When I was a founder, I though 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 backwards 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. 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. 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.
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 responsible for.
(Cross-posted @ SaaStr)