Ahh, SaaS marketing metrics. Those pesky numbers and statistics that marketers know they need to be aware of, but can be a bit of a bore to actually track. Which ones are absolutely necessary? Which ones can you pass on? This is certainly one of the challenges involved in SaaS marketing as a whole.
Unfortunately, those pesky numbers and statistics are also vital to your success as a marketer. After all, without metrics to track, how would you know if your marketing efforts are even successful? Which strategies to keep and which to modify or drop? Even the most successful SaaS companies out there will tell you all about how crucial it is to monitor these metrics and know what to do with the data.
If you’re going to use SaaS marketing metrics to your advantage, it’s important that you understand exactly how they work.
What Makes SaaS Marketing Metrics Different?
At its core, marketing metrics for SaaS differ based on one key principle: you’re selling a service. Not a physical product. This isn’t just another guy walking into your store, purchasing the newest video game console, and taking off, never to be heard from again. We’re talking about a subscription-based service where you not only have to get your generated leads to sign up, but you also have to retain them. This key difference is what will always make SaaS companies stand out from physical products.
Ordinary B2B Product Marketing
Selling a product
Selling a service
Relies on retention alongside signups
Upselling is basically non-existent
Upselling is a huge revenue stream
For example, as a shoe salesman, you wouldn’t spend time calculating customer lifetime value! However, to a SaaS company that relies on subscription-based payments for revenue, customer lifetime value is a very important metric to track.
The same goes for a metric like customer churn. Since regular businesses typically sell a product that’s more of a one and done scenario, customer churn doesn’t really apply to them. However, SaaS businesses need customers to stick around after subscribing, which is a whole other can of worms. Calculating the percentage of customers who stop using their product or service every year is important to them.
As you can likely tell, SaaS marketers have their work cut out for them! The job isn’t over once they get that elusive transition from trial user to paying happy customer. They need to develop relationships with customers in order to persuade them into becoming customers for life.
Understanding that a lot of the same old strategies you’ve been using before won’t apply to SaaS marketing is vital to your success.
SaaS Marketing Metrics You Need To Track
As we’ve mentioned already, marketing requires a set plan. Not only that, but it also requires adaptation. Knowing which strategies aren’t working. Doubling down on those that are. Using SaaS marketing metrics is how you figure this out. Some are important, while others are simply vanity metrics to get a cheap boost of confidence in your service.
So which SaaS marketing metrics do you absolutely need to keep at the front of your mind?
- 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
The unique visitors metric is essentially what it sounds like: the number of individual visits to your website during a specified time. This means that if someone were to visit your website ten times, they’re only counted as one unique visitor. Although it’s considered by many to be a simple vanity metric, unique visitors can actually provide you a lot more info about your business than you might realize.
A high number of unique visitors is a great indication to SaaS marketers that their top of the funnel content is resonating with their target audience. However, this also means that it’s more important than ever to pinpoint which channels are actually sending these people to your website. Channels such as:
- Organic traffic
- Paid search
- Social media
Figure out which channel is working best for you and double down on it!
In order to properly measure unique visitors, the most common method is using Google Analytics. They make it simple to see just how many unique visitors you have during any specified time period, be it daily, weekly, monthly, etc.
Also, as you can see from the screenshot of the Google Analytics demo account, they show you exactly which channels your traffic is coming from. No guesswork needed!
Unique visitors can be so much more than a simple vanity metric. Use it properly and you’ll be well on your way to success!
Lead Velocity Rate (LVR)
Growth is an important aspect of any SaaS company. No one wants to stay stagnant month to month.
But how do you actually measure growth?
Well, one simple SaaS marketing metric you can use to measure if your marketing strategies are inspiring growth or not is called lead velocity rate, or LVR for short.
Your LVR is essentially the percentage of growth your lead count sees from month to month. It’s a bit of a longer equation to get there, but thankfully HubSpot has a great graphic on how to calculate your LVR.
A little long-winded, but it gets the job done. This will show you just how much your lead count is growing from month to month!
Leads By Lifecycle Stage
Not every lead is equal. Some are certainly more qualified than others. They require different content or different strategies to help nudge them further down your funnel.
So how do you actually classify these different types of leads?
Well, there are two common categories of qualified leads:
- Marketing qualified leads (MQL)
- Sales qualified leads (SQL)
Leads toward the top of the funnel
Leads further down the funnel
Not quite ready to buy yet, needs further nurturing with marketing efforts
Typically ready for sales push
Marketing Qualified Lead (MQL)
A marketing qualified lead, or MQL, is a lead that has typically passed the awareness stage and is now dipping into the middle of your funnel. Maybe they’re a frequent visitor to your website. Or maybe they’ve taken it one step further and actually downloaded an e-book from you.
One way or another, the MQL is certainly a step up from your average top-of-funnel lead.
Sales Qualified Lead (SQL)
A sales qualified lead, or SQL, is a step beyond an MQL. This is where a direct sales pitch would be appropriate. These leads are actively searching for a solution to their problem and are likely aware that your service would get the job done.
Defining and separating your leads will help you determine the next steps to take in order to push your prospects further down your funnel, and hopefully boost your conversion rates in the process.
But how do you efficiently classify your different leads?
A marketing automation tool such as Marketo would come in handy here. All you need to do is set criteria for each type of lead. Depending on the actions your prospects take on your website, Marketo will classify them into different categories for you!
Of course, having qualified leads is important. No doubt about it. But are you really accomplishing anything if these leads aren’t turning into paying customers?
No, you aren’t.
Knowing the percentage of leads that turn into customers sounds like information any SaaS company would want, doesn’t it?
Luckily, the lead-to-customer equation is here to save the day. For example, if you want your lead-to-customer rate for one month, simply take your number of customers from that month, and divide it by the number of leads from the same month. Multiply the result by 100 and boom: lead-to-customer rate as a percentage.
Lead-to-customer rate has an impact on not only SaaS sales teams, but SaaS marketing teams as well. Sales have to push leads through to the bottom of the funnel, but the onus is on the marketing teams to ensure their leads are properly qualified. At the end of the day, both teams need to be working in tandem with each other to ensure the lead-to-customer rate stays as high as possible!
Monthly Recurring Revenue (MRR)
Here’s another easy one for those of you who despise math and long equations.
Monthly Recurring Revenue, or MRR for short, is all about calculating your short-term revenue. In order to find this number, you’ll need to multiply your total number of customers by the average billed amount.
For example, if your average billed amount is $30, and you have a total of 1000 customers, your MRR would be $30,000. Doesn’t get much simpler than that!
MRR is one of the primary stats that investors look into when deciding on whether or not they want to invest in a SaaS company. An MRR that is on a growth trend is a clear sign of a SaaS company with a sound strategy and a vision of success.
When we’re talking about any subscription-based company, churn is the number one killer. If you were to only track one SaaS marketing metric (not a good idea, by the way), churn is the one you need to be tracking. It’s a surefire way to tell if your SaaS company is sinking or swimming.
However, what you might not know is that there are actually two different types of churn: customer churn and revenue churn.
How many customers are leaving your service at any given time?
In order to answer this question, you’ll need to calculate your customer churn. This metric is a good insight into how well your customer retention is.
Say you want to calculate your customer churn percentage from last month, and at the beginning of last month, you had 200 customers. You also lost 5 customers during that same month. Simply take your number of lost customers, 5, and divide it by the total number of customers, 200. Then multiply the result by 100. This is your churn percentage, which if you calculated it correctly, would give you a percentage of 2.5.
Doesn’t take a math whiz to figure that one out, does it?
Not every customer is equal. Especially when you have different price points for different plans.
Think about it this way. One customer who is paying a monthly fee of $120 is worth the same as four customers paying a monthly fee of $30. This means that simply calculating your customer churn and calling it a day isn’t enough. It can leave you wondering where all your money went and why your company isn’t doing so hot, even though your customer retention seems okay.
While it may be a little wordier than most equations, calculating revenue churn is as follows:
This will give you a slightly bigger picture of how your SaaS company is doing than simply calculating customer churn and breaking for lunch!
Customer Lifetime Value
Wanna figure out just how much a single customer is worth to you? Thankfully, there’s a SaaS marketing metric that’ll do the trick!
Your CLV is a crucial metric to track. However, in order to get this value, you’ll need to calculate a couple of separate metrics and use an equation combining the two.
One of these two is called your customer lifetime rate. To find this, simply divide the number 1 by your churn rate.
Next, find your average revenue per account (ARPA). Divide your total revenue by your total customers to grab this number.
Lastly, multiply your customer lifetime rate by your ARPA. This will give you your customer lifetime value.
We get it. CLV is one of the more complicated metrics to calculate for those of you who don’t consider math your strong suit. However, with your CLV calculated, it will help you figure out:
- What a customer is worth, on average
- How often a customer purchases
- The amount a customer spends
Don’t sleep on your CLV. Combined with the next SaaS marketing metric, it can be one of the most crucial metrics to track.
Customer Acquisition Cost (CAC)
How much does it actually cost YOU to acquire a customer? Do you know? Do you even have a clue how to figure that out?
The customer acquisition cost equation is here to save the day!
To figure out what your CAC is for any given time period, divide your marketing and sales spend over that time period by the number of customers gained during the same time. Voila! That’s how much it costs you to acquire a customer.
Now, calculating CAC on its own is not the whole story. Sure, it might cost you a little more to acquire a customer, but what if that customer ends up spending far more money than most? That’s where things start to get a little more complicated. And where this next SaaS marketing metric comes into play.
So you’ve calculated your customer lifetime value and your customer acquisition costs. What now? What good are these numbers? What information can we pull from these seemingly arbitrary stats?
Combine them, of course!
If you’ve only calculated your CAC, then all you’re getting is your costs. They might appear high, but without CLV, you won’t know how much you’re actually getting in profit.
Conversely, your CLV is a great number to have, but what if your marketing and sales costs are skyrocketing? What good is a customer who gives you tons of revenue if it costs near as much to acquire them in the first place?
If you’ve already got your CLV and CAC calculated, finding the ratio is a piece of cake. Divide your CLV by your CAC. Presto. Your CLV:CAC ratio is now calculated!
So why is this ratio even important?
CLV:CAC ratio is a clear indicator of whether or not you’re using a viable marketing and sales strategy. As stated above, high paying customers are no good to you if you’re paying a premium to reel them in.
An ideal CLV:CAC ratio can vary. However, the industry standard for SaaS companies is about 3:1. Shoot for that. If your ratio is closer to 1:1, or god forbid, below 1:1, it’s time to think up some new strategies. Something isn’t working!
Customer Engagement and Health Scores
Think of these two SaaS marketing metrics as a sort of early warning sign for customer churn. If you want to keep your churn rate down, you’ll need to get a system in place that tells you who is at risk of leaving your service. Customer engagement and customer health are the answer to this problem. While they’re under the same umbrella, they differ on a couple of key points.
Customer engagement scores are pretty self-explanatory. They tell you just how engaged a customer is with your service through different parameters you set.
Do they log in daily? Are they only using certain features?
These are scenarios you need to take into consideration when you assign customer engagement scores.
Creating a system can be a little more time-consuming, but it’s worth it in the long run to keep that churn rate down. You need to assign values to different actions your customers take within your service. You know if they’re logging in daily or reach a certain milestone of time spent with your service, they’re unlikely to churn.
Customer health scores really boil down to whether or not your customer is likely to re-subscribe to your service or not when their time runs out.
Your customer engagement is just one factor in your overall customer health. Some other channels to monitor for customer health are:
- Whether or not the customer has met their goals
- Logistics issues (billing, support tickets, etc.)
- Specific customer feedback
From there, assigning your customer into one of the three categories will help you decide what action needs to be taken. For the customers who are in good standing, continuing what you’ve been doing all along with basic customer nurturing will suffice. A customer with a positive health rating is also one you should be looking to upsell to. If they’re already using your service daily, why not demonstrate to them the value of your next tier service?
The customers who are in bad health are the ones you need to act on. They require a plan in order to remedy their issues or they’re likely to churn.
Wanna keep that churn rate as low as possible? Start monitoring your customer engagement and health scores!
SaaS Marketing Metrics Summary
Everyone knows that diving headfirst into anything, regardless of industry, can result in negative outcomes. However, sometimes plans have to change. The same old strategies aren’t working, and it’s time for an overhaul. The only way to figure this out is by tracking these important SaaS marketing metrics.
To summarize the ten most important SaaS marketing metrics:
- Unique visitors
- Lead velocity rate
- Leads by lifecycle stage
- Lead-to-customer rate
- Monthly recurring revenue
- Customer lifetime value
- Customer acquisition cost
- CLV:CAC ratio
- Customer engagement and health scores
We get it. There’s a lot to calculate there. Unfortunately, if you want to adapt to the constantly changing world of SaaS marketing, there’s no other way around it. These metrics need to be at the front of your mind at all times. Tracked and acted upon.
Don’t sleep on them. Start tracking these SaaS marketing metrics today and open yourself up to a world of success!
Are the Waters Still Muddy?
There’s a lot of math involved here. On top of all kinds of new info being thrown at you at once. There’s absolutely no shame in asking for a hand! Why not get in touch and we’ll show you the ropes?