Are you a SaaS company struggling to achieve the desired marketing results? Maybe you have launched great campaigns, but are not keeping track of the performance. Standing out in this industry demands tracking the right metrics and making appropriate changes to SaaS marketing accordingly.
Every metric can offer valuable insights into marketing performance and enable businesses to make improvements as well as enhance growth. However, with so many metrics out there, deciding which one to track can be confusing.
So, if you are wondering which SaaS marketing metrics you must prioritize, this blog will walk you through the ones that really matter. Let’s dive in!
Understanding SaaS Marketing Metrics
Before getting into the metrics you must track, having an idea of what they actually are is important. In simple words, SaaS marketing metrics refer to the measurement standards that allow businesses to evaluate the effectiveness of SaaS marketing campaigns. They offer a frame of reference to compare current as well as past performance and make the required improvements for achieving the desired objectives.
7 SaaS Marketing Metrics You Must Measure
Here are the top seven metrics you need to track to take your marketing efforts a notch higher and accelerate business growth.
1. Customer Acquisition Cost
No doubt, acquiring new customers is vital for the growth and expansion of any business. However, it is crucial to note that it comes at a cost. For that reason, you need to measure customer acquisition costs. It is often referred to as the lifeblood of your SaaS marketing budget.
Customer acquisition cost (CAC) is a key SaaS marketing metric that allows you to get an idea of the average amount that a business needs to spend to acquire new customers. It includes sales and marketing costs to other expenses associated with customer acquisition.
Wondering how to calculate CAC? Well, it is quite simple. All you have to do is divide the total cost of customer acquisition by the number of customers acquired during that period.
Keeping this metric under control is indeed crucial as it will have a direct impact on your ROI and profitability. Make sure that the income margin of your business for every customer is higher than the money spent on acquiring them. By keeping track of this metric, you can conveniently make the necessary changes to your marketing approaches and ensure cost-effective customer acquisition.
2. Monthly Recurring Revenue
Do you want to predict the income of your SaaS business and ascertain sustainable growth? If yes, keeping a tab on the monthly recurring revenue or MRR, matters a lot. This SaaS marketing metric enables companies to gain insights into the revenue that they earn every month.
Simply put, MRR is all about the total amount of money that a company receives from its existing customers every month, if no customers are lost or acquired. This metric lets businesses predict the financial performance of the company over the years to come. Moreover, it also helps identify the growth or decline trends of the business.
MRR is calculated by multiplying the number of active customers by the subscription fees. This figure can offer you an idea of the current health of your business and pave the way for forecasting future revenues.
In order to increase monthly recurring revenue, companies will have to expand their customer base, lower the churn rate, and upsell to existing customers. When you find that your MRR is growing and predictable, it is a key indicator that your SaaS business is ready to scale its operations. Hence, you can concentrate on acquiring new customers and reducing your marketing expenses.
3. Lifetime Value
The lifetime value (LTV) of customers is another vital SaaS marketing metric that must not be overlooked. This metric lets you calculate the total revenue your business can expect from a customer throughout their relationship with your company. That means if a customer avails of your services for a prolonged period of time, your LTV will be higher.
In order to calculate the lifetime value of customers, multiply your average revenue per user by the average customer lifespan. After you measure the LTV, ensure comparing the value with CAC.
When your LTV is greater than CAC, it is a clear indication of positive returns on customer acquisition. However, if your CAC is higher than LTV, it shows that you are losing money in customer acquisition. Therefore, improving your lifetime value matters.
Wondering how to increase LTV? Focusing on retaining more customers can help. With an increase in the number of customers using your services for longer periods, you can expect higher lifetime value. Besides customer retention, offering personalized onboarding and enhancing your customer support can also help improve LTV.
4. Rate of Activation
Is your SaaS business offering free as well as paid plans? Then, the rate of activation is indeed an important SaaS marketing metric that must be calculated to accelerate your business growth. Wondering what it is? Well, it is defined as the percentage of customers switching from a free plan to a paid one in a given period of time.
To calculate it, divide the customers passing the activation point by total users that signed up. Lastly, multiply that figure by 100. After subscribing to your services, the moment of activation is when the customers actually start realizing your worth.
However, besides measuring this metric, make sure to figure out what exactly compelled your customers to subscribe to your paid services. That can aid you in growing your SaaS business and ensuring lasting success.
To improve your rate of activation, having a straightforward subscription process can help. As customers do not like challenges, the simple approach can convince them to take immediate action and opt for your paid plans.
5. Churn Rate
Ever wondered how many of your customers have stuck with your services over time? If you have not measured it yet, it’s time to get started. That is where the churn rate comes into the picture.
Customer churn rate refers to the total number of customers who’ve stopped using your services/products during a certain period. It is easy to calculate the churn rate. Divide the number of customers lost the business by total customers at the beginning of the period. Next, multiply that figure by 100.
Having a high churn rate may indicate an issue with the customer experience. It is likely that your customers aren’t satisfied with the product price or the services you are offering. Besides, a higher churn rate can have a negative impact on the growth and revenue of your business.
Hence, minimizing it becomes vital. Don’t know how to bring it down? Well, simple strategies such as improving your products or service offerings, customer support, and providing discounts or incentives to your customers can help.
6. Net Promoter Score
You cannot leave behind the NPS or net promoter score when it comes to SaaS marketing metrics. This metric lets you measure the chances that your customers will recommend your products or services to others, reflecting their loyalty and satisfaction level. A SaaS Development company can make use of this metric to gain insights into customer sentiments and rate their services effectively.
In order to calculate NPS, you will have to ask your customers to rate how likely they are to recommend your services to others. Then, you need to subtract the detractors from the promoters to get the real NPS value.
A high net promoter score is a clear indication that your customers are quite satisfied with your products and services and will recommend them to others. As a result, increasing word-of-mouth marketing and enhancing brand loyalty become easier.
Improving this score is simple. You just need to listen to the feedback of your customers, improve your services, and ensure the delivery of exceptional customer support.
7. Customer Retention Rate
Even a 5 percent increase in customer retention can accelerate company profits by nearly 25 percent to 95 percent. Yes, you read it right! Therefore, CRR proves to be a vital SaaS marketing metric for growth.
Customer retention rate is the ratio of customers that stay with your company during a certain period. Here is the formula: |(Customers at the End of Period (minus) New Customers) divided by (Customers at Start of Period) multiplied by 100|
A higher retention rate shows more loyal customers of your business. However, a lower retention rate may indicate problems with your services, resulting in dissatisfaction among customers. So, improving CRR is important.
Wondering how to do that? Well, maintaining robust customer relationships is the key. Moreover, you can also reach out to the customers, understand their pain points, and address them.
Final Thoughts
The significance of SaaS marketing metrics cannot be undermined. By now, you must have clarity about the different metrics, from customer acquisition cost to churn rate. It’s time to prioritize the improvement of these metrics and ensure explosive growth.
Make sure to continuously measure the metrics, leverage the appropriate strategies to improve them, and enhance business growth successfully. With such efforts, scaling SaaS businesses will be a hassle-free affair.
