SaaS marketing metrics?
Sounds like boring numbers and statistics but plays an important role towards your success as a marketer. You need metrics to verify that your efforts aren’t going in vain and if your strategies are working or not. Let’s see how these SaaS marketing metrics work.
But first, why use SaaS metrics?
- “You’re selling a service. Not a physical product” hence you need to quantify the results from an otherwise intangible offering.
- Business revenue streams follow the theory of the Pareto principle. That is, 80% of future profits will come from 20% of existing customers.
- The average cost of acquiring a new customer is 5 to 25 times more than retaining a current customer.
- It’s hard to generate sales in SaaS business hence businesses usually earn through user retention and upsells and not direct acquisition. You will need metrics to understand your user retention and improve it.
Saas marketing metrics you should keep track of as a marketer?
We know that marketing requires a plan, strategies that should work to increase the customer base, but when do you know how to change strategies or double up? You can figure it out using SaaS metrics.
Some metrics are important for every team member, while others may be relevant only for your customer success team and product managers.
- Unique visitors
- Lead velocity rate (LVR)
- Leads by lifecycle stage
- Lead-to-customer rate
- Monthly recurring revenue (MRR)
- Customer lifetime value (CLV)
- Customer acquisition cost (CAC)
- CLV : CAC ratio
- Customer engagement and health scores
1. UNIQUE VISITORS
❖ What are unique visitors?
The number of individuals visiting your website during a specific time. Here, if an individual visits your website 10 times in a month, you will count her as 1 unique visitor only.
❖ How to measure unique visitors?
Google analytics is a free tool that is one of the best ways to track unique visitors. Use this tool to generate weekly/monthly reports on new and returning users.
❖ Why are unique visitors important?
A huge number of unique visitors show that your content is connecting with your audience. It’s also important to see how these visitors are coming to your website. Here are some of the common sources to consider:
- Organic traffic
- Paid ads
- Social media
❖ What are leads?
If a user registers to your website, joins your mailing list, or fills a form on your site, then you consider her a lead. There are 2 types of leads:
1. Marketing qualified leads – Frequent visitors to your website
2. Sales qualified leads – The users which are searching for a solution or a service and your website can fulfil their demand by providing some paid service.
❖ How to measure leads?
Marketing automation tools like HubSpot, Marketo, or Pardot can measure leads.
❖ Why are leads important?
Leads drive sales. You are tracking the number of unique visitors converted into leads here.
3. LEAD-TO-CUSTOMER RATE
❖ What is the lead-to-customer rate?
The number of leads that are converted into customers is the lead-to-customer rate.
❖ How to measure the lead-to-customer rate?
Total number of customers of that month divided by total leads. Multiply that number with 100 to get a percentage.
❖ Why is the lead-to-customer rate important?
The percentage you get will draw a clear picture of how well your marketing strategies are working and if they need to be changed.
❖ What is churn?
It is a number that shows how many users cancelled a recurring service or a subscription in a certain time period. There are two types of churn:
1. Customer churn – It shows how many customers left
2. Revenue churn – It shows how much revenue you generated and you can compare it with past results to see decline/growth
❖ How to measure churn?
Take the total number of customers you lost in that month, divide it with total customers you had and multiply by 100. Say 10 customers left, and you had 100 of them. Your churn rate will be 10%.
❖ Why is churn important?
Churn is a naturally occurring event for a business. You will lose some customers and add some as well. But here, a high percentage will put your business in the danger zone.
5. CUSTOMER LIFETIME VALUE (CLV)
❖ What is CLV?
The average amount of money a customer spends in your business is CLV.
❖ How to measure CLV?
Here’s the tricky part: we need different metrics to calculate this.
1. Customer lifetime rate (CLR) – Take the number 1 and divide it with your churn rate. For example, 1/0.01 = 100 months (because we calculated monthly churn rate)
2. Average revenue per user(ARPU) – Divide your total revenue by total customers
3. Multiply your CLR with ARPU. This will give you the Customer lifetime value.
❖ Why is CLV important?
CLV shows whether you have a stable growth for your business or not.
6. CUSTOMER ACQUISITION COST (CAC)
❖ What is CAC?
How much did you spend to gain a customer? Let’s find out.
❖ How to measure CAC?
Take the total of your marketing and sales budget spent that month, divide it with the number of customers, and here you have it.
❖ Why is CAC important?
It gives you a clear idea about performing your marketing team. Let’s say your CAC is a little more. How can you predict the customer will spend more on your business? Or the customer leaves after some time so that money spent was for nothing? Here comes the next metric to save the day!
7. CLV : CLC RATIO
❖ What is CLV:CAC ratio?
This ratio shows the relation between customer lifetime value and the cost you paid to acquire that customer in a single metric.
❖ How to measure CLV:CAC ratio?
Divide your CLV by your CAC and you have the value.
❖ Why is CLV:CAC ratio important?
This ratio indicates if you are using a viable marketing strategy or not. Standard ratio is 3:1 but say your ratio is 1:1 or even less! Then eventually your business can end up dead if you don’t improve.
8. MONTHLY RECURRING REVENUE (MRR)
❖ What is MRR?
Short-term revenue generation is calculated in MRR
❖ How to measure MRR?
Average billing amount of a month multiplied by the total number of customers, quite easy!
❖ Why is MRR important?
This value will attract investors and is a guarantee that your business has a sound income. This growing number is healthy for business.
9. LEAD VELOCITY RATE (LVR)
❖ What is LVR?
Do you want your business to stay stagnant or to grow? This metric shows growth of your business.
❖ How to measure LVR?
Current months qualified leads – last months qualified leads divided by last months qualified leads multiplied by 100
❖ Why is LVR important?
This rate shows how your business is growing from month to month. You should always focus on having an increasing number.
10. CUSTOMER ENGAGEMENT AND HEALTH SCORES
❖ What is customer engagement and how to measure it?
Customer engagement explains itself. You set different parameters and judge customer engagement on that basis. How frequently do they login? Do they take part in contests? How much content do they like and share?
❖ What is a health score and how to measure it?
Health score means if the customer is likely to stay with your business or service for a long time or can leave at any point in time. Divide customer health into three categories:
Set parameters and score the health based on customer feedback, issues, customer satisfaction.
Why are SaaS metrics important?
These SaaS marketing metrics are important to keep the churn rate down. The more engagement you get, the more growth is likely to occur. You can specifically target customers with low health scores and try to fulfil their need to keep them in your business.
We know, there’s a lot to calculate here. But with the changing business world, we have to catch up on the new techniques and metrics, work on it and if we are successful in using these metrics in our favor, well, you’ll know the result yourself for good. Start tracking this metric and allow your business to enter the world of success.