10 MARKETING METRICS TO TRACK FOR YOUR SAAS
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Most SaaS companies have a lot of marketing metrics to track. But this is especially true for B2B SaaS. Even if you are swimming in resources and tracking software, it can still seem overwhelming to follow them all.
It’s really important that you decide which SaaS marketing metrics are most important to your organization and your team. You don’t want to be wasting time chasing pointless vanity measures that won’t help you down the road. What you want to do is truly concentrate on improving your product, increasing acquisition and retention rates, and boosting bottom-line, right?
What are the top 10 SaaS marketing metrics to track? Here’s the TL;DR list:
- Customer Acquisition Cost
- Sign-up to paid conversion
- Churn rate
- Net Promoter Score (NPS)
- Top of the funnel leads
- Marketing sourced revenue
- Active trials
- Lead velocity rate
Your ultimate aim is to increase monthly recurring revenue (MRR) and ARR over time. So, of course, these are two of the most important SaaS KPIs you must measure. Your MRR and ARR are key indicators for company growth, though they’re also your KPIs for corporate success. Are there any other key performance indicators (KPIs) that you can use to track your growth? Sure there are. Keep reading.
1. Customer acquisition cost; LTV:CAC ratio
Customer loyalty is the most important consideration for SaaS companies. A loyal customer means recurring revenue at no extra cost. Once you have someone as a customer, you need to put it little to no effort into getting their subscription money. And this brings us to the infamous Customer Acquisition Cost (CAC).
Customer Acquisition Cost (CAC) is the top customer-acquisition metric, as measured by the number of customers acquired per $1 invested in marketing and demand generation efforts. Basically, how much money do you spend to gain one paying client?
But without comparison data to go alongside it, the CAC metric is worthless. One of the most essential SaaS metrics you need to line up CAC with, is the customer lifetime value (CLTV.) To put it another way, how much does the average paying client contribute to your business throughout their usage?
Determining these numbers can be tricky. Even if your marketing budget is relatively small, you may still save money on it by consolidating certain costs. If you’re running multiple marketing campaigns, for example, Google advertising and social ads, email marketing campaigns and paid partnerships, or salespeople and social media management tools, there are a lot of moving pieces to consider. It’s not an easy number to come by. But with this equation, you may arrive at it:
CAC = [Total cost of sales + Total cost of marketing] / New customers acquired
CLTV = Average Revenue Per Account / Net Monthly Recurring Revenue Churn %
How do you tie the two together in order to enhance company growth?
Well, you want a 3:1 LTV:CAC ratio. That implies that, in terms of new users, you’re frequently generating three times more income than it costs to attract them.
The bad part is that CAC is always growing. You need to be scrappy in how you fight back against this, as SaaS marketers. The solution isn’t always to raise prices. This works only if you’re underpriced in the first place. If not, you may suffer a significant drop in purchase frequency and customer lifespan.
What you need to do instead, is consider keeping customers for longer and increasing our CLTV by upselling, cross-selling, and developing brand loyalty.
You need to look at innovative technologies, procedures, and agile ways of working to keep our CAC from increasing. You also need to create more long-term acquisition content, evergreen SEO content that does not rely on paid pushes. You will be in a far better financial position and have a more trusting, loyal customer base if you can establish organic acquisition customer pathways.
There’s a lot of debate about whether SaaS should track sign-ups or activations. Sign-ups suggest a high level of interest in your offering. However, if no one uses your product, sign-ups will provide little benefit.
So which is better? Activations or signups?
Let’s look at activations first. Activations vary depending on your product. But they are essentially the first time someone uses your product in a way that shows they get value from it.
Personalized onboarding makes for more successful app or software activations. Understanding your user’s goal with your product and if they’re already using any other solution to address their problem is crucial. You can personalize the onboarding messages based on whether or not you understand those two aspects.
Activations can also be referred to as PQLs: product qualified leads. Because they can occur whether you’re charging for your product or not, they’re known as PQLs: product qualified leads. Why is that? Perhaps you have a free version of your software or a trial period. The people that create an account are still leads. In fact, they are leads who are most likely fit for your product.
In the case of product-led businesses, tracking PQLs is mandatory. PQLs are how you determine who is getting value from your product and who is not. You’ll quickly see that your entire organization will focus more on user success when you begin measuring PQLs.
Activations are also a great way to measure and scale paid advertising. If you set activation as a conversion goal, you can get the ad algorithm to bring individuals who will eventually buy your product and generate money for your company, rather than those that sign up but do nothing.
3. Signup to paid conversion (12-month period)
If you have a freemium plan, keep reading. If you don’t have a freemium plan, keep reading because it might give you some good ideas. But if freemium is totally against your SaaS, jump to the next point.
Perhaps you are driving people to sign-up, but that might not result in them converting. Only a fraction of them are likely to convert in the first month.
You can apply these metrics to find out what drives your conversion rate and, more importantly, what doesn’t. You’ll learn a lot about your business by knowing what the average signup to paid conversion rate over 12 months was. In fact, you will be able to:
- Calculate the number of paid conversions that can be expected, just based on a group of signups.
- Increase the effectiveness of marketing ROI measurement
- Attribute paying users to past acquisition efforts
- Identify what makes a user got from freemium to paying customer and try to speed up bridging that gap
4. Churn rate
There’s no true article about SaaS metrics that skips over churn rate, right? This is one of the Captain Obvious kinds, but it’s intentional. Churn rate is still one of the most important indicators to track.
Customer Churn Rate = [Existing customers at the beginning of period — Existing customers at the end of the period] / Existing customers at the start of the period
This metric has traditionally been used by product and UX teams. However, it might benefit SaaS in their marketing efforts too. If product and customer success teams are doing their jobs well, then churn shouldn’t be happening for reasons relating to the user experience, the actual product, or the price.
This means that you need to take a better look at marketing, specifically at product messaging you use in your marketing efforts. Is your messaging creating false expectations? Is there something in those messages that portray something that is not delivered after onboarding?
5. Net Promoter Score (NPS)
Think about taking your marketing metrics a step further? Say no more! Just start tracking your Net Promoter Score. A net promoter score is calculated by asking your clients one simple question: On a scale of 0-10, how likely are you to recommend us to a friend?
The answers you will get will fall into three categories:
- 0-6 Detractors: Those that are most likely to hurt your brand’s reputation.
- 7-8 Passives: Those who are uninterested in harming or promoting your brand.
- 9-10 Promoters: These are the folks most likely to promote your business.
Net Promoter Score = % of promoters — % of detractors
The Net Promoter Score (NPS) is usually disregarded by a SaaS marketing team since it isn’t particularly beneficial. As a result, NPS surveys are frequently accompanied by additional questions that a company may find valuable.
However, an NPS score may be a useful indication of whether you have a healthy brand relationship with consumers, good customer engagement, and can be an indication of expected future referral growth.
Any SaaS out there needs to be laser-focused on retention, both revenue retention as well as user retention. Why? Because the growth or shrinkage of a SaaS can be determined by revenue retention. User retention is an early indication of a user’s health and engagement with the product. It forecasts the likelihood of upgrading to paid subscriptions for free users. It forecasts churn or expansion for paying customers.
Many founders believe that there needs to be a growth in retention over a set period, and as a result, there will observe a reduction in churn rate. This is where many SaaS companies go wrong. They believe that reducing churn extends retention or vice versa.
Reducing churn is more of a short term solution to increasing customer lifetime value. This isn’t necessarily a negative thing, but aiming for retention is better than targeting turnover.
A 5% increase in customer retention might result in 25-95% higher profits. Retention brings with it a long-term view of CLV, client success, net promoter score, and other metrics. Upselling, cross-selling, and extending the average contract value are all possible by attempting to retain customers.
7. Top of the funnel leads from organic traffic
There are a few crucial funnel metrics to keep an eye on at all times that we’re all aware of, but I think the most important marketing indicators to watch are determined by the current period’s objectives and how the sales funnel is flowing. A simple measure such as returning users can be a key leading indicator for future MRR if you’re promoting an early-stage, innovative product.
If you’re in a competitive market where the primary aim is to gain market share, you should keep an eye on leads produced by organic traffic or conquest offers since they’re the most telling indicator of your success.
Pay attention to your organic data. Keep analyzing so you can spot patterns and use them to improve your inbound marketing strategy. If you can develop a strong organic growth funnel, you’ll be seen as an industry leader and less reliant on ad spending in the future. A great tool for this is Google Analytics. However, don’t get your hopes too high. Organic has become a sort of luxury.
8. Marketing sourced revenue (MSR)
If you want to know whether your marketing campaigns are efficient or not, well, it all starts with setting your marketing goals.
If you’re focusing more on ROI, combine your MSR with your CLTV and CAC.
You can easily calculate a direct cash ROI if your marketing KPIs are to increase clicks, unique visitors, conversions, or activations. In this situation, you’ll need to measure the ROI in a variety of ways. For example, look at ROI as sales-qualified leads (SQLs), marketing-qualified leads (MQLs), or an increase in newsletter subscribers, for example.
In case you are wondering why you should track marketing sourced revenue, let us tell you that it will help you make better business cases. Moreover, you will be able to look at ways to make your SaaS marketing spend and campaigns more streamlined, agile, and effective.
9. Number of active trials
As a SaaS, you should be constantly trying to generate the correct sort of demand to keep the company going. And make every effort to get everyone focused on one key indicator that signifies whether or not you’re making good progress. Normally, the figures indicate whether or not you have enough interest in the product to drive sales. One option is to track the number of trials deployed. But this only works if you have a freemium product that can be self-deployed.
Remember, this is not about your total number of customers here. If your number of active trials is continually increasing, you may conclude that what you’re doing now is not only generating interest but also educating. Tracking the number of trials allows you to see patterns in growth and can help you to improve your product messaging as a whole.
If your SaaS business only relies on a sales force to drive up trials or give product demonstrations, you should look into how you might automate the procedure. It’s more scalable and helps increase the time your staff spends working on bigger contracts.
10. Lead velocity rate (LVR)
The last of our top SaaS marketing metrics to track is lead velocity rate. Of course, this is dependent on what you choose to count as a lead in your lead generation efforts. It’s also known as your customer velocity rate (CVR). The keyword here is velocity.
LVR%= [Total number of MQLs from Month B — Total number of MQLs from Month A] / [Total number of MQLs from Month A] X 100
Identifying the month over month velocity of the number of leads your marketing team generates allows you to see growth patterns in your SaaS marketing campaigns, as well as establish targets for upcoming quarters.
As a result, you’ll be able to assess if you’re on track to meet your end of quarter or end of year goals. And if you’re not, no problem! Just include it into your SaaS marketing plan and start working on getting leads through the door as soon as possible.
Whether you’re a seasoned pro or just getting started, hopefully, the data in this post helps you narrow down on metrics. Or at least gives you an idea about what to start tracking. These metrics can tell you a lot about your typical customer and their experience with you, which is something you can learn a lot from. This information might help you increase your overall income in the long run. It will certainly help you increase the quality of your marketing output.
Keep in mind though that revenue growth doesn’t happen overnight. And keeping an eye on these SaaS marketing metrics is one thing, but taking action on the information you generate is another. Read it carefully, put it to good use by improving your product and client experience, and hit your revenue targets month after month year after year.