How Can SaaS Companies Use the NPS Metric

Are you looking for a powerful way to measure customer satisfaction and loyalty? If so, the Net Promoter Score (NPS) is exactly what you’re searching for. 

In recent years, NPS has become a leading metric for SaaS companies to gain invaluable insight into how their customers actually feel about their product or service. 

The reality is that without measuring customer loyalty, it can be difficult for you to predict churn rates and improve user experience. In this blog post, we will show why NPS is important for your SaaS business and how you can use it to achieve your business goals. 

What is the NPS metric? 

NPS is a simple but effective way to measure customer satisfaction and loyalty, and it can provide valuable insights into how your customers view your brand and what you can do to improve their experience.

It is based on the simple question, “How likely are you to recommend our company/product/service to a friend or colleague?” Customers respond on a scale of 0 to 10, with 0 being “not at all likely” and 10 being “extremely likely.”

To find out more about the formula and how to interpret your NPS results, head to our article “Net Promoter Score: What Is It and How to Calculate It.”

To jump straight into measuring NPS, use this free template:

Why should SaaS companies pay attention to the NPS metric?

Sending out NPS surveys is one of the best things you can do as a SaaS company to ensure consistent growth. Here are some ways you can use the information you gathered with NPS successfully.

Improve customer retention

Customer retention is crucial for the success of any SaaS company. In a subscription-based model, retaining existing customers is often much more cost-effective than acquiring new ones.

By measuring the NPS, you can easily identify customers who are dissatisfied with your product or service and address their concerns promptly. For example, if a customer gives a low score in the NPS survey, you can follow up with them to understand their concerns and take corrective action. This not only helps to retain customers but also improves customer experience with your brand. 

Identify areas for improvement

The NPS score provides valuable insights into the areas of your product or service that require improvement. By analyzing customer feedback, you can identify the features or functions that are not meeting customer expectations.

One thing that can help you identify areas for improvement is running NPS surveys at different points in customer journeys. This will help you better assess customer experience and sentiment at these touchpoints. 

Drive growth

Naturally, the NPS metric can also help you drive growth. By improving customer satisfaction and retention, you will increase customer lifetime value (CLTV) and drive growth. Satisfied customers are more likely to continue using the product or service and are more likely to recommend it to others.

Additionally, the NPS score can help you identify customers who are promoters and leverage them to drive growth. NPS promoters are loyal customers who are likely to recommend the product or service to others.

Benchmark against industry standards

You can compare your score against industry NPS benchmarks to understand how you are performing compared to your competitors.

For example, if the industry benchmark for SaaS companies is 50, and your NPS score is 40, you can identify areas where they need to improve to meet industry standards. 

The pros and cons of using the NPS metric for measuring customer satisfaction 

Imagine having data on how likely your customers are to stick around and even recommend your product or service to others as well as the reasons behind their choice. This could be a game-changer for your business.

By measuring NPS, you'll be able to uncover potential issues and work on improving the quality of your product, ultimately boosting customer retention and growth. 

What’s more, having a high NPS score not only makes you stand out amongst competitors but also speaks volumes about the value you provide to your customers. And guess what? Happy, satisfied customers are more likely to promote your services via word of mouth, leading to increased brand awareness and trust. So, investing time and effort into mastering the NPS metric could pay off in the long run, helping you to create a thriving, customer-centric SaaS company.

However, NPS, like any other metric, needs to be used appropriately to make sure it doesn’t skew your understanding of your customers’ satisfaction with your business.  

The pros of using the NPS metric for SaaS companies

It’s easy to understand and use

One of the main benefits of using the NPS metric is that it is simple and easy to understand for everyone involved. The scale is straightforward, and customers can provide their scores effortlessly. This simplicity makes it easy for you to collect and analyze data, and it also makes it easier for your employees to understand what they need to do to improve customer satisfaction.

It provides a clear benchmark

Another advantage of using the NPS metric is that it provides a clear benchmark for customer satisfaction. You can use this benchmark to track changes over time and compare your performance to your competitors. This will help you to see how you stack up against others in their industry and make improvements where necessary.

It’s predictive of business growth

Research has shown that there is a strong correlation between a company's NPS score and its future business growth. Companies with high NPS scores are more likely to experience growth and success in the future, while those with low scores may struggle. This makes NPS a valuable tool for predicting business success and identifying areas where improvements need to be made.

The cons of using the NPS metric for SaaS companies

It oversimplifies customer satisfaction

While the simplicity of the NPS metric is a benefit, it can also be a drawback. The metric oversimplifies customer experience by reducing it to a single number. It does not take into account the nuances or the reasons behind a customer's likelihood to recommend a company. Unless you add a follow-up question to your NPS survey or run other satisfaction surveys, this can result in a lack of understanding of the underlying issues that need to be addressed.

To max out the value of your NPS survey, use this template with a follow-up question: 

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Limited scope

The NPS metric is also limited in scope. It only measures the likelihood of a customer recommending your company and does not provide insight into other aspects of customer satisfaction, such as product quality, customer service, or pricing. This can result in a narrow view of customer satisfaction and may lead to a focus on improving only one aspect of the customer experience.

Relies on self-reported data

The NPS metric relies on self-reported data, which may not always be accurate. Customers may not provide honest answers, or they may not fully understand the question being asked. Additionally, customers may be biased in their responses based on their personal experiences, which may not be representative of the broader customer base.

Examples of successful SaaS companies that have used the NPS metric effectively 

SaaS companies can successfully utilize the NPS metric to gain insights and foster customer loyalty. 

For example, Slack, a highly popular team collaboration tool, has prioritized collecting and acting on NPS data to improve user experience and retain customers. Slack's Net Promoter Score (NPS) is 55 with 68% Promoters, 19% Passives, and 13% Detractors. 

Similarly, Dropbox, the famed file hosting and sharing service, regularly analyzes NPS feedback alongside other metrics to understand user expectations and refine its product development strategy. 

Then, there's ClientSuccess—an aptly-named customer success management solution—that not only relies on NPS to drive improvements but also encourages its own clients to do the same. 

By leveraging the power of NPS, these SaaS giants have demonstrated how invaluable customer feedback is for sustaining and enhancing their impact in an ever-evolving competitive landscape.

How can SaaS companies improve their NPS metric 

If you’re not happy with your recent NPS score, don’t worry—there are practical steps you can take to improve it. 

Understand your customers' needs

The first step to improving your NPS score is to understand your customers' needs. This includes identifying the pain points they experience when using your product, as well as their goals and objectives. This knowledge can be gained through surveys, customer feedback, and customer interviews. Once you have a good understanding of your customers' needs, you can tailor your product and service offerings to meet those needs.

Provide excellent customer support

Customer support is a critical component of any SaaS company's success. Providing excellent customer support can help you improve your NPS score by addressing customer issues quickly and effectively. Make sure your customer support team is well-trained and equipped to handle customer inquiries in a timely and professional manner.

Implement user feedback mechanisms

Implementing user feedback mechanisms is a great way to improve your NPS score. This can include features such as in-app feedback, surveys, and email follow-ups. By soliciting feedback from your customers, you can gain valuable insights into what they like and dislike about your product. This information can be used to make improvements to your product and service offerings.

Collect and track your NPS metric with Survicate

Sending out NPS surveys to customers is one of the best things your SaaS business can do to boost metrics across the board. 

Not only is it a great way to determine if your product or service is appealing to customers, but it can also be used as a source of customer feedback for improvement and growth.

By sending the surveys regularly and analyzing your results, you will be able to take more effective action as you strive to keep your customers happy. 

The easiest and quickest way to send an NPS survey is to use our template. On a 10-day free plan, you'll get access to all Business plan features and be able collect up to 25 survey responses. What’s more, you can easily connect your survey to third-party tools using our native integrations. Ready to start measuring your NPS? Sign up now.