3. Net Promoter Score (NPS)
Commonly used to assess the customer’s experience, NPS evaluates your customers’ loyalty to your company and its products or services. It’s known as the “gold standard CX metric” as it shows businesses how the customers perceive them. Is the company doing an excellent job in meeting the customer’s expectations? NPS shows the customers’ loyalty fostered from multiple interactions. A higher NPS score indicates a greater level of customer loyalty.
With one question, it enables segmentation between poor and positive feedback. Moreover, it helps identify which customers are more likely to become promoters that can drive revenue growth for the company.
How to calculate NPS?
To calculate NPS, you must first survey all or at least a sufficiently large representative cross-section of your customers to provide meaningful statistics to be returned for analysis. An NPS survey contains just one question, and NPS surveys are sometimes asked on their own and sometimes included in a broader survey containing more questions. However, this does run the risk of introducing bias that might skew the NPS results. The question asked in an NPS survey is:
How likely are you to recommend our product or service to your friends or colleagues on a scale of 0 (not at all likely) to 10 (extremely likely)?
The responses are then collated as follows:
- % returning a score of from 0 to 6: detractors
- % returning a score of from 7 to 8: passives (which are ignored for calculation purposes)
- % returning a score of from 9 to 10: promoters
Once the customer’s feedback is categorized into the above three groups, you can now establish the NPS by the following formula:
NPS = the percentage of promoters – the percentage of detractors
4. Customer Health Score
One of the most common SaaS KPIs is the Customer Health Score, which identifies the likelihood of a customer to grow, renew, or churn. With the growth of Customer Success and the increasing focus on customer retention, the Customer Health Score has become even more essential. Compared to other metrics, CHS is highly specific to a company, and is calculated by combining multiple indicators, selected carefully to show overall customer “health.”
This combined value is then often shown as a traffic light style indicator for each customer, where GREEN indicates a healthy customer relationship that is in little to no danger of churning, AMBER indicates a reasonably healthy customer relationship but where there may be room for improvement, and RED indicates a likely or potential churn candidate if action is not immediately taken to prevent this from occurring.
CSMs often use a customer health score to help with time management decisions – as it contributes to an awareness of which customers need the most time and effort to be allocated to them to reduce churn. CSMs may sometimes be targeted based on customer health score statistics (individually or as a team).
There are many indicators (or metrics) that can be utilized within the overall combination formula used to calculate the overall customer health score, including:
- Usage Frequency tells how much time the users spend on utilizing the product or services of the company.
- Usage Breadth measures the number of users under a specific account and using the product; and
- Usage Depth identifies which products are often used compared to the others.
To know more about calculating Key Performance Indicators and their purpose, check out our Certified CSM Basic Practitioner Course: https://practicalcsm.com/certified-csm-professional/.