Net Promoter Score (NPS)

An excellent method to learn how likely customers are to recommend your service is the Net promoter score. The NPS measures customer loyalty and the likelihood of churn and can be used to indicate business growth. Therefore, it is necessary to measure the NPS regularly. When your NPS is high, you have a healthy relationship with customers, making customers recommend your service and eventually reduce your customer acquisition cost.

How to calculate the NPS

Figure out your NPS by asking your customers: “On a scale of 0 to 10, how likely are you to recommend us to a friend?”. Then, group the respondents into three categories.

• Promoters 9-10
Happy customers, who are likely to recommend your service.

• Passives 7-8
Customers who will not recommend your service but will also not use negative word of mouth against you. “Passives” have a high potential of becoming promoters. Therefore, it makes sense to find out how you can improve their experience to make them more satisfied.

• Detractors 0-6
Unhappy customers, who will not recommend your service, plan to cancel their business with you or, even worse, will advise against using your service.

NPS is expressed as a number from -100 to 100. When you have more detractors than promoters, your score will be negative.

For example, if 80% of respondents were Promoters and 10% were Detractors, your NPS is 70.

NPS = % Promoters – % Detractors.

It is useful to follow up with open-ended questions about the “Why.” For example, “What was the reason for your score? What would have changed your score?”. Thanks to this, you will get great insights on how to increase the likelihood of recommendations.

How to improve the NPS

• Provide an exceptional customer experience, right in the beginning
• Provide value regularly
• Be transparent with customers
• Have a great customer support
• Ask customers for feedback to improve your service
• Learn from churned customers

What to do with all these metrics? How can you use cohorts to get your metrics game to the next level?

We have covered a lot of essential metrics for your SaaS business / Startup. But do you need to track them all? No. Do you need to track additional metrics? Maybe yes. Depending on your business, it can make sense to use additional metrics to identify your business growth. Although these metrics are standard in most SaaS businesses, sometimes it is even recommended to create your own metrics based on the company you run. Since you know your business better than anybody else, you alone can define which KPIs genuinely move the needle for your business.

When you start, use industry benchmarks to get a gauge of how you are currently performing. However, as already stressed initially, benchmarks are only helpful to get a first indication of growth. It is much more meaningful to measure your own numbers and find trends for further development.

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