27 Apr What is the Net Promoter Score, How to Measure It, and Why It Matters
The Net Promoter Score is a metric used to determine a company’s customer loyalty, enthusiasm, and contentment. It is obtained by asking customers the question: “According to your experience, on a scale of 0 – 10, what is the probability of you suggesting this company or product to a colleague or friend?” Net promoter scores (NPS) help firms enhance their services, delivery, and customer service, among other aspects, to boost consumer loyalty.
As a metric, NPS helps organizations of all sizes focus on a mission-oriented goal. For example: raising their NPS score by acquiring more enthusiastic clients who can be easily quantified and tracked over a given period.
NPS can be utilized in forecasting business growth. If your firm’s NPS is high (or more than the average in the industry), it indicates that you have a good relationship with customers. They may act as brand ambassadors, verbally raise awareness, and generate a net improved growth cycle.
How to Calculate the Net Promoter Score
To calculate the NPS of your SaaS, simply subtract the percentage of your consumers who answer the questions with a 6 or less from the percentage of consumers who answer the net promoter score questions with a 9 and 10. The first group is referred to as ‘detractors’ while the second group, who highly rate your services, is referred to as “promoters.”
The following formula is a simplification of the process:
NPS = % of PROMOTERS – % of DETRACTORS
Net Promoter Score Scale
The Net Promoter System classifies customers into three categories based on their feedback to the standard question, “Would you recommend us to your colleagues or friends?”
Promoters (scores of nine or ten) are the most loyal and enthusiastic customers of a SaaS. They are most likely to be brand advocates, improve the reputation of the SaaS, as well as create referral flows that help drive the company’s growth.
Detractors (scores between 0 and 6) are unlikely to promote a product or company to their counterparts, are unlikely to make more purchases, and, in the worst scenarios, may discourage prospective customers.
Passives (scores 7 and 8) neither promote nor harm the brand of the SaaS. Although they are not included in the calculation of NPS, they are on the verge of becoming promoters. As a result, trying to convert them into promoters may bear fruit and it is an investment worth making.
Interpreting Your Net Promoter Score
The NPS is expressed as a numeral ranging from -100 to 100. When a company has more detractors compared to its promoters, the NPS score is negative; and when the opposite is true, the NPS score is positive.
Net Promoter Score and its Relevance to Your Saas Business
Keeping track of the NPS averages in your niche can help you follow how your significant competitors are faring, as well as provide further context for what constitutes a ‘good’ or ‘poor’ score.
Any score above 0 is considered ‘excellent’ in the -100 to +100 range because it implies that a company has more promoters.
Before you freak out, always remember that while an NPS of -3 may look poor, it is crucial to compare it with your competitors to put it into context. If your industry average is -10, this score suddenly appears less negative. So always compare your metrics to the industry standards, no matter the metric.