With SaaS marketing evolving as we speak, how can you be sure you’re adopting the right strategies? Tricky business, if you ask us. The honest truth is that the success of your marketing ultimately depends upon the metrics you’re tracking.
But with so many KPIs dominating the search engines, which ones do you actually measure? Luckily for you, we’ve separated the hits from the misses and listed the essential SaaS marketing metrics you must be regularly reviewing.
But first, let’s see how the success determinants for SaaS companies differ from other industries.
What Makes SaaS Marketing Metrics So Different?
What makes SaaS marketing so unique is that you’re promoting an intangible product. In simpler words, a service.
In the case of a tangible product, let’s take the example of chocolate bars, you can easily measure how many sales were made. You wouldn’t really bother with calculating how ‘worthy’ different clients are and whether they’re buying more chocolate bars than before.
SaaS companies rely heavily upon gathering leads, nurturing them enough to convert, upselling them, and finally retaining them. So, a simple net profit amount wouldn’t do for SaaS companies.
To successfully track the outcomes of SaaS marketing techniques, you must measure metrics that relate to the different levels of the SaaS funnel.
6 Essential SaaS Marketing Metrics You Must Measure
For your ease, we not only have listed the necessary KPIs, but we’ve also explained them and showed you how to calculate them. Get your notepads and pens ready.
- Unique Visitors
As the name suggests, in this metric, you measure the number of individuals who have visited your website in a given time period.
You shouldn’t confuse this with the number of sessions. It might so happen that a single prospect visited your website 30 times in a month. The unique visitor, in this case, is 1, while the sessions are 30. You should prioritize unique visitors over sessions to get a more authentic picture of your traffic.
How to calculate unique visitors?
You can easily view your website’s unique visitors through Google Analytics, which you can use free of charge. While you’re at it, we suggest you check the main source of your visitors (organic, paid, social media, etc.) and amplify it subsequently.
- Leads
Are you really working in a SaaS company if you don’t hear the word ‘leads’ after every 5 minutes?
Simply defined, a lead is a member of your target audience that has the potential to convert. For better analysis, we like to divide leads into 3 segments;
- Leads: Someone at the top of the funnel and has filled an opt-in form on your website.
- Marketing Qualified Leads (MQLs): Someone at the middle of the funnel, has downloaded an ebook, interacted with your content, and is all set to be a potential customer.
- Sales Qualified Leads (SQLs): Someone at the bottom of the funnel, has done their research and is finalizing which company to give their time and money to.
Ideally, you should have different strategies for boosting leads in all these segments.
How to calculate leads?
We suggest opting for the easy (read: smart) way out by using the services of an email marketing software. You can set different time periods to see when your leads grow the most and set conditions to measure MQLs and SQLs.
- Lead Conversion Rate
A lead won’t benefit you if s/he is not converted into a customer. After all, you’re interested in the revenue you can generate at the end of the day. Also known as lead-to-customer rate, this marketing metric measures how many leads were transformed into customers.
How to calculate lead conversion rate?
Lead conversion rate = (number of customers per time period ÷ number of leads per time period) ✕ 100%
- Churn
Just like you measure the number of new customers, you must also track those customers who have left, i.e., churn.
Churn measures the number of SaaS customers who have stopped doing business with you. While it’s perfectly normal for brands to lose customers, a high churn rate may depict faulty service or a poor user experience.
How to calculate churn?
Churn = (number of customers lost in a time period ÷ number of customers at the start of the time period) ✕ 100%
- Customer Lifetime Value (CLV)
CLV is a critical metric for any SaaS company, especially those who are going towards the funding route. It shows your company’s value by measuring the worth of a single customer.
To make this easier to understand, CLV is the average money paid by your customers during their interaction with your company. As obvious, you should aim for a high CLV since it proves your SaaS company is not one to take lightly.
How to calculate customer lifetime value?
Okay, so this metric is not the quickest to calculate, so bear with us. You can figure out the CLV of your company through the following 3 easy steps:
- Calculate the average customer lifetime.
Average customer lifetime = 1 ÷ customer churn rate
- Calculate the average revenue per account.
Average revenue per account = total revenue ÷ total number of customers
- Multiply average customer lifetime with average revenue per account.
Customer lifetime value = average customer lifetime ✕ average revenue per account
- Customer Acquisition Cost (CAC)
CAC is a metric you shouldn’t ignore when gauging the profitability of your business. It tells you how much cost you incur to get a customer on board.
You must take into account your sales, research, advertising, labor, and technology costs to get a clearer picture of how costly it is to acquire new customers. Ideally, your CAC should be lower than your CLV to remain up and running.
How to calculate customer acquisition cost?
Customer acquisition cost = (sales expenses + marketing expenses) ÷ new customers acquired
Conclusion
There you have it – the essential SaaS marketing metrics explained. Use them to your advantage by tracking your progress effectively.