.
Questions that SaaS businesses must ask themselves in this stage:
- Is a welcome email for members available?
- Is the documentation process easy to follow?
- Does the customer get educational emails that aid him in using the product effectively?
- Does the customer receive a call from the support team to follow up on the onboarding process?
- Is it easy to invite other users to sign up for the product?
5. Support
In this phase, the customer contacts the customer support for resolution of a query. He might do so through any of the channels available to him at any time of the day. The support team resolves the query effectively and turns an unhappy customer into a satisfied and loyal one.
This is the most crucial step at which all SaaS businesses must NPS surveys. Collecting feedback and acting on it will bring more loyalty among customers – a factor that is crucial for all SaaS businesses to succeed.
Questions that SaaS businesses must ask themselves in this stage:
- How easy is it to reach the customer support team?
- What are the channels available for the customer to reach the team?
- In how much time is a resolution provided to the customer?
- What are the categories in which the support requests fall? (Bugs in the solution, functionalities not present?)
Thus, mapping the customer journey and conducting NPS surveys at each of these stages will help a business understand not just the concerns of the customers but also the features and services that customers enjoy.
Utilising transactional and relational NPS feedback
Once the customer journey is mapped and an understanding of customer expectations at each step is developed, you must look at dividing your feedback into two broad categories: transactional and relational. Transactional feedback is captured at the end of a transaction. The transaction need not be a monetary transaction though. For instance, even technical support is a valid transaction.
On the other hand, relational feedback is captured at a regular time interval from all or a segment of your customers. This is transaction independent. The idea is to collect feedback from even those customers who might not have transacted recently. Relational feedback is a good opportunity to restart the conversation with an old client whom you have not heard from in a long time.
It is important to use a mix of both transactional and relational feedback to develop a holistic picture of customer experience for a SaaS business. By targeting multiple transactions identified from the customer journey map, you will understand what’s working and what’s not working at the touchpoint level. With the NPS score at each touchpoint laid out, you would be able to identify the internal root cause behind poor or good experience at each touchpoint.
This information must be used to immediately fix problems in the path of customers. In addition, you must look at replicating for all other touchpoints, the processes that create positive customer experience at one touchpoint. Of course, some tweaking would be required.
I can imagine that with such a wide variety of customer transactions happening almost daily in a SaaS business, you’d think that a customer will get irked by frequent feedback requests for each transaction. Of course, he will get annoyed if you bring up a survey question after every transaction.
So, let me help you with a simple framework that will save you from such a situation. Ideally, you shouldn’t seek feedback on each transaction from the same customer. My recommendation is to have a segmentation methodology to select the right group of customers for each transaction and seek only their feedback. Over a period of time, you will have information about each customer’s feedback across a majority of touchpoints in the customer journey.
The segmentation method that I recommend is shown below. Club up different transactions by their frequency and create a sub-group based on the impact of recency of the transaction on customer experience. Let me explain this through examples.
1. High frequency – high recency
Transactions that are high in frequency and have an immediate impact on customer experience would make it to this segment.
Let’s consider a SaaS CRM product and identify the kinds of transactions that would fall into this category. All active users of a CRM software would frequently add new contacts/leads and send connection or nurturing emails to them on a daily basis. The user would expect this activity to be easy and quick. As you can see, the experience of performing this action is immediate. However, if the CRM makes it cumbersome to add new contacts and makes the user wait before the contact can be added to a particular campaign, it is going to mar the user’s experience. This is a typical example of a transaction that would fall under this segment.
There could be other high frequency and high recency transactions. What’s important to remember is that you should aim to offer automation and efficiency to the user on such transactions. In order to capture feedback at such a touchpoint, target only the most recent and impactful transactions. Don’t seek feedback for every transaction. If a user doesn’t respond to the first instance, do not bother the user again.
2. High frequency – low recency
Continuing with the same CRM example, let’s look at transactions that are high in frequency but have a delayed experience.
An example of such a transaction could be the purchase and on-boarding touchpoint. There could be frequent sign-ups happening for the CRM and almost every new user would go through an onboarding flow. Typically, a new user would take some time to experience the entire process and play around with the product.
Seeking feedback immediately after the sign-up is futile because the user would not have had a chance to experience the entire product. Therefore, it is important to delay the feedback request on this touchpoint. Ideally, the CRM application would track a user’s activities and therefore would know when the onboarding is completed. Once the user reaches this stage, feedback related to his purchase and onboarding experience must be collected.
It is important to deliver easy and quality experience on such touchpoints. Don’t rush into asking for feedback. Wait for the right point in the transaction and ask for feedback only after the user has experienced the complete transaction.
3. Low frequency – low recency
A typical example of such a transaction is customer service or technical support transaction.
Ideally, the frequency of such a transaction should be low and the support provided may have a long-lasting experience for the customer. It is advisable to build such transactions with an outlook to deliver a memorable experience whenever the customer reaches this point in their customer journey.
Let’s take an example of a scenario where a user wishes to create a new deal on the CRM. Let’s say the CRM wouldn’t allow the deal creation without adding an alternate contact. In a situation where the user might not have an alternate contact, the user is at a loss of options to proceed.
To resolve this issue, the CRM must disable the condition of adding an alternate contact to create a new deal. It might take time for the support team to get this fixed. Hence, the entire transaction could take several days.
Asking for feedback on such a touchpoint right after the contact with the support team would annoy the user. Therefore, it’s best to wait for the entire transaction to be completed and seek feedback once the user has experienced the fix provided for his concern.
It is also important to personalize the feedback request reminding the user about the transaction. This helps the user to provide detailed feedback that can be used to improve the process.
4. Low frequency – high recency
Some transactions are low in frequency, however, the experience is immediate.
In the CRM example, such a transaction would be when a user closes a deal on the CRM. At this point, the user has experienced a full cycle of the CRM’s sales process management flow. Hence, the feedback must be collected immediately from the user at this instance.
However, the feedback question must be comprehensive enough to capture the user’s experience for the entire flow. It is best to target this feedback as an in-app feedback form. Whether the user responds to the feedback request or doesn’t, it is important to follow up with the user to have a conversation and collect more data about his experience. Having gone through the complete cycle, the user would have considerable insights about his experience that would help the SaaS company improve the product and processes significantly.
Set up a closed-loop NPS system
Once you have established the customer segments and the transactions where you’d be collecting NPS feedback. It is now time to set up a closed-loop process. The closed-loop process is depicted in the above diagram. Here are the different steps involved in the closed loop process:
1. Listen
Firstly, you must identify the touch points at which you’re capturing feedback from your customers. This is to ensure that you are listening to your customers’ feedback on the right steps.
1.1. Fix
Once you’ve captured the feedback, you must fix the customer complaints and provide a tactical solution. There are some issues that can be addressed promptly and do not require a large team or massive planning. So, you must focus on fixing these issues quickly. This provides you with an opportunity to score some quick wins.
2. Understand
Secondly, you must get to the root cause of customer dissatisfaction and understand the drivers of your customers’ satisfaction or dissatisfaction. This would entail analyzing the data. The analysis can be done by slicing and dicing the data or by deep-diving to some qualitative feedback that you have received. But, this essentially means putting your head around what your customers are saying about doing business with you. This must encompass all the feedback: the good, the bad and the ugly!
3. Design
Thirdly, you must build an action plan for improving CX. This must include developing project plans and budget. That’s where looping in the stakeholders and inputs from senior management is critical. This allows you to get a buy-in from the senior management for these projects. Further, it helps to fix customer issues based on the understanding of customer experience being delivered.
4. Implement
Once you have defined the projects you need to drive to improve customer experience, showcased the ROI, and received approvals from the senior management, the final step is to implement the projects. To do so, you must identify the stakeholders and drive projects based on defined timelines. That’s a loop; it’s a continuous process. You’ve to continuously listen to the voice of the customer and evolve the experience you are delivering to your customers.
How often should SaaS businesses collect NPS feedback?
Not collecting feedback regularly can cause a SaaS business to miss out on some important information whereas very frequent feedback collection can result in customer fatigue. So, unfortunately, there is no one right answer to this question – it depends on multiple factors as discussed above.
What are the tools a SaaS business can use to measure loyalty?
There are a wide variety of tools available for SaaS business. However, you should check on the best one depending on your requirements. For instance, a few tools send surveys only via email whereas some others use multiple channels such as SMS and a phone-call. Other factors to bear in mind before making a decision on purchasing a software are features such as survey customizations, notifications, analytics and reporting of feedback, workflows and custom feedback, and pricing.
Some of the most sought tools after ones are:
How can the Net Promoter Score help to measure and enhance customer experience?
Helps derive actionable insights
The NPS question just gives a number and helps a business identify Promoters, Passives, and Detractors. However, the follow-up question that asks for the reason behind the score is a goldmine of information. The verbatim comments from customers help a business derive actionable insights by understanding the pain points and grievances of a customer.
It is important to understand that customer loyalty does not come at one stage of the customer experience. Rather, it is a product of the customer’s engagement with your brand at each instance across the customer lifecycle. NPS helps a SaaS business understand challenges and assets across each customer touchpoint – right from onboarding, implementation, and training to renewal.
Aids in adding new features into the product roadmap
I believe the one amazing reason for conducting NPS surveys is that the feedback it collects from the clients gives important perspectives on your product roadmap. Many times, it might happen that you want some features to be incorporated into the product. But, the feedback that you get might suggest the opposite. In an earlier blog, I have conveyed how customer feedback added some valuable inputs into the product. This could not have been possible if it were not for the feedback.
Helps personalize service based on customer segments
By identifying the trend of customer feedback, an NPS survey also helps to personalize the service based on the three segments of customers – promoters, passives, and detractors. All businesses must correlate and map this feedback received to various teams within their business – customer service, product, engineering, marketing, sales and the like. Then, appropriate remedial action can be taken based on the pattern of feedback received. On the other hand, this data also helps you evaluate the areas where you are surpassing expectations.
Helps in identifying promoters and up-sell
Promoters are the brand advocates. SaaS business can take the opportunity of up-selling to such customers. Also, you can ask for referrals and testimonials from such customers. Do remember to show your love to such customers too – by thanking them personally, giving them a preview of new features, and incentivizing their relationship by giving one-off discounts.
Helps in identifying detractors and passives and convert them into promoters
Identifying detractors and passives is only half the work done. The more important other half is to close the loop on the customer feedback received and turn such customers into promoters.
How to rollout NPS as a metric of customer experience?
Be prepared to embrace all kinds of feedback
Before rolling out the NPS process, a SaaS business must be ready to embrace all types of feedback and work on it appropriately. It must be transparent in its feedback collection process in terms of collecting feedback from all its customers – both happy and disgruntled. This is a certain way to bring purity to the final NPS score.
Ensure that the senior management is aligned with the program
The NPS program will fail if it is a bottom-up one; rather, it must flow right from the top. This makes it easier to align all the stakeholders with the common goal of improving customer loyalty. Further, approval and allocations in terms of resources, effort, and finances are easier with the senior management on board with this initiative.
Set up the relevant team to own the process
The success of the NPS program would entail setting up the right team to own the entire process. There is no denying that only a dedicated team can do justice towards the goal of creating loyal customers and enhancing customer experience. Many times, when this function is clubbed with another team, it is taken up only as an additional task and not as a priority.
Establish the processes required to act on feedback
A SaaS business that is working on an NPS program must predefine the process to collect, analyze, and act upon feedback. This could be either by means of an in-house program or an external tool. Further, there must be a fixed process to close the loop on customer feedback – this is the one aspect that will massively improve customer experience, and thus enhance customer loyalty.
Focus on the low-hanging fruits immediately
NPS helps improve customer experience in two ways – there are the short-term CX gains and the long-term ones. Now, the short-term gains refer to those issues that can be worked upon in the first few months of implementing the NPS program. These changes could be made based on the immediate feedback received from customers. It could be something as simple as setting reminder emails for invoice payments for customers or an easy-to-spot contact number of the customer support team on the invoice. You will notice an upward trend on your NPS score with such minor changes.
Get to the bigger goals with time
In contrast to the short-term wins, long-term wins are those that take time to materialize and work upon. A considerable amount of resource and budget allocation might be required for such activities. Enhancing or adding new features and functionalities to a product, or introducing new teams to the organizational structure could be examples of such goals.
Conclusion
In conclusion, start your journey to growth by mapping the customer journey, segregating transactional and relational feedback, and subdividing the transactions based on their frequency and recency. Further, utilizing the methodology presented in this article, you could establish a Net Promoter Score program that will deliver tangible results for your organization.
