Customer Success

NPS for SaaS - a Key to Reducing Your Churn Rate

May 31, 2022
12 min read

If you build a great experience, customers tell each other about your product. Word of mouth is compelling" - Jeff Bezos.

When existing customers begin promoting the product—you can witness a steady decline in advertisement cost and growth in their revenue. It happens when you're invested in your customers as people and go farther than a transactional relationship. NPS for SaaS is a great way to achieve this dynamic with your customers, and it leads to an interactive customer relationship.

This article will take you through every aspect of Net Promoter Score and how you can use this metric to boost relationships with customers.


What is a net promoter score?

Net Promoter Score (NPS) is a new buzzword in the SaaS town that's proving to be more relevant by the day. It's a critical SaaS metric that promises precisely what every brand desires — customer satisfaction and loyalty.

You've experienced an NPS survey before, even if you're not running it for your SaaS brand. 'Notion' does this all the time, and it keeps track of customer satisfaction by asking them to rate their product.

On a scale of 0-05, users answer various questions. It all comes down to, "how likely are they to recommend Notion to their friends?" That's what an NPS survey aims to achieve. The more they rate, the more they'll promote.


Calculating your Net Promoter Score

To calculate your product NPS, you must conduct an NPS survey. There are three types of voters in this survey.

  1. Promoters: Customers who rate your product 9 or 10 are the most enthusiastic about your product. They are called "Promoters".
  2. Passives: "Passives" are those who rate 7 or 8. These people are satisfied with your product but are open to looking for better options.
  3. Detractors: Customers who rate your product 6 or below are "detractors". They don't like your product. They are likely to point out your shortcomings when referring to their peers.

Formula to calculate Net Promoter Score

Here's a simple formula to calculate your NPS:

% Promoters - % Detractors = Total Net Promoter Score

If 60% of your respondents were promoters and 30% were detractors, your Net Promoter Score will be 30.

As a brand, you should aim to increase Promoters and decrease Detractors always to have a positive product NPS.


Why is NPS important?

Around 59% of companies around the globe use NPS to track their customer loyalty and happiness. Some companies fail to use it to the maximum extent regardless of such a massive audience.

NPS is more than a vanity metric. Tracking the NPS metric can help you figure out the most notable features of your product and also help you to increase the product adoption by directing other users in that direction too.

For additional validation, here are some of the benefits of tracking the Net Promoter Score:


Tracking customer loyalty

NPS for SaaS is a great benchmark to track customer loyalty.

Liking your product is a good sign, but your focus should be increasing conversions. They may be trying different options to choose one in the end.

NPS helps you understand which customers will choose your product over the competition. If you know who's staying and leaving, you can deploy resources to manage their experience.


Improve the customer satisfaction

Once you've known the NPS of your product, analyze the top or common issues amongst the customers. Follow up with detractors through e-mails and get your team to solve their struggles.

Sympathy towards customer problems builds emotional connection. When you show up and take responsibility for your product's limitations, it makes a lasting impression in the customer's mind and benefits you in the long run.


Build a referral system

When you've got enough promoters to refer your product, it's time to build a system that helps customers in the process.

Imagine asking a user to refer to your product when they're already dissatisfied— leave a sour taste in their mouth.

Without NPS, it's hard to see who's interested in becoming a part of the referral system. But with crystal clear NPS, you know whom to invite.


Decrease customer churn

The most important reason to create an NPS survey is to decrease churn. You don't want your users to slide away and talk badly about your product.

That's why you should hold regular meetings to discuss your NPS score and find ways to reduce churn.


How to set up NPS goals for SaaS?

Before beginning your journey with product NPS, you must establish benchmarks and goals for your brand. It's better to analyze different scores, re-evaluate user responses, and implement customer feedback to improve the overall experience.


Evaluate your current NPS

Analyze industry benchmarks

A good NPS benchmark is different for each industry. Your main goal should be keeping your Net Promoter Score positive, and in SaaS, anything above 30 is considered good.

It comes from the fact that SaaS is a fundamental part of business management. Unlike lifestyle and luxury products, decision-makers avoid discussing what systems they use.

Look at other data

NPS has amazing benefits when it comes to increasing promoters. But it's not best to solely rely on the Net Promoter Score.

Use other customer satisfaction surveys like CSAT (Customer Satisfaction Score) or CES (Customer Effort Score) to dig deeper into the customer's psyche.

It is easier to develop a relevant solution when you know more about customers' issues.

Set goals

Additional surveys

On top of NPS— CSAT and CSE are the most influential satisfaction metrics to track. You can create website feedback, post-purchase customer satisfaction, and onboarding surveys to track these metrics.

You can effortlessly monitor your customer's health and relationship in real-time with these.

Differentiate detractors

It's best to pay attention to detractors to make the most of NPS. Detractors point out problems in your system that don't bother promoters.

Working to solve those problems will increase their trust in your brand. Pull detractors aside, listen to their issues, and see how they react to changes.

Analyze patterns

Look for patterns in NPS ratings. See which sections of your products are experiencing the most backlash, and increase your focus in those sections.

Each time you launch a new update, ask for long-form feedback through an NPS survey. Analyze this feedback for keywords like 'time-consuming', 'hassle-free' or 'complicated' to get an idea about the customer experience.

Keep a tab on other customer satisfaction metrics.

Combine other SaaS customer satisfaction metrics with NPS. You can calculate Repeat Purchase Rate to see the frequency of purchases.

If you witness any increase in churn rate, then analyze it. For existing customers, calculate Customer Satisfaction Score to see if they're happy with your product.


How to improve the net promoter score?


Adjust NPS frequency as per the survey

Not every customer wants to keep filling in surveys. Choose your frequency wisely. It's best to send relationship surveys every month.

They are best to showcase customers' overall experience with your brand. If it's a transactional survey, send one after each meaningful conversation.


Send transactional surveys

Transaction surveys are sent after each meaningful interaction or transaction. For example, you can ask about their experience with the customer support team after solving a ticket or ask for feedback after making a payment.

With fresh insights in their minds, customers provide relevant answers in transactional surveys.


Get relevant data by segmenting NPS users.

Don't send the same surveys to promoters, passives, and detractors. Segment them and create separate NPS surveys as they have different opinions about your product.

Focus more on detractors as promoters are already on your side. It's easier to devise strategies and campaigns to categorize your customers based on NPS ratings.


Measure the NPS after each change

When you're aware of the customers' challenges, create a plan and make some changes. You must also measure the NPS after each change.

See if customers are satisfied with them and are adapting to them quickly. Get your customer support team on it ASAP if the NPS goes down after you reinvent a feature.


Dig deep by following up after a survey

Creating surveys is only one-half of the job, and your main goal is increasing promoters. If your NPS score is low for a survey, it's not a good enough reason to stop there.

Follow up with more surveys to dig deep into the problem and find solutions. Prompt actions put you above your competitors in the market.


Analyze NPS comments

Customers give detailed reports of a problem in the NPS comments. They share their personal experience, so you know how each of them reacts to your product. Look for common concerns and solve them first.


Wrapping up

NPS for SaaS is much more than a vanity metric. When combined with other metrics like CSAT and CES, NPS can prove to be your saviour in enhancing word of mouth for your brand.

With Salesmachine, you can automate segment and event triggered NPS surveys. One you get your results, you can get down to increasing promoters - engaging customers has never been this easy.

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