This Well Known Investor Thought NPS Was Dumb. He Was (self-admittedly) Wrong.

Last week, Jason Lemkin, founder, investor and considered by many to be the Godfather of SaaS, said the following:

“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 equally responsible for.”

When Jason was the founder of EchoSign (which is now owned by Adobe), he admits that he thought NPS was “pretty dumb”.

Much of his reasoning for not liking it as a metric came down to some common misconceptions, including the belief that the data was only a historic measurement and didn’t contain any predictive forward-looking insights.

So, what changed?

As Jason put it, “Now I work with 20+ SaaS companies more closely. And many track their NPS monthly, and carefully. And … I love it.”

Much like we see on a daily basis with new customers starting NPS for the first time, Lemkin finally witnessed first-hand that NPS data is accurate in proactively identifying issues and unearthing new opportunities both in the present and in the future.

All of us at Promoter work tirelessly on a daily basis advocating for not just our own platform, but also the NPS methodology in general. We’re big believers in the process and take a lot of pride when someone comes around on their own by witnessing its power first-hand.

So, to say that we were excited to see Jason’s change of heart would be a massive understatement.

That said, our work isn’t done yet. There are many people who haven’t been fortunate enough to witness the value of NPS first-hand. People who still have questions, and maybe even some doubt.

If you’re one of those people, let me address a few misconceptions that Jason had pointed out in his post:

NPS is backwards looking

While it’s true that what you’re measuring is your customers sentiment based on their past experiences with your company, the score and insights they provide you are absolute indicators of their future behaviors.

In fact, NPS is the only model that has been proven to be an indicator of future growth.

Is it a silver bullet? Of course not, but it’s the highest engagement method to predict customer behavior with a relatively high degree of confidence.

Promoter.io also lets you compare your NPS data with other important customer attributes all in one view to further boost that confidence and draw more specific conclusions.

NPS isn’t tied to upsells, churn, or revenue

If you ask anyone at Promoter if NPS is a cost-center or a profit-center, we’ll tell you that, if you’re not seeing at least a 10X return on the cost of measuring NPS, you’re doing it wrong.

If you're not seeing at least a 10X return on the cost of measuring NPS, you're doing it wrong. Click To Tweet

NPS should, without a doubt, make you money.

As we’ve written about many times, NPS is the ultimate way to reduce churn and increase revenue. And, that’s only the beginning.

On countless occasions, we’ve heard from our customers how they were able to unearth insights which led to avoiding costly mistakes as well as opening up new revenue opportunities.

If anyone tries to tell you that NPS isn’t tied to your bottom line, they’re are simply wrong.  

NPS can lead to celebrations of the past … and even, mediocrity in the present.

The argument that Jason was making here was to say that, it’s possible that a company could become complacent with an existing product because of the positive sentiment from its customers.

I’ll be honest, this is one of the risks of not getting into the habit of creating a daily cadence with your surveys. Sentiment can change rapidly, and if you’re sending your surveys out all at once twice per year, you could be sitting in the dark for months at a time.

To stay current, you should be sending surveys daily over time (we call this dripping) and recurring them on a quarterly (or bi-annual basis) depending on the nature of the product or service.

This ensures a steady flow of feedback, the ability to trend sentiment closely over time and map this to changes in the product, internal processes, etc and provides your team the time to effectively follow-up and “close the loop” with individual customers post-survey.

NPS is just a number that does nothing to grow my business

While this wasn’t one of the misconceptions brought up in the SaaStr post, it’s one that we hear quite often. That the actual Net Promoter Score is just a vanity metric, which doesn’t reflect our bottom line.

In a few ways, the argument is accurate. The actual score itself can be somewhat meaningless.

That said, as companies are becoming more customer-centric, it’s now increasingly more popular to use the number as an internal KPI (key performance indicator).

And, if you’re a venture-backed company, investors are known to be keen to use scores (and how they’re trending) to evaluate investments.

Overall, what’s much more meaningful are the individual scores and insights your customers give you and how you respond and leverage those opportunities. And that has everything to do with your bottom line.

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At the end of the day, the success of an NPS process absolutely hinges on the proper implementation and focus on the right actions post-survey. This really does not include tracking your score on a dashboard somewhere and hoping the number will change.

I’d like to invite you to sign up for a free trial of Promoter and see first-hand what Jason came to realize about NPS.

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Chad Keck

As a product lead and executive for numerous successful ventures (Rackspace, HP Cloud, AppFog), Chad founded Promoter.io to help bring the actionable insights provided by Net Promoter to all businesses. He is a native Texan with a passion for helping other entrepreneurs.

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