15 Advanced SaaS Marketing Metrics That You Need To Track
June 18, 2024
Tracking the right metrics is an essential element to the success of a SaaS business. Traditional indicators like website visitors and conversion rates matter, but there is a whole slew of other metrics that are unique to the SaaS business model. In this blog post, we dive into why they matter and how to calculate them to take your SaaS marketing strategy to the next level.
One of the challenges of being a marketer is knowing which metrics make the difference for your business and which do not. Missing out on important metrics can make or break Tech companies, as numerous real-life cases have shown. And another challenge is prioritizing metrics that matter, tracking them religiously and constantly optimizing. Now, working in SaaS, adds another layer of complexity here, since the industry has specifics that need to be accounted for. And this is exactly what we are going to cover in this article.
Why Do You Need Advanced SaaS Metrics?
When you start working in SaaS, you might approach it like any other B2B product. But SaaS is different in a way that it’s neither a physical item nor a one-off purchase. Compared to your “ordinary” B2B product, you need to rely on retention and upsells, which typically makes for a considerable stream of revenue.
So, for example, if you are a Tech company and sell datacenters in a box, you don’t need to calculate customer lifetime value or churn rate. Once the sale is done, it’s done. But if you are in SaaS, these metrics are crucial. And in general, what happens after the sale (sign-up in your case) is of critical importance.
As a marketer, you are probably already tracking such metrics as website visitors, cost per lead, and conversion rate. These are important. But let’s dive into advanced and unique to SaaS metrics that you need to understand and track.
Advanced SaaS Marketing Metrics
1. Lead velocity rate (LVR)
SaaS companies are all about growth. Lead velocity rate is a crucial metric that allows you to see if your marketing efforts are bringing the desired results and how much your lead count is growing from month to month. In order to calculate it, use the formula:
2. Leads By Lifecycle Stage
But not all leads are of equal value to you. Some are “hot” on the lower stages of the sales funnel, some are still “lukewarm” on the top of the marketing funnel. Typical differentiation of leads is Marketing Qualified Leads (need more nurturing) and Sales Qualified Leads (ready to buy). To efficiently track differentiated kinds of leads, you will need a marketing automation tool (i.e. Marketo Engage).
3. Lead-To-Customer Rate
Now, this metric comes even closer to showcasing the real results of your marketing. It represents how efficiently your leads are converting into paying customers. The formula for Lead-To-Customer Rate is (Number of Conversions / Total Leads) x 100.
4. Monthly Recurring Revenue (MRR)
Monthly recurring revenue calculates your predictable short-term revenue. In order to count it, multiply the number of monthly subscribers by the average revenue/user.
5. Monthly Recurring Revenue Churn (MRR Churn)
Monthly revenue churn is the percentage of MRR that your SaaS business has lost from customer cancellations, non-renewals, and downgrades.
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Get Started6. Annual Recurring Revenue (ARR)
Annual recurring revenue is your predictable long-term revenue, and it’s important for planning and understanding the financial health of your SaaS business. It shows how much you can expect to get each year via subscriptions. To count it, take your MRR minus MRR Churn, and multiply it by 12 months.
7. Revenue Growth Rate
Revenue growth rate is another metric that is essential to track to understand the long-term financial health of your SaaS business. It signifies the percentage increase in revenue over a certain time period. Here’s how you calculate it:
8. Customer Acquisition Cost (CAC)
A key metric for SaaS is customer acquisition cost. CAC shows exactly how much it costs you to gain a new customer (subscribers). To calculate it, divide total sales and marketing costs for a specific time period by the number of new customers gained within the same period. It’s important to keep in mind that CAC doesn’t give you a full story, since different customers spend differently. That’s where the next two metrics comes into play.
9. Customer Lifetime Value (CLV)
Customer lifetime value indicates how much a single customer is worth to your business and takes into account several other metrics. You calculate CLV by multiplying the average revenue per customer by the average customer lifespan. To calculate your average revenue per customer, divide your total revenue in by the number of customers during that same time period. And to find out your average customer lifespan, divide the number 1 by your churn rate.
10. CLV: CAC ratio
If you divide your CLV by CAC, you can get an important metric that shows a fuller picture of your customer acquisition efforts and the overall sustainability of your business model. All three metrics (CAC, CLV, and CLV:CAC rations) are extremely important to keep constant track of.
11. Customer Retention Cost (CRC)
Another metric that you need to keep in mind is customer retention cost. It represents the total cost of activities that have been made in order to retain the existing customers. Constantly compare your CRC against CAC – you can’t be spending more on new subscribers than retaining the old ones. In order to count CRC, divide all costs on retention by the number of customers that have been retained.
12. Customer Churn Rate
Churn rate shows the % of customers who cancel your SaaS product over a certain period. Calculate churn rate by dividing the number of customers who’ve cancelled by the total number of customers at the beginning of the time period. This metric is an essential indicator of the health of your customer base.
13. Activation Rate
Activation rate means how many new users take their first key action inside your SaaS product. This metric indicates if users find the product valuable and if they will continue to use it. To count your activation rate, divide the number of users who complete a first action by the total number of new users, then multiply the result by 100.
14. Customer Engagement Score (CES)
Customer engagement score gives you a clear understanding of customer engagement with your service, and ultimately the value you give them. It’s also useful to track SaaS usage patterns and help your customers to get the most out of your product. To calculate CES, define what user actions signify “engagement” in your concrete case, and count these actions taken by each user. By the way, another metric that is important to track in this regard is Customer Effort Score, which measures the ease of using your SaaS product.
15. Net Promoter Score (NPS)
Net promoted score indicates how likely are your users to recommend your SaaS product to others. To calculate NPS, simply ask your customer base how likely they are to recommend your service on a scale of 0 to 10. And then use the following formula:
Takeaways
Understanding and tracking advanced SaaS metrics is crucial both for your SaaS marketing and the overall strategy of your business. Such metrics as Lead Velocity Rate, Lead-To-Customer Rate, Monthly Recurring Revenue, and Customer Acquisition Cost are key to measure your growth. Metrics such as Customer Lifetime Value, Customer Retention Cost, and Customer Churn Rate give valuable insights into the long-term financial health of your SaaS business. And lastly, Activation Rate, Customer Engagement Score, and Net Promoter Score are vital if you want to understand customers’ behavior, engagement, and satisfaction levels.
By tracking these metrics, you make informed decisions and make sure your SaaS business enjoys sustainable growth.
Do you want even more SaaS metrics? Check out insider tips for 3 rules to follow when developing your SaaS KPIs for your paid advertising.
Need more SaaS growth? Drop a line to our team, and they will come back to you with concrete strategies to propel all your crucial SaaS metrics forward.
Ekaterina crafts engaging and strategic content to drive brand awareness and audience engagement. Her expertise in digital marketing helps the agency deliver impactful campaigns and achieve client goals.