In the digital age, understanding SaaS marketing metrics is crucial for any marketer. These metrics help us track progress, analyze performance, and make informed decisions. In this post, we'll discuss 38 key SaaS marketing metrics that every marketer should understand.
SaaS marketing metrics are quantifiable measures used to track and assess the status of a specific business process related to software as a service.
Key SaaS Marketing Metrics
Monthly Recurring Revenue (MRR): This is the income a company can reliably expect every 30 days.
Calculation: Total Customers x Price per Subscription
Example: If you have 50 customers paying $200/month, your MRR is $10,000.
Annual Recurring Revenue (ARR): This is your MRR multiplied by 12.
Calculation: MRR x 12
Example: If your MRR is $10,000, your ARR is $120,000.
Customer Acquisition Cost (CAC): This is how much it costs to acquire a new customer.
Calculation: Total Sales and Marketing Costs / Number of New Customers Acquired
Example: If you spend $5000 to acquire 10 new customers, your CAC is $500.
Customer Lifetime Value (CLTV): This is the total revenue you can expect from a customer during their lifetime.
Calculation: Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan
Example: If customers typically spend $500 per year and stay for 3 years, the CLTV is $1500.
Churn Rate: This is the rate at which customers leave your service over time.
Calculation: Customers at Start of Period - Customers at End of Period / Customers at Start of Period
Example: If you start with 100 customers and end with 90, your churn rate is 10%.
Net Promoter Score (NPS): This measures customer willingness to recommend your product.
Calculation: % Promoters - % Detractors
Example: If you have 70% promoters and 10% detractors, your NPS is 60.
Retention Rate: This is the percentage of customers you retain over a certain period.
Calculation: ((CE-CN)/CS)) * 100
Example: If you start with 200 customers, lose 20, and end with 180, your retention rate is 90%.
Expansion MRR: This is the additional recurring revenue generated from existing customers through upsells, cross-sells, and add-ons.
Calculation: (Additional MRR from Existing Customers / MRR at Start of Month) x 100
Example: If you start with $5,000 MRR and earn an additional $500 from existing customers, your expansion MRR rate is 10%.
Lead-to-Customer Rate: This is the percentage of leads that become paying customers.
Calculation: (Number of New Customers / Number of Leads) * 100
Example: If you get 200 leads and 10 become customers, your lead-to-customer rate is 5%.
Sales Qualified Leads (SQLs): These are leads vetted by marketing and deemed ready for the sales team.
Calculation: It's not quantifiable in simple mathematical terms, but rather a qualification process based on lead behavior and interaction with your brand.
Example: A website visitor that fills out a form requesting a demo.
Cost Per Lead (CPL): The amount spent to acquire a lead.
Calculation: Total Campaign Cost / Number of Leads
Example: If you spend $1,000 on a campaign and get 200 leads, your CPL is $5.
Cost Per Acquisition (CPA): The cost to acquire a new customer.
Calculation: Total Campaign Cost / Number of Conversions
Example: If you spend $1,000 on a campaign and gain 20 customers, your CPA is $50.
Average Revenue Per User (ARPU): The average revenue generated per user or account.
Calculation: Total Revenue / Total Users
Example: If you have 200 users and generate $4,000 in a month, your ARPU is $20.
Revenue Churn: The lost revenue due to customers downgrading or leaving.
Calculation: (MRR at Beginning of Month - MRR at End of Month) / MRR at Beginning of Month
Example: If you start the month with $10,000 MRR and end with $9,000, your revenue churn is 10%.
Gross Margin: The percentage of total revenue that the company retains after incurring the direct costs associated with producing the goods and services sold.
Calculation: (Total Revenue - Cost of Goods Sold) / Total Revenue
Example: If you generate $100,000 in sales and it costs $40,000 to deliver your service, your gross margin is 60%.
Conversion Rate: The percentage of visitors to your website that complete a desired goal.
Calculation: (Conversions / Total Visitors) * 100%
Example: If 100 people visit your website and 5 people make a purchase, your conversion rate is 5%.
Sales Efficiency: A measure of the effectiveness of your sales investments.
Calculation: (Current Period Revenue - Previous Period Revenue) / Sales and Marketing Expenses
Example: If this period's revenue is $200,000, last period's was $150,000, and you spent $20,000 on sales and marketing, your sales efficiency is 2.5.
Time to Payback CAC: How long it takes for a customer to generate enough revenue to cover the cost of acquiring them.
Calculation: CAC / (ARPU * Gross Margin)
Example: If your CAC is $300, your ARPU is $50 and your gross margin is 80%, your time to payback is 7.5 months.
Lifetime Value to CAC Ratio (LTV:CAC): The value of a customer over their lifetime compared to the cost of acquiring them.
Calculation: LTV / CAC
Example: If your LTV is $500 and your CAC is $100, your LTV:CAC ratio is 5:1.
Quick Ratio: A measure of a company's growth efficiency, taking into account both growth and churn.
Calculation: (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Example: If your new MRR and expansion MRR total $5000 and your churned MRR and contraction MRR total $1000, your Quick Ratio is 5.
Product Qualified Leads (PQLs): These are potential customers who have used a product and reached pre-defined triggers indicating a high likelihood to become a paying customer.
Calculation: Based on user engagement with the product rather than a simple mathematical formula.
Example: A user who has crossed a certain usage threshold on a freemium product.
MRR Growth Rate: The month over month percentage increase in MRR.
Calculation: ((MRR This Month - MRR Last Month) / MRR Last Month) * 100
Example: If your MRR grew from $20,000 last month to $25,000 this month, your MRR Growth Rate is 25%.
Customer Engagement Score: A composite index of various factors that indicate how engaged a customer is with your product.
Calculation: Each company will have its own formula based on factors such as login frequency, feature usage, etc.
Example: A user who logs in daily and uses many features scores highly.
Customer Health Score: A measure of how likely a customer is to churn, upsell, or refer new customers.
Calculation: A composite score based on various behavioral, usage, and feedback metrics.
Example: A customer who uses your product extensively, provides positive feedback, and has a large user base within their organization will have a high health score.
Days Sales Outstanding (DSO): The average number of days that it takes for a company to collect payment after a sale has been made.
Calculation: (Accounts Receivable / Total Credit Sales) * Number of Days in Period
Example: If your accounts receivable is $5,000, total credit sales are $20,000, and the period is 30 days, your DSO is 7.5 days.
Total Contract Value (TCV): The total contractual revenue a company can recognize from a customer contract.
Calculation: Total value of the contract including recurring and non-recurring revenue.
Example: A two-year contract priced at $5,000 per year plus a one-time set-up fee of $2,000 has a TCV of $12,000.
Lead Velocity Rate (LVR): The month-over-month growth rate of your leads.
Calculation: ((Leads This Month - Leads Last Month) / Leads Last Month) * 100
Example: If you had 150 leads last month and 200 leads this month, your LVR is 33.3%.
Social Media Engagement: Measures the public shares, likes, and comments for a company's social media efforts.
Calculation: Total Engagement (Likes + Comments + Shares) / Total Followers (or Impressions)
Example: If your post reaches 1,000 people, gets 50 likes, 10 comments, and 5 shares, your engagement rate is 6.5%.
Email Open Rate: The percentage of email recipients who open a given email.
Calculation: (Number of Emails Opened / Number of Emails Sent) * 100
Example: If you send 200 emails and 40 are opened, your open rate is 20%.
Email Click-through Rate (CTR): The percentage of email recipients who clicked on a link within an email.
Calculation: (Number of Clicks / Number of Emails Sent) * 100
Example: If you send 200 emails and recipients made 20 clicks, your CTR is 10%.
Customer Satisfaction (CSAT): A measure of how products and services meet or surpass customer expectation.
Calculation: (Number of Satisfied Customers (rating 4-5) / Number of Survey Responses) * 100
Example: If out of 50 survey responses, 40 customers rated
Understanding and tracking these metrics will help you gauge your marketing efforts, identify areas of improvement, and accelerate your business growth. Remember, the key to successful SaaS marketing is in the data.
I encourage you to familiarize yourself with these metrics and apply them to your SaaS business. With these in your arsenal, you're well-equipped to drive growth and success. Stay tuned for more insights on SaaS marketing.
May 24, 2023