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Should I be using NPS to measure customer loyalty in SaaS?
I want to start off this blog post by addressing the wording of the question itself.
Should you be using NPS to measure customer loyalty?
Let’s take a step back here…
Do you measure loyalty in your life? Do you have a board of leaders and laggers to see who are the most loyal people and see who will do things for you in the future?
Yeah, didn’t think so.
So why would you take the same approach with your customers?
NPS (Net Promoter Score) is an outdated metric, particularly for SaaS businesses.
Let’s take a deep dive into it and understand how to do things better.
The History of NPS
Before we get to how to do things better, it’s important to understand how NPS actually started.
NPS was invented by Fred Reicheld and the Bain and Company team in 1996 and wide popularized by Harvard Business Review in 2003. Its aim was to understand customer satisfaction and loyalty in businesses.
For reference, while SaaS has been a thing since the late 1990s, the modern cloud versions we know today didn’t really hit a hype until the late 2000s. This means NPS was primarily focused on brick-and-mortar stores such as Ogilvy, although it was also adopted by some big software companies such as IBM.
Now take a moment to think about it though. Back then, we still had fairly clunky computers and the world wide web was still being adopted.
Apple was still gaining traction in its own right, and many didn’t know the benefits of going for the modern rotating-screen G5 machines. So would you ask a family member about which computer is best to buy? Most likely, yes. (Mind you, I am still being asked this question by family members in 2021.)
So when it comes to personal shopping and consumer items, then perhaps NPS stands the test of time.
I am more than happy to recommend personal products from brands such as The Ordinary…
