SaaS Metrics Performance
Numbers! Numbers! Numbers! There are just too many of them, aren’t they? To track or not to track is no longer the question. We have realised that we need to. The deeper question is, what numbers are relevant and how do they impact the business. SaaS marketing might be a whole lot easier, if only we knew that.
Well, then you are in the right place. We are here to tell you exactly what you need to keep your eyes on.
For instance, if you are trying to lose weight, it’s nearly impossible to judge the difference unless you step on the weighing scale and measure your results. And if you have data, then you can plan out different ways to improve it.
That’s why, no matter what the industry is, data is the ruler as it is critical to performance measurement. This helps brands identify strengths and weaknesses, high performers and areas of improvement. Historical data is needed to set the benchmark for future performance. But, understanding data is not easy, and it could send you down the rabbit hole if you don’t know what you are looking for or looking at.
Keeping this in mind, we have carefully selected the key B2C and B2B marketing SaaS growth metrics to help you enhance your performance measurement.
But, before we go ahead, let's talk about the importance of metrics for a SaaS business.
Importance of metrics for a SaaS business
"The future of SaaS will be defined by doing more with less. Today, technology is proactive but tomorrow technology will be predictive. Interestingly, 90% of all data has been generated in the past two years. I like to think about artificial intelligence and machine learning, not as a product, but as electricity that will power future tech."
- Chris Makkreel, Head of Technology, Salesforce
SaaS is a powerful model as it comes with the ability to scale, predict and operate economically. Metrics help SaaS businesses to bring recurring revenue, retain customers and increase conversion rates at low CAC.
As we know, different business models require a completely different set of metrics. I'm not an expert in every business model out there. But, based on my experience with SaaS business, I can give you a set of metrics that provides a comprehensive view of how your business is performing.
B2C or B2B SaaS Marketing Metrics
Here are the top B2C or B2B SaaS marketing metrics to measure the performance of your business.
Churn rate
There are two types of churn rate, i.e., customer churn and revenue churn. As per Sophia Bernazzani from Hubspot, customer churn rate is the percentage of your customers or subscribers who cancel or don't renew their subscriptions during a given time period. Whereas, revenue churn rate measures customers' revenue, leaving each month as a percentage of full payment.
If you are an upcoming SaaS company, tracking churn rate isn't helpful. This is because you have 50 customers; it is easy to find one or two new customers who have left your service. On the other hand, as your company grows, minimizing churn becomes an important goal. For example, if you have a 2% churn rate, then it means that 20000 customers are leaving your service every month, which makes it challenging to replace.
What is a good customer churn rate?
In an ideal scenario, the answer would be zero. Unfortunately, that is not possible. You are going to lose customers even if you provide excellent service or products.
How can you achieve a good customer churn rate?
The best way is to engage with your customers and understand their problems. Also, you can make use of your competitive advantage and reinforce the brand's uniqueness.
Activation rate
The moment of activation, i.e., the 'aha' moment in which your customers first realize your product's value for themselves, is known as activation rate. But it isn't easy to calculate. Activation rate combines customer journey mapping, interviews, and behavioural data to find which product actions lead to long-term success and retention. Once this value is defined, you can enhance your user onboarding to shorten the time.
What is a good activation rate?
The activation rate varies across products and people. That's why it's challenging to have an industry standard. This is because you need to look at important activation events to define activation. All you can do is compare your activation rates over time and perform A/B testing to improve them.
How to improve activation rate?
When it comes to improving activation rate, it's crucial to track the data using google analytics. That means you need to map the customer flow and understand the areas that require work. This will let you figure out the areas where you need to put your focus.
Monthly recurring revenue
MRR is one of the metrics that help you define your predictable revenue stream. For instance, if you work for a company that sells cloud platforms, customers sign a yearly subscription and pay a monthly fee to use the service.
So, if the customer agrees to pay thirty-six thousand per year, you can earn around three thousand as MRR each month. Once you know this value, you can get an estimate of the total MRR for your business.
Why is MRR significant for SaaS business?
MRR metric is crucial for your financial and business growth. This is because they help you optimize your pricing strategy and help you get consistent growth. Also, it tracks your sales and marketing team performance. That means if the customers are happy with the service you provide, they will keep paying you every month.
Customer Acquisition Cost
Customer Acquisition Cost (CAC) provides the cost of acquiring new customers. It can be calculated by summing up prices and dividing them by the number of new customers for that period.
CAC also relates to the lifetime value (LTV) you gain from new customers. That means for a successful SaaS business, you need to spend less to acquire them. In reality, LTV must be 3X times larger than CAC.
How to measure and optimize the CAC?
It's not easy, especially if you are trying to attach acquisition costs to individual accounts. Even adding up other costs can't provide the correct value. In such cases, you must create different target CACs based on the customer segments. And, if you are new, you must keep spending as low as possible.
Customer Lifetime Value
Customer Lifetime Value (LTV) measures the total gross profit generated from a customer. So, the longer they use your service, the better is their lifetime value.
You can calculate LTV by multiplying the average period payment by the average gross margin by the number of periods the customer is expected to make a payment. It tells you how valuable your customers would be over time.
How can CLV help a SaaS business?
With effective CLV models, you can improve customer profiling and segmentation. It also works as a compass to guide you and win back your customers.
Now that you know which metrics create an impact, it's essential to act upon those measurements to improve your SaaS business. After all, making calculative decisions is what matters.
There are a few ways to predict SaaS revenue
- Begin with past performance and create historical data
- Study your pipeline diligently
- Measure your KPIs
- Calculate the percentage of possible renewals
- Don’t forget add-on sales
- Calculate your churn rate
Vajra Global and SaaS Marketing
How can Vajra Global help you?
Vajra is a dedicated SaaS Marketing agency working towards building and nurturing SaaS businesses worldwide with impressive strategies. We assist you in growing your business by enhancing lead generation, increasing customer conversion, customer delight and retention, and powerful content strategy. We strive to create successful partnerships with promising SaaS companies through our expertise in understanding business objectives, accurate and exhaustive data analytics, and seamless execution of profitable tasks.
We help you interpret all your data in the most meaningful way there is. Our team strives to present rich information by using the relevant metrics tracked for your website or mobile app. Customized reports, automated tracking, comprehensive analysis of vital metrics that matter to your business are some of the highlights of what we can offer under this service.
Your goal is our business. If you are still not sure, you can get in touch with us and clear your doubts.