9 Essential SaaS Marketing Metrics You need to measure

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Introduction:

SaaS, i.e., Software as a Service, enables you to utilize cloud-based applications via internet connectivity. It allows you to subscribe to or rent the apps you require for your organization. As the SaaS service provider handles both the Software and the hardware part and takes care of the security and accessibility of apps, it helps your organization run a process at an affordable cost. 

SaaS marketing refers to a SaaS provider’s strategies to promote and generate leads for SaaS products. While there are several SaaS marketing metrics or marketing KPIs that you can track to evaluate the output of your SaaS strategies, you must only track the metrics that matter to your business. These SaaS marketing metrics should help you analyze all the aspects that are in or not in favor of your business. Here are the nine essential SaaS marketing metrics to track for reaching your ultimate target of business growth and revenue:

Customer Acquisition Cost

CAC is the cost to acquire leads or customers. You need to track the CLV (Customer Lifetime Value) metric and CAC to compare how much value customers bring to your business during their entire lifespan. The CAC indicates the money you need to spend to acquire one customer, while the CLV is the amount a customer pays you, excluding service costs. 

The formula to determine CLV and CAC is given below:

CAC = (Total marketing cost + Total sales cost)/Customers acquired 

CLV = Average revenue per account (ARPR)/Monthly Recurring Revenue MRR %

The marketing cost includes several expenses such as email marketing, advertisement, social media campaign expenses, etc. Therefore, determining the exact cost can be difficult. However, the above two formulas will help you to get a rough estimate that enables you to move forward to measuring other marketing SaaS metrics

Activations 

The number of users who have signed up for your SaaS offerings does not matter as long as they start using it. Activation is when customers start using your products and services and eventually develop trust. Therefore, it is one of the essential SaaS marketing metrics that help you evaluate the growth of your business. 

Paid conversion rate 

If you have included a free plan for the new customers, you will have to include another metric to fine-tune your SaaS marketing KPIs: the average time a customer takes to pay for your products from when they first activate the products. It helps you measure the ROI precisely while getting an idea about the special features that enable customers to subscribe to your paid services. 

Churn rate 

Churn rate refers to the rate at which you are gaining or losing customers. The formula to calculate the churn rate is given below:

Customer Churn rate = (Customers you lost during the period/Customers that existed at the start of the period) * 100

Customer churn rate refers to the natural business cycle of gaining and losing customers. Every company experiences churn irrespective of the quality of its products and customer service. 

Net Promoter Score helps you determine how your customers perceive your SaaS products or offerings. For example, you can ask all your customers to rate your products on a scale of 0 to 5 or ask them if they would recommend your products to a peer on a scale of 0 to 10. The higher they rate or are likely to recommend your products, the higher your net promoter score would be. 

You can categorize your customers into these categories:

• 0 to 5 – These customers may damage your brand reputation, i.e., detractors by not speaking highly of your SaaS offerings. 

• 6 to 8 – These customers may promote your products passively, or at least they will not damage your brand reputation.

• 9 to 10 – These are the promoters, i.e., customers, who will promote your brand and help you acquire better leads in the future. 

Your target will be to add more customers in the third category and minimize those who fall into the first one. The formula to determine the NPS is given below:

NPS =  % of promoters – % of detractors 

Retention 

Retention is an essential SaaS marketing metric as it directly influences your profits. Now, retention can be either from the perspective of the revenue or the retention of the customers.  Revenue retention determines whether your business has declined or grown over a period. Customer retention calculates the chances of a customer continuing to continue using your paid plans. 

Annual Contract Value 

If you are running a subscription-based model for your SaaS business, ACV, i.e., Annual Contract Value, helps measure the annual value of a contract. It allows you to forecast your total revenue and income and manage the expenditure accordingly. The following formula will help you determine the ACV:

ACV = (Net Contract Amount/Number of contract months) x 12

Marketing Sourced Revenue (MSR)

B2B SaaS marketing metrics are incomplete without measuring MSR (Marketing Sourced Revenue). It allows you to determine how much revenue your marketing plans are generating for the company, which solely depends on the marketing strategies adopted by the company to accomplish its goals. For instance, your marketing goal is to increase visitors, clicks, activations, or conversions; MSR will be the ROI generated through the marketing efforts. 

Funnel metrics: Leads generated through Organic Traffic 

The best indicator of the success or failure of the SaaS marketing plan is the leads generated through organic traffic. Through inbound marketing, your products will be visible to the potential audience via targeted and implicit marketing. As a result, these strategies will help generate around 54% more leads than other strategies. One of the best ways to measure this metric is using Google Analytics. 

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