Term sheets can be intimidating as a first time founder. As it is likely the first time you’ve seen a term sheet, the intricacies of the deal can be difficult to…
How to Measure Customer Experience Better
It’s simple: if customers are happy, they are more likely to renew. Customer experience is essential—it can make-or-break your retention efforts, determine whether you’re at an acceptable churn rate and potentially drive your SaaS startup…
It’s simple: if customers are happy, they are more likely to renew. Customer experience is essential—it can make-or-break your retention efforts, determine whether you’re at an acceptable churn rate and potentially drive your SaaS startup toward the all-important negative churn milestone. After all, as Tomasz Tunguz wrote, “startups that manage customer renewals better than their peers grow faster and require less capital.”
What are you customer experience metrics? You wouldn’t avoid measuring marketing leads or quantifying the success of your sales staff to hit its quarterly goal. So if you’ve avoided measuring and evaluating customer experience until now, you’ve ignored an indispensable part of assessing your business.
Luckily, your current client base likely offers a wealth of data you can quickly tap into if you ask your customers the right questions. One of the easiest ways to do this is to use Net Promoter Score (NPS).
How to start measuring NPS
It starts with a simple question: How likely are you to promote this company or product to a friend or colleague? Survey your customers and this will give you initial insight into the overall direction of your customer experience. Use a scale from 1-10 to measure their response. Here’s how the different scores are grouped.
- Promoters(score 9-10) – These are the most loyal customers likely to renew and make recommendations to their friends and colleagues. It’s this group that will drive your company’s growth.
- Passives(score 7-8) – Consider these customers satisfied, but unlikely to recommend you to others. Your company is vulnerable to losing this client base to a competitor if you’re not careful.
- Detractors(score 0-6) – This is your unhappy customer base who can actually harm your company’s reputation and prevent referral growth.
To get your NPS average, subtract the percent of detractors from the number of promoters. According to Zendesk, a good average for a SaaS company is 29.
Establish your company’s first average as the baseline. This will help you determine whether future efforts work. Also, it will help as we move into the second part of developing NPS feedback: segmenting.
Paid vs. Trial
A one-size-fits-all approach to NPS can be limiting for a growth startup. In order to best measure customer experience, parse out different customer segments. Start by separating free trial signups and paid customers. Determine how each scores individually on their level of satisfaction. Trial customers won’t have enough experience with the product to deliver a quality assessment. However, they will provide insight into your conversion efforts. By evaluating this group’s NPS trend over time you’ll be able to measure your trial performance improvements. NPS can be the most important indicator of whether any new efforts the company is making actually produces customers.
As for paid customers, they can provide essential feedback on how well your product improvements work. After a new release, measure the NPS performance in the subsequent weeks to find how your customers are responding to the product tweaks.
Customer experience can vary by location, especially if where a client lives determines how much they interact with your sales or customer success team in person. For international companies, different countries can have very different renewal or customer experience patterns.
Are you selling to right customer? How is your company performing when the C-suite is using your product versus middle management? By segmenting NPS scores by job titles, you’ll know which groups like and dislike your product the most. That will help you improve messaging to the low-scoring groups and double-down efforts on selling the segments performing well.
If something like price point is causing dissatisfaction or an expanded offering of your product is driving customers to deliver high scores, segmenting plan type will reveal these sentiments. Parse out your different plans and you might find that some of your current offerings are weighing down the rest of your customer experience.
Number of users
By creating different segments by a range of the number of users, you develop an understanding of whether your products start to perform poorly at a certain number. If adding more users is a large part of your strategy to scale, identifying a breaking point in customer satisfaction by number of users could be a crucial red flag that the product needs immediately attention.
Determine your own
No one knows your company better than you. If the above groupings aren’t the best segmenting options, create your own based off the demographics that are most essential to improving your product.
Now that you’ve created customer segments, ask for feedback on specific experiences with your product. Do you have an appealing interface? How is your customer service response time? These kinds of questions can help you isolate problems and make necessary changes.
Metrics aren’t the only things that matter. Once you’ve asked your customers the first NPS question, allow a free-form feedback option and/or an additional survey to drill down into specifics you might not catch in your segmentation. Zendesk found that 63 percent of customers that gave negative reviews left additional feedback—that can be remarkably important to your business’ growth.
It’s important to segment and identify who is unhappy early because changing a customer’s opinion is incredibly hard. Zendesk found that more than 70 percent of surveyed users that gave negative reviews in the past didn’t change their mind. The majority of positive reviewers maintained their high marks, but to a lesser extent than their negative counterparts. Zendesk also found that more than half of NPS respondents rate a company 0 or 10, so your product is likely to produce a pretty strong reaction from the people paying for it.
Share the results
Now that you’re receiving more customer experience data points, be transparent about the performance of different segments with your team and investors. This level of detail helps your organization focus and will inspire confidence in your investors that you’ve parsed the necessary numbers to make big improvements.