Marketers face the challenge of tracking an abundance of metrics to improve their products, boost customer acquisition and retention, and drive bottom-line growth.
The sheer number of resources and tracking software can be overwhelming and, at times, distract from focusing on what truly matters to grow a business.
In this article, we will explore the key SaaS marketing metrics identified by industry experts, offering actionable insights to help prioritize and refine your focus on the most impactful data for your business, driving optimal results in every aspect—from customer service and financial outcomes to sales and marketing campaigns.
Activations are an essential marketing metric for SaaS companies as they indicate real usage of the product by customers.
This differs from simply tracking signups, which can be an inflated metric if users are not actually engaging with the product.
Activations occur when a user has their first meaningful interaction with a product, showcasing an understanding of its value.
By tracking activations, SaaS marketers can more accurately assess the success of their onboarding efforts and how well their product is resonating with users.
Activation Rate = (Number of users who complete the activation event) / (Total number of users) * 100.
Monitoring activations can also reveal patterns to potential user drop-offs, allowing for targeted improvement of the onboarding experience.
The Customer Acquisition Cost (CAC) is an important marketing metric to track, as it showcases the expenses related to acquiring each new paying customer.
To fully understand the value of each customer, marketers should also track the Customer Lifetime Value (CLTV), which is the average revenue a paying customer contributes throughout their user lifespan.
By examining the LTV ratio, marketers can ensure that the revenue generated from each customer is at least three times greater than the cost of acquiring them.
This helps maintain profitability and allows for better scaling of the business. The formula for calculating CAC and LTV is as follows:
CAC = (Total cost of sales + Total cost of marketing) / (Number of new customers acquired)
CLTV = (Average Revenue Per Account) / (Net Monthly Recurring Revenue Churn Rate)
Churn rate is a crucial SaaS marketing metric, as it indicates the percentage of customers who have stopped using a product within a specific period.
A high churn rate can significantly hinder a business’s growth and profitability.
By tracking churn, SaaS marketers can identify potential areas of improvement within the customer lifecycle and take action to retain more customers.
Customer Churn Rate = (Customers at the beginning of the period – Customers at the end of the period) / (Customers at the beginning of the period).
Tracking the signup to paid conversion over a 12-month period is essential for SaaS companies offering a freemium plan.
By understanding this metric, businesses can better predict revenue, measure marketing ROI, and refine their customer nurturing strategies to optimize conversion rates.
Signup to Paid Conversion Rate = (Number of users who converted to a paid plan) / (Number of users who signed up) * 100.
The Net Promoter Score (NPS) is an essential metric for SaaS companies, as it measures overall customer satisfaction and the likelihood of a customer recommending the product to others.
The NPS is derived from asking customers a single question:
“On a scale of 0-10, how likely are you to recommend us to a friend?”
Based on their responses, customers are categorized into detractors, passives, and promoters.
NPS = % of promoters – % of detractors. This metric can reveal areas for improvement in customer satisfaction and has a strong correlation with revenue growth.
Retention is the ability of a SaaS company to keep its customers for a longer period.
Retention is critical as it affects the company’s revenue generation and customer satisfaction.
Retention Rate = (Customers at the end of the period – New customers acquired during the period) / (Customers at the beginning of the period) * 100.
The annual contract value (ACV) metric represents the average revenue generated per customer on an annual basis.
It’s an important metric to track as it gives a clear understanding of the company’s revenue per customer and helps evaluate the effectiveness of the pricing strategy.
ACV = (Total revenue from contracts) / (Number of contracts).
Top-of-the-funnel (TOFU) leads generated from organic traffic are essential for SaaS businesses.
These leads have discovered a brand without any paid advertising efforts, typically through search engines or social media.
The number of TOFU leads generated from organic sources can be an indicator of effective content marketing and SEO performance.
Leads from Organic Traffic = (Total leads generated from organic search) / (Total leads).
Marketing Sourced Revenue (MSR) is a crucial metric that measures the revenue generated directly from marketing efforts.
By tracking MSR, marketers can assess their campaigns’ effectiveness and the ROI of their marketing investments.
MSR = (Total revenue attributed to marketing efforts) / (Total revenue).
The Lead Velocity Rate (LVR) is the growth rate of qualified leads month-over-month.
This metric is essential for SaaS businesses, as it helps forecast future sales and revenue.
A steady or increasing LVR indicates that marketing efforts are successfully generating demand for the product. LVR can be calculated using the following formula:
LVR = (Current month’s qualified leads – Previous month’s qualified leads) / (Previous month’s qualified leads) * 100.
The number of active trials is an important metric for SaaS businesses that offer free trial periods.
A high number of active trials suggests strong interest in the product and a larger pool of potential customers to convert.
Monitoring the number of active trials allows businesses to optimize their nurturing strategies and assess the effectiveness of their marketing efforts in driving new leads into trials.
SaaS marketing metrics are crucial for companies to monitor their marketing efforts and make informed decisions.
A thorough understanding of these metrics, such as Customer Acquisition Cost (CAC), Monthly Recurring Revenue (MRR), and Customer Lifetime Value (CLV), helps businesses assess the effectiveness of their marketing strategies.
Companies should carefully track these metrics and adjust their strategies accordingly for better performance and growth.
Founder of Rock The Rankings, an SEO partner that helps B2B SaaS brands crush their organic growth goals. An avid fan of tennis, and growing micro-SaaS businesses on the weekend. 2x SaaS Co-Founder – Currently working to build and scale Simple Testimonial.
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Last Updated: November 16, 2023