What is a Good NPS Score for SaaS?
You’ve likely heard the term “NPS” or Net Promoter Score thrown around in terms of SaaS recently and it has a bit of a buzzword feel to it. However, NPS is quickly being recognized as an important concept and metric to understand for SaaS companies because it tracks something that is intrinsically important for businesses in the industry: customer satisfaction and loyalty 📈.
Customer satisfaction holds a lot of power for services companies as the most influential sales and marketing tool. Additionally, SaaS business success rides on avoiding unhappy customers and improving customer loyalty to keep monthly recurring revenue high.
Your Net Promoter Score gives your company’s teams a good understanding of how your product is being received by your customer base and how likely they are to help you spread the word 💘.
“The secret to marketing success is no secret at all: Word of mouth is all that matters.”
– Seth Godin, Founder and CEO
As you can see, tracking performance with a number like that is up for debate in terms of focus, what the inputs are, and how much weight SaaS companies give to certain things. The reality is, there are multiple ways to do this and every company is different in their focus and what customer success looks like.
We’re going to go through a few different perspectives on calculating and understanding NPS and likely one (or multiple) will resonate with your team.
This is guide on how to calculate Net Promoter Score and how to make it competitive.
What is NPS and what does it indicate?
We started to talk about this a bit but we need to better understand NPS scores and what it really indicates to really understand what a good NPS score is (for your team).
NPS means Net Promoter Score and it’s a measurement of customer happiness, and in turn, loyalty to your product. It also measures how likely customers are to promote your product to other potential customers. In NPS jargon we call them “promoters”.
Unlike other more traditional, generic metrics like customer engagement, NPS takes into account your customers’ happiness, customer experience and the potential growth due to word of mouth.
For SaaS teams, a healthy NPS score means that your product is solving customer pain points and providing value. It also means that your promoters can generate leads that are highly likely to convert.
How do you calculate NPS score?
Typically, Net Promoter Score measures if a customer would recommend the brand, company or product to a friend or colleague with a simple question that you’ve probably heard a lot: “How likely are you to recommend [the brand, company or product] to a friend?”.
NPS surveys provide a range of responses, usually a one to ten scale. The data you collect from this numeric feedback is used to calculate your NPS score.
The three kinds of customer of Net Promoter Score.
The calculation is easy and sorts responses in three groups: promoters, passives and detractors 📊.
Promoters – the super fans.
Anyone who gives you a 9 or 10 are your promoters, your biggest fans who probably would recommend your brand, company or product. Promoters are the goal. They are happy with your product, it provides them value, and they’re willing to share that feedback with others like them who can become customers too.
Passives – the meh.
Those who give scores of 7 or 8 are passives. Passives are not overtly thrilled with your company or brand. Maybe they don’t have seen the value or have minor issues that don’t make them unhappy customers but enough to not become promoters.
Detractors – the ones to avoid.
Those who give a score of 6 or below are called detractors. Detractors are not helping to promote your company or brand, are probably unhappy customers that have issues with your product and hence are likely to produce negative word of mouth.
Calculating the Net Promoter Score.
Once you have the data provided by the responses, you can do the math. To get your final NPS number, subtract the percentage of respondents who were detractors from the percentage of respondents who are promoters. Ignore the passives.
The goals and benefits of Net Promoter Score.
By sorting your customer base using their NPS responses, you can get incredible benefits and achieve different goals 🏆.
- Get insights based on actual data about customer satisfaction. Make decisions based on actual customer experience and feedback.
- Measure the growth of your loyal customer base (the percentage of promoters relative to detractors).
- Survey the health of your relationship with your customers.
- Create targeted campaigns based on a customer response to increase promoters and reduce detractors.
- Vary engagement methods according to survey fluctuations.
- Use your Net Promoter Score as a success metric and train your employees to use it as a driver for their performance.
- Avoid negative word of mouth and churn by targeting your detractors in order to make them passives or even promoters of your business.
- Target promoters with ambassador programs to make them more engaged with your brand or service. Engaged promoters could write positive reviews, convert a friend or colleague or produce user generated content that could increase growth spending less than conventional marketing.
- Use the data and calculation to measure the effectiveness of your organization, your brand reputation, your quality of service, and your company’s marketing programs.
- Create a feedback loop using your survey as a way to improve customer experience, and get better results from those improved experiences.
- Use the metric to compare with your own company’s previous NPS.
- Compare your NPS against and average metric or versus your main competitors in your industry.
How do you determine a “good” NPS?
What good even means? Is there a range for good? Once you have your benchmark Net Promoter Score, it’s still just a number that needs to be determined for your product.
It can be hard to determine if your product is in competitive with so many different opinions on what a good performance score is.
Good NPS for each business.
Net Promoter Score is relative. It can vary greatly depending on what kind of audience your customers are within and what kind of industry you serve. There is no single measure of growth, it’s a range.
Compare with other companies in your niche.
For example, industries like specialty stores and department stores have some of the highest NPS scores because they are normally branded and their customers shop there because of that experience.
On the other hand, industries like internet services and cable services tend to have very low NPS scores 📉 because they’re not nearly as personalized and interesting to the vast majority of users. They’re a basic necessity. It’s just the nature of how customers relate to the industry overall, not the brands themselves.
Regarding the previous examples, mind the difference in service: an NPS score of 10-15 would be outstanding for a cable TV service but shockingly bad for a speciality store. Compare your NPS to the industry you’re in, a business with a similar organization, and the customers you serve. Take a look at the averages for NPS scores by industry here.
Consider SaaS benchmarks.
Aside from the industry of your SaaS service, taking into consideration SaaS NPS scores as a whole helps to better understand where your NPS sits.
The Software as a Service industry as a whole has an average NPS score of 31. Take that as a benchmark: a score of 50 for a SaaS company would be considered quite good. That is a very general SaaS ballpark.
Mind the limits.
According to surveys from Quora, many SaaS companies never break the 60% barrier in terms of NPS score and customers tend to be a little stingier in terms of positive feedback and promotion.
This may have to do with the fact that SaaS is a background tool for many companies and there are few arenas to really share your customer experience on software with peers online unlike more “sexy” industries like luxury stores and fashion.
Also, as Software as a Service is usually assigned to all employees in an organization or entire teams, not many of them would be able to recommend it to a friend or colleague.
Taking this into consideration that data can help gauge whether your NPS score is aligned with SaaS and explain any concerns.
Good NPS for each market.
Where your users are and your users’ culture can affect your NPS score fairly heavily. Make sure to compare your NPS by geographical location 🌎.
Are you international?
In the United States 🇺🇸, for example, customers are much more likely in general to share their customer experience with others (both negative and positively).
However, in Europe 🇪🇺 customers are much more reserved in general about their opinions and conservative with what we would consider positive feedback than the US.
In the US, they are also more likely to give five star reviews and 10/10 when they are at least satisfied with a service. If you check out Amazon products, you’ll see much more five star reviews. They give them out like candy! 🍬
Cultural differences can affect how customers score when asked on a scale of 1 to 10, even though their satisfaction range is the same.
If you have customers internationally, what may be best to get an accurate idea of the health of your NPS score is to take an average of the scores per region and adjust the weight according to cultural norms in terms of rating. This may help you get a better, more accurate idea of how your customers feel about your product.
“Localize” the calculation.
As globally there’s no single average human experience, you can also try different scales to measure user satisfaction in terms that may be more universal than a 1 to 10 or 1 to 5 range.
For example, a scale based on emoji (happy, neutral and angry or sad face) may be friendlier in some regions. The math is done behind the scenes, with each face standing for a numeric value.
The core insight for all businesses that step on the international stage is to not only translate but localize your content. Industries with global reach know that localization goes beyond merely translating the words but taking into account cultural and regional differences that could arise. That at goes for general customer experience (and better UI/UX) but also for your NPS survey.
Good NPS for each organization.
All SaaS products are different and their relation to customers are different. It’s also best to compare to your previous NPS results to see how well your team is doing at improving your customers’ experience.
Compete with yourself.
Based on the approaches above, you can come up with a general starting point based on where your SaaS sits in terms of industry, competitors, and other factors.
From here, consistently tracking your NPS score and comparing it over time is the most accurate way to determine customer success and promotion. A core tool to get powerful insight in the reality of customer experience.
NPS survey tools.
Tracking your NPS score in app and outside of your own app has become increasingly easier. There are plenty of tools to help you survey customer insights at every point.
You can send surveys via email to users or you can collect feedback within your product’s user interface.
With Beamer’s NPS, you can present a survey throughout your products’ user experience: pick the question, select your score method (1 to 10, 1 to 5 or emoji) and even add follow up questions.
On the Beamer backend, you can see all results from your NPS surveys and get a quick view of how your customers are liking your product.
Beamer is not just a survey tool, it’s also a great way to keep customers in the loop. Beamer is an in-app changelog and news feed that sits within your app where you can post updates for anything from new features, company news, bug fixes, updates, and more.
Additionally, Beamer gives you the data on your open and click through rates for your updates so you can get a more complete picture.
NPS metrics can be a valuable research tool to get a tangible view of how satisfied your customers are with your product and how likely that is to affect your sales and marketing efforts.
Boosting NPS can be beneficial for reaching new customers organically and ensuring that customers stay on board. Try Beamer to track and measure your NPS score and boost customer engagement within your product.