Most successful businesses have one thing in common, a bunch of loyal customers.
And when it comes to SaaS business, the importance of customer loyalty even increases as loyal product users attract more users to your business, and dissatisfied customers can even shoo away your potential customers by sharing their lousy experiences.
But how would you identify your loyal customers? You should have the right information before considering any customer as loyal or disloyal. Here comes the need for a powerful metric like Net Promoter Score that can help you to gauge customer loyalty.
NPS® is not only a useful and widely accepted metric to measure customer loyalty, but it also acts as a key indicator to measure the performance of your SaaS product and customer success teams. It is a great way to collect product feedback and know how much loyalty your products and services are able to generate for your business.
In this article, we will explore what Net Promoter Score is, why it is important for your business, and how you can measure it for your SaaS product. Let’s get started!
What is Net Promoter Score?
NPS®, or Net Promoter Score, is the most effective and widely accepted Customer Success Metric that businesses use to collect customer feedback in SaaS and measure customer loyalty. It provides insights into how your customers perceive their experiences with your products and services and how likely they find your product worth recommending to their friends and known ones.
An NPS Survey is a short survey containing a couple of questions. The first question asks for a rating from 0 to 10 from the customers, and the next asks the reason for that rating. The main question of the survey, which is also known as the Ultimate Question, is:
How likely are you to recommend our product to your friends and colleagues?
A rating scale of 0 to 10 is provided to the customers where 10 means ‘Most Likely’ and 0 means ‘Not at all Likely’ to recommend.
On the basis of their experiences, customers choose a score from 0 to 10 to rate their experience with your product.
Based on their ratings, customers are divided into three categories, viz., Promoters, Passives, and Detractors.
Promoters are the customers who give a rating of 9 or 10. They are considered the most satisfied and loyal customers who are most likely to continue using your product and recommend your product to their friends and known ones.
Passives are those who give a rating of 6 or 7. They are usually satisfied customers but not truly happy or delighted with your product. They are likely to switch to other products if they are offered a better deal.
Detractors are those who give a rating of 0 to 6 and are considered the most dissatisfied customers. They are not only most likely to churn but are also likely to spread bad word of mouth for your product in the market and prevent new customers from investing in your product.
How to Calculate NPS®?
To find the Net Promoter Score, you need to first calculate the percentage of Promoters and Detractors with the simple formula below.
% Promoters = No. of Promoters/Total Respondents x 100
% Detractors = No. of Detractors/Total Respondents x 100
For calculating the Net Promoters Score, you need to subtract the percentage of Detractors from that of Promoters.
Net Promoter Score = %Promoters - %Detractors
Net Promoter Score can lie from -100 to 100. The more the Net Promoter Score, the better it is. Let’s explore some reasons to measure Net Promoter Score for your product.
Why should you Measure NPS® for your SaaS Product?
Net Promoter Score is not only a metric to measure customer loyalty but also a rating to track and showcase the performance of your product in the market. Let’s understand better why we should measure Net Promoter Score by exploring some benefits of Net Promoter Score for SaaS.
Benefits of Net Promoter Score in SaaS
- It is simple and easy to use
- It can boost customer loyalty and growth
- It helps you identify your strengths and weaknesses
- It helps you segment your customers
- It helps to predict and prevent churn
Let’s learn more about the benefits of measuring NPS in SaaS.
1. It is simple and easy to use
Net Promoter Score is simple and very easy to use to measure customer loyalty. As NPS Survey is a very short couple-question survey. It is easy for you to create it, as well as easy for your customers to respond. If you use a tough and lengthy survey instead, there is a high chance of getting fewer responses from your customers.