When I was a founder, I thought Net Promoter Score (“NPS”) was a pretty dumb, Big Company metric.?There were a bunch of things I didn’t like about it:
- NPS is backward-looking.?It doesn’t tell you much about your prospects, the future, or your most recent customers.?I wanted to see the future.
- NPS isn’t tied to upsells, churn, or revenue.?I didn’t want a metric that was abstracted away from revenue.?I cared much, much more about our net negative churn rates per segment (and that the metrics here were always improving) than some abstract NPS score of 42.
- NPS can lead to celebrations of the past … and even worse, mediocrity in the present.?Customers can like an old product that is no longer competitive.?(“You’re never getting that copy of ACT! out of my hands!”) NPS doesn’t give any credit for innovation in the future.?I saw Big Companies celebrate their NPS scores, even knowing their products were on the way to obsolescence as new entrants were displacing them.?That was the exact opposite of the sort of culture I wanted.
And yet … now I work with 20+ SaaS companies more closely.?And many track their NPS monthly, and carefully.?And … I love it.
What it turns out I love about NPS:
- >> It keeps a SaaS start-up honest <<.?This is my favorite NPS “feature”.?Different teams and different executives can have heated debates on your product quality.?Engineering thinks it’s good enough.?Customer Success thinks everything has to improve – now.?Or we’ll lose all our customers.?Sales thinks we need 3-4 more features to win deals.?Who’s right??NPS is.?It’s the voice of the customer.?If you have a High NPS score, you’re doing something right here, no matter the feature gaps or other issues.?If it’s low — take action, my friends.?Stop being so proud of yourself.?Your customers aren’t.?This is so, so important.
- It does a good job of predicting net negative churn in bigger accounts.?If your NPS is high, then at least for larger customers … I pretty much know the upgrades are coming, the net negative churn, the expansion deals,?Like clockwork.?If your customers love you … you’re gonna sell them more.?Even if you aren’t yet.?You’ll figure that part out.
- It works, better than I’d expect, on a relative basis.?Share your NPS with your CEO friends.?Figure out why theirs is higher than yours.
- It builds confidence.??Struggling at $1m, $2m, $3m ARR??If your NPS is super high, and going up … well … it’s gonna be OK.?It will.?Break through to $10m ARR, and life will get better.?The cavalry will come
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I was wrong.?Track NPS as a core, monthly metric.?Share it with everyone.?And importantly — use it for a cross-functional discussion across Sales, Support, Customer Success, Marketing, Engineering, and Product.?It’s the one metric all of them directly impact,?and?all of them are equally responsible for.
For Founders trying to raise their NPS, I have one last suggestion:?join our totally free SaaStr University
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Co-Founder/CEO ShinePay
3 年Jason M. Lemkin Can you post about sales people vs digital marketing? Sales people are so expensive. We mostly sell via our website and Google Ads + SEO. Are sales people still relevant vs content marketing and other forms of digital marketing?
Co-Founder/CEO ShinePay
3 年Jason M. Lemkin Can you post about how do you interview sales people?
Founder at Uptics.io | Money Loves Speed | #girldad
3 年Is 63 good for a bootstrapped sales process automation system?
COO @ TheySaid | AI Surveys
3 年NPS is certainly better than nothing. It's certainly a nice number to show investors. But there are so many problems, it's hard to run a company off NPS: * It's not actionable: this quarter's score dropped by 7 points. What do we do about it? No one knows. * It's overused: which means response rates are often in the 8-10% range. * It's hyperbolic: meaning you generally heard from the 1-2 and the 9-10s. But the other 90% of customers, who knows what they're thinking? * It evenly weights responses: In most SaaS companies, the buyer still makes the purchase decisions, but almost all NPS responses are from users with no power. That's just the tip of the iceberg with NPS problems. For SaaS companies, I'd prefer to see a series of questions that helps the company detect product market fit: * Value received * Pricing level * Feature completeness (distance from all needed features) * Likelihood to renew * Competitive threats There are more numbers here, but they're actionable, and give execs an an actual understanding of what's going on with customers.
AI News & Research Aggregation Platform | SDG driven B2B SaaS Marketplace | MangoGTM_ | Former Mubadala Investment Company & Gartner
3 年Jason M. Lemkin, NPS is a great metric. In conjunction I would also use the CES (Customer Effort Score). I.e. How much effort did a customer have to exert to use a product, service, find relevent info, get things resolved etc. In my experience, in most b2b environments, customers dont want to be delighted. They want to receive the goods/services the easiest way possible to get on with running their business. Maurice FitzGerald, thoughts?