This story is a version of a post published here.
What is considered a good NPS in the SaaS industry?
Over the years, various companies such as Temkin Group and CustomerGuage have conducted numerous research studies to identify what is a good Net Promoter Score for SaaS businesses. Unfortunately, no two answers are the same. I have compiled a few answers from publicly available industry research.
Retently believes that it’s hard to achieve NPS above 60 in SaaS
On the other hand, Growthscore.io claims anything above 55 is best!
This is also backed by a 2016 research data from Temkin Group…
While yet another research from Qualtrics claims that the top NPS is in low 50’s
Bonus: Read their full answers on Quora
Evidently, there is no straight answer to this question. I have also come across market research companies that offer NPS benchmarking service that help organisations compare their NPS with their competitors’. I am not entirely sure about the process followed in this benchmarking exercise. From what I understand, a primary research is conducted to collect NPS response from customers using competing products. Of course, the research questionnaire doesn’t just ask the NPS question – it captures several other qualitative and quantitative data points. Such an exercise, however, delivers localised data and might not serve SaaS products that are inherently meant to be global.
Regardless of such discrepancies, all industry experts suggest that SaaS companies not chase the score. Instead, they recommend that the top management focuses on what is done with NPS feedback and how it can be used to grow the business.
Does Net Promoter Score impact the business?
Businesses use Net Promoter Score (NPS) as a metric to measure customer loyalty. NPS indicates the propensity of customers in recommending their products or services in their network. Does this mean that a higher NPS would result in getting tons of recommendations? If so, what must a company do to increase its NPS? Remember that NPS as a quantitative metric can show whether you are doing the right things in your business. However, using NPS feedback data to create a positive impact on your business is a different game altogether.
Let me share a case study on how one of Omoto’s eCommerce clients utilised NPS to improve its business.
One of our clients is an eCommerce company in India that sells gifts, cakes, and flowers online. When this company started using Omoto, its management goal was to understand what factors affect customer experience and how they could move the needle in improving that experience. The question was – how to go about this?
The company utilised Omoto’s detractor management system to first set up a process that addressed unhappy customers. It set up a dedicated team that closed-the-loop with every detractor within twenty-four hours of receiving a detractor response. By proactively communicating with unhappy customers, the company has been successful in recovering its detractors and, subsequently, delighting them.
Next, the management focused on taking action on promoter feedback and utilised its promoters to enhance its social media voice. Through an automated promoter activation campaign, over 60% of the brand’s promoters responded by subscribing to product updates and also following the brand’s Facebook page. This helped the brand grow its social media audience organically. Promoters who followed its Facebook page are willing to buy more from the brand and to amplify the marketing message by sharing page updates in their social network.
This eCommerce brand understood the importance of keeping the NPS survey simple and avoided some common mistakes in their NPS surveys. As a result, its survey responses doubled. This ensured that the company receives enough responses to gauge customer feelings and take informed decisions on how to improve the customer experience.
As you can observe, this eCommerce brand was able to reduce customer churn and spread positive word of mouth on social media by setting up a well rounded NPS system.
Furthermore, they were also able to increase NPS survey response rates, which helped them understand the real customer issues and make apt business decisions based on these insights. Gradually, customers observed that their feedback is being worked upon, which turned them into brand advocates.
How is this relevant to the Software-As-A-Service (SaaS) industry?
As we know, SaaS businesses sustain an upfront Customer Acquisition Cost (CAC) and it takes a long time to recover it entirely. Since SaaS products are available on a subscription-based model, customers can cancel their subscriptions anytime. Thus, it is important for SaaS organizations to retain customers and reduce customer churn. To reduce customer churn, measuring NPS aids a SaaS company in identifying detractors and the reason behind their unhappiness. With this understanding, it becomes easy to engage with customers and close the loop on their feedback.
Companies that have a poor NPS rating but a high NPS feedback response rate can heave a sigh of relief; they can be sure that customers are at least engaged and not lost. Yet… SaaS companies must seize this opportunity and use the feedback to focus on customers’ grievances, take quick action on their feedback, and improve their experience. When customers see that their feedback is being valued and acted on, chances are that they would become loyal brand advocates once their concerns are addressed within a reasonable time.
Bonus: Read how SaaS businesses can act on NPS Feedback on Omoto
It is perhaps easy to inflate one’s NPS and hope that customers will recommend the SaaS product or they will keep renewing the subscription. However, merely recording a high score will not boost the business’ growth. To use NPS optimally for the growth of a SaaS business, it is crucial for companies to go beyond the score and focus on acting on the feedback shared by all customers.
Undoubtedly, collecting NPS feedback is sure the first step forward. Stick around and I will show you how.
Is a high NPS good?
I have heard a good many companies boast about having a really high NPS rating – as high as 70 or even more. Honestly, this could be misleading. In my experience, I have come across a few companies that claim to be industry leaders but they neglect the customer experience.
Don’t get me wrong, I don’t mean to say that a high NPS is incorrect or unattainable. My point is that the qualitative feedback received in the NPS responses – the answer to the question ‘What is the primary reason for this score?’ – is an important aspect of the entire Net Promoter System.
Using this feedback, SaaS companies must actively listen to the Voice of the Customer to maintain harmonious relationships with these customers. Acting on the feedback and closing the loop would help SaaS companies increase customer retention and reduce customer churn.
What are some of the reasons for misleading high NPS?
NPS feedback is collected only from happy customers
With the good intention of maintaining a customer focus in service delivery, many companies set up NPS as a Key Performance Indicator (KPI) for their customer facing employees. Unfortunately, to meet targets and perform better than their colleagues, employees collect NPS responses from only those customers who have had a positive experience with the brand – the promoters.
Indeed, a high score gets reported in the company’s strategic meetings and employees are offered juicy incentives. However, this hampers the company’s chance to capture the real needs and grievances of customers. By not capturing and acting on the feedback shared by passives and detractors, the company unknowingly aggravates the dissatisfaction of these customers. Consequently, the chances of customers churning and spreading negative word of mouth increases, eventually slowing down business growth.
How to overcome this: Employees must receive regular training on how to be empathetic towards customer issues. This way, employees would always stay motivated to be responsive to customer feedback and resolve customer concerns rather than collecting feedback just for the sake of reporting high NPS to management.
Additionally, the top management team must actively engage with customers, especially detractors. This way, employees would truly comprehend the sense of commitment and passion of the company’s leaders towards customer experience.
Bonus: Learn how to build a customer centric culture via Omoto
Detractors are not engaged with the brand
Another reason why companies could be recording a high NPS is that detractors have not responded to the NPS survey. Such a situation is alarming because if unhappy customers are not expressing their concerns with you, some of them will spread negative word of mouth against you. Not only will you lose these customers over time but you will also reduce your chances of acquiring more customers due to negative word of mouth.
How to overcome this: You must improve response rate. Companies need to first identify customers who have not responded to the NPS survey. Personally reaching out to these customers to understand their concerns would help the company build a great relationship with them. Additionally, in order to encourage more customers to respond, a SaaS company must communicate in a way that gives customers the confidence that any and every feedback will be addressed.
Additionally, designing better surveys could also increase engagement of detractors with the brand.
How can SaaS companies achieve good NPS?
Remember that NPS is not a market research tool
NPS is a system that enables you to listen to the voice of the customer and use it to derive insights, making incremental business improvements. It is not a metric that you can use as a research exercise. This initiative should not be about adding just one NPS question in the plethora of questions that you are already asking your customers. Use it in its truest flavour, bring in purity to that number, so that it can add value to business growth.
Don’t forget to close the loop
You must ensure that you are closing the feedback loop on your detractors, passives, and promoters. If you are not doing so, your customer would certainly feel that this is just an eyewash exercise that you are not serious about it. Apart from setting the context that you are serious about customer feedback, closing the loop also gives you a chance to restart a dialogue with customers who were at risk of stopping their subscription. With promoters, this conversation could lead you to up-sell opportunities.
Focus on the ‘why’ and not just the score
The answer to ‘why’ of the NPS questionnaire is a gold mine of information. You need to make sure that you are meticulously reading every comment in the NPS responses. For instance, there could be times that a customer has given a promoter rating but still has given an advice on an area to improve. Don’t you think you should put special emphasis on taking action on this feedback?
Share customer feedback within organization
Customers tend to leave both negative and positive feedback. You must share these feedback openly within your organisation.
Negative feedback shows the team where they need to improve.
On the other hand, the positive feedback allows you to plan how to tune your marketing message and understand what your customers like about doing business with you. You would also identify what kind of customers love doing business with you, which could help you get to product market fit.
Sharing both positive and negative customer feedback within the organisation builds a culture of transparency and customer focus. Teams would be intrinsically motivated to deliver better customer experience to see more positive feedback being shared throughout the company.
Get your frontline involved
Your frontline employees are the ones interacting with the customer day in and day out. These are the employees that understand your customers the best. You must get them involved in your initiative. They must be encouraged to proactively reach out to customers and resolve their concerns. However, it is also imperative that the top management is involved in this project.
Automate the feedback collection process
Remember that you don’t have to get involved with executing campaigns. This should be an automated process. Your focus should be on taking action, making sure that you are closing the loop, ensuring that you are using the insights to actually make business improvements.
With an automated NPS survey management system like Omoto, organizations can manage and act on customer feedback quickly and efficiently. Employees receive real time notification as soon as a customer provides a detractor or passive rating.
A simple system such as this, coupled with a robust strategy to improve the experience of your customers, can start showing results within two to three months of rollout.
While it is important to keep an eye on the aggregate NPS, it’s imperative to take action on individual customer feedback. Indeed, for subscription businesses, NPS is even more important to grow the organisation sustainably. While there is a disparity in data around what is a good NPS score for SaaS, from my experience, a score above 50 should be a fair target for a SaaS company. The company must, however, pay close attention to how that score is achieved and look for opportunities to connect with customers and understand the real reasons behind a good or bad NPS score.