SaaS marketing has evolved over the years. The digital channel has played a crucial role in its growth. While traditional forms of marketing are still being used, SaaS marketers are moving away from these channels to focus on digital channels. The internet has played a huge role in the growth of the business. It has become easier to do business, and also to find customers for your products or services. The same is true for software-as-a-service (SaaS) companies that provide online cloud computing, storage, analytics, email marketing, social media management, mobile device management, and more. While SaaS marketing is considered to be less measurable than eCommerce or B2B marketing, there are still some metrics that you can track. This article will help you understand the SaaS marketing metrics that every SaaS business should track.
Top SaaS marketing metrics you need to track
The SaaS marketing metrics are of great importance to SaaS marketers. To successfully market SaaS products, you need to focus on the correct metrics. We’ve listed the most important ones that help with successful marketing.
In SaaS marketing, CLTV stands for Customer Lifetime Value. It is a great metric to evaluate the success of the marketing campaign, as it can show you how much money a customer will spend on your product.
The CLTV is used to measure the number of sales that a company has gotten from a specific customer. To calculate the CLTV, you will need to know the number of customers that have signed up for your product/service.
It is a key metric to determine the overall health of a SaaS business. CLTV is the average lifetime value of an active customer. A company that has a CLTV ratio of less than 1 will be losing money.
CLTV = Average Revenue Per User / Net Monthly Recurring Revenue Churn
Signup and Activation
The most important thing in SaaS marketing is to track signups or activations. It helps you to know how many people have signed up for your SaaS product and how many of them have used it. You can track the success of your marketing efforts with the help of Google Analytics.
You can track the number of signups or activations to analyze the effectiveness of your marketing campaigns. This will help you determine whether your efforts are paying off or not. You can also track the time it takes for users to become active, and measure their engagement level. For example, you can track signups by different stages of the signup funnel. You can also track activation and churn rates.
This can help you decide if your product/service is selling well and whether you need to make any changes to improve the activation rate.
Churn rate is often not considered when calculating metrics for B2B companies. But it is a very important metric that should be taken into account for measuring the success of marketing. There are two types of churn metrics to be considered: customer churn and revenue churn.
This metric allows you to measure the number of clients/customers opting out of your program at a given time. This metric is rather easy to measure. Let’s say you want to measure the churn rate for the last 6 months.
Gather the data of the number of customers you had before 6 months, and also data on the number of customers you lost in the 6 months. Now all you need to do is divide both the metrics and multiply them by 100 to get the customer churn percentage.
For Example, You had 1200 customers before 6 months and in that period you lost 20 customers. So the churn rate = (6 / 1200) x 100, According to these metrics your customer churn rate is 0.5 percentage.
Now if you have a subscription-based model. Then calculating customer churn would be all for your churn rate. In the subscription model, not every customer is equal. A customer who is paying $250 is worth 5 customers who are paying a $50 subscription. Even if your customer numbers seem to be less the revenue loss may be more if you are losing your highly paid customer. The formulae to calculate the net revenue churn is
Annual Revenue churn = ( Net Revenue lost from an existing customer in a year / Total Revenue at the beginning of the Year)
LTV: CAC Ratio
This metric will allow us to understand the customer acquisition cost. Calculating CAC standalone is not very effective and useful. It is important to align CAC with the lifetime value of the customer (LTV).
Both these metrics are not static and depend on lots of factors. It is very difficult to accurately measure this metric. Many organizations usually run multiple campaigns in the mix like social media ads, email marketing, influencer marketing, SaaS marketing tools, Marketing automation tools, and much more. The best way to calculate the CAC is by using the formula:
CAC = (Total cost of marketing + Total Cost of Sales) / New customers acquired.
Similarly, we have already discussed the best way to calculate the CLTV. By using that metric we have to find the ratio of LTV: CAC.
It is best to stick with the ratio 3:1 LTV: CAC. That is you are gaining 3 times more of what you spent to acquire the customer. One the go the Ratio going to increase.
To achieve the 3:1 ratio and improve the ratio on the go SaaS marketers should concentrate on retaining the customer by cross-selling, up-selling, and building loyalty. The same must not be done by increasing the price of your service unless you have underestimated the price in the first place.
Net Promoter Score (NPS)
Another great metric every SaaS business should track is NPS. This is a simple yet very crucial metric as SaaS is all about customer loyalty and the power of word on mouth marketing. As a business, you ask one question to all your customers and that is:
“How likely would you recommend our product/service to a friend? Answer on a scale of 1 – 10”
Let’s divide the answers into 3 categories based on the rating
0 – 6: These customers are detractors, that is they are likely to damage your brand reputation and are not finding your product any useful.
7 – 8: These are passive customers, The customers falling in this category are not likely to become detractors and also they are mostly not interested in recommending or promoting your product to others.
9 – 10: People rating this high are promoters of your brand. They love your product and will most definitely promote your brand and products.
This metric will help you understand your product performance, brand relationship with customers, and engagement rates all of which can help you improve and grow your brand. Calculating NPS is pretty simple:
NPS = Percentage of Promoters – Percentage of Detractors
SaaS marketing is an essential part of any business and should be implemented as a priority to generate leads and sales. Without the right metrics, it’s hard to know how effective your efforts are and whether or not you’re making progress. To help you understand what makes a good marketing strategy for SaaS, using the metrics used in the blog will help you optimize your results. SaaS businesses can boost their conversion using these metrics.
We at CarbonPaper have experimented and perfected the marketing aspects and measuring metrics for SaaS businesses. Don’t forget to check out our service to grow your business.