I’m frequently asked what the best way measure NPS score is. It’s top of mind for a lot of my clients. First of all, what is a good NPS score? How do you compare to companies in your sector?
How do you know if your NPS score is telling you the truth What does your NPS score actually tell you?
Unfortunately, there isn’t a simple answer to the ‘what is a good NPS score’ question.
The Metrics You Should Focus On
The key metric to measure in a B2B SaaS business is the rate of profitable growth. It’s not revenue at all costs; it’s how you can generate more revenue more profitably. In a B2C SaaS business, the key metric to measure is user engagement. How many of your users are returning to your product or service more than once a week? How about more than once a day?
If profitability is accelerating, your NPS can act as a leading indicator several areas. It reveals opportunities for installed-base growth, churn mitigation, reducing cost of service and increasing your top of funnel with positive word-of-mouth.
On the flipside, if your NPS score is improving, but your financial metrics are flat or declining, you have one of two problems. Either your business isn’t doing enough to activate your promoters, or your NPS method is up for question. It might not be telling you the whole truth.
Comparing Net Promoter Scores
For B2B software companies, who should you compare against? Any software company? Software companies in your industry? How about in your market segment? Any of these answers are fraught with challenges because there are a lot of things that can impact an NPS. For example, solution scope, size and complexity, product maturity, market position, market sector, price, margin (and many more) can have a direct impact on the NPS measurement. Either individually or collectively.
Would you compare NPS from Salesforce against Salesflare because they’re both CRMs? Or Amazon Web Services against GoDaddy because they both provide web hosting services?
How To Know If Your NPS Score Is Truthful
The most accurate method to uncover potential issues with your NPS is with internal benchmarking. This should be an apples-to-apples comparison, with similar methods of capturing data.
A recent client believed their NPS was in the high 40s. I was sceptical after reading a few support tickets. When we dug down into the NPS data, most of the positive respondents were the company’s smallest clients.
Some of its biggest clients were detractors. They were not being served appropriately.
What if you were to split NPS scores into customer segments. Does it tell the same story as the full NPS survey? If it doesn’t, what expectations have you set with the different types of client? Is their job to be done different? Are they using your service differently?
But I get it, you still want to benchmark against other companies in your sector.
In that case, the most effective way of benchmarking would be with a blind study run by a third party. This is expensive, as it requires you to commission third-party market research. However, it will allow you to capture perceptions from both your current and target customers in a set of directly-competitive businesses using a consistent methodology. A better alternative would be purchasing industry studies from third parties.
A less accurate way to capture similar data would be if some of your customers work with several vendors in your space. You can ask them how they think of your company relative to the other companies they work with. The hope is that you come out on top of their list.
Understand NPS Scoring With Outcome-Driven Segmentation
Neither of these options will give you an accurate view of how you compare to your competitors. Thus, the most effective way to determine how accurate your NPS is, is with internal benchmarking and segmentation within your customer base.
You can segment your customer base by account size or revenue, by use case, or better still by job to be done and desired outcomes. That way you can determine whether your product or service is satisfying customers based on what they are trying to get done, and how well it meets their desired outcomes. It will then help you to align your happiest customers with both the job they’re trying to get done and the value they place on that.
If you’d like to talk about outcome-driven segmentation, and understanding your customers’ jobs to be done, please do get in touch. I’d love to help.
When you’re looking at NPS, understand which lens you’re looking at it through. Even if you had an NPS of 100, can you pack your bags and head off to the desert island you’ve just bought?
A ‘good’ NPS score can really only be determined through your ability to help your customers get jobs done and achieve the outcomes they desire. If you’re competing against non-consumption in an industry where there isn’t much competition, a very low (or even negative) NPS score might be okay. Equally, in a competitive industry, what you perceive to be a high NPS score might not be okay.
Often it’s the detractors that will tell you where you’re going wrong. They might give you the most valuable data for where you can improve your product, your messaging or the way you engage your customers. But, they also might not.
Working with a detractor can have significant cost implications. Promoters are less costly to serve, and are far easier on employee morale. And they also get what you’re trying to do, so might be more willing to share constructive ideas on how you could serve their needs even better.
But, the fact remains… how can we continue trying to compare NPS across different businesses who use different methodologies and potentially target different customers. The reality is, we can’t. The only thing it does is to create more confusion and doubt; you’re better focusing on segments in your own customer base.