There is some controversy these days with regard to using Net Promoter Score (NPS) - a tool where customers rate their willingness to recommend your product - as a product KPI. This post will explore the current state of NPS and how to decide whether it is useful to you.
If you haven’t already, I suggest you start by reading my post on Choosing your metrics as it provides a foundation for some of the concepts discussed here.
The majority of startups that I come across are tracking NPS as a core metric for their business. This is no trivial matter: unlike many other business KPIs that you can track passively such as new signups or monthly revenue, NPS imposes quite a burden.
NPS requires “bothering” your customers with email or in-app messages as frequently as once per quarter. It likely requires the time of your Support, Success, Product, or other teams to respond to users who share negative feedback. And it requires time for someone on your team to implement and maintain the process.
There is also a financial component. NPS has become a big business. In my most recent NPS implementation, I evaluated over 10 NPS platforms on the market. These weren’t just survey tools that you can repurpose for NPS; they were products or entire services fully-dedicated to NPS. I received quotes from these services ranging from $2,500/year to up to $15,000/year for a fairly low-volume use case.
Additionally, NPS has garnered some legitimate criticism since its creation 20 years ago. Some people argue the score doesn’t actually affect a company’s growth. Others that it is too easily manipulated and therefore has no objective meaning.
So it shouldn’t be taken lightly that despite the burden imposed by NPS and its criticisms, NPS remains near ubiquitous. Is NPS still a relevant tool for us? Or should we become detractors of the tool and find something else?
If you’ve read my post Choosing your metrics, you may predict that my answer to the question above depends on why and how you use NPS. I’ll start by sharing what I use NPS for and then dive into some of the key limitations.
I’ve been tracking NPS for my products for over 10 years and I continue to find it valuable for the situations I work in. But it’s important to keep in mind that my situations may not be the same as yours. For example, I typically work with earlier-stage product-focused software startups building fintech productivity tools for small and medium-sized business customers. I fully recognize that in a different situation one might come to a different conclusion.
That said, there are 2 main reasons why I find NPS valuable: using it as a proxy for overall customer sentiment and using it as a tool to promote a more customer-centric culture.
I measure and optimize NPS as a proxy goal for driving overall product satisfaction. While there are some good mechanisms for measuring a user’s satisfaction with discrete features and experiences, we don’t have great alternatives for quantifying the overall customer sentiment.
I believe that customer satisfaction is a key driver of long-term business growth (again - in my situations). I believe this so strongly that I’m willing to accept some risks to accuracy if it allows me to better quantify that satisfaction.
It is incredibly helpful to have a single number that says “this is how customers are feeling about our product”. And more so, to be able to plot that number over time to see whether things are improving or getting worse.
What’s more, while not a leading indicator, NPS can at least be used as a current indicator of customer sentiment.