Crucial SaaS marketing metrics to track in 2023
It is true that there is a plethora of SaaS marketing data you might be monitoring. Even if you aren’t the one actually performing the work, it might feel like a lot to keep track of everything, no matter how many tools and guides you have at your disposal. Therefore, it’s crucial to know which SaaS marketing metrics are the most valuable for your organization. After all, spending time and resources on a variety of metrics will be useless in the long run. To help you figure out what are the most significant SaaS metrics to follow, we’ve consulted experts from top digital marketing agencies in New York. Keep reading to get their perspective.
Five most important SaaS marketing metrics you should track
Knowing which SaaS marketing metrics are crucial to monitor and which you can ignore is essential. A good way to prioritize SaaS metrics is to try and apply the rule of 40. Successful SaaS businesses have a growth rate and profit margin of at least 40%, according to this rule. A business is regarded as “healthy” if it can sustain a profit margin of at least this amount.
Therefore, if you want to keep your business going, you need to stop obsessing over meaningless vanity metrics. Instead, start paying attention to the ones that actually matter: those that tell you something about the quality of your service, marketing efforts, customer service, and brand recognition. After all, when you put money into anything, you expect to make a profit and perhaps boost your customer acquisition and retention rates. Start improving your KPIs for 2023 by learning more about the metrics that are most relevant when it comes to SaaS marketing:
- Churn rate
- MRR & ARR
To put it simply, churn is the rate at which a company loses a particular percentage of its paying customers over a given time frame. In the SaaS industry, a churn rate of 5-7 percent is standard and this metric is a common enemy of many SaaS companies.
There are two types of churn rates that are particularly important for a SaaS owner or product manager to monitor:
- Customer churn is the percentage of former service users who haven’t returned. One of the most common methods of calculating the customer churn rate for a Software as a Service (SaaS) provider is to divide the total number of customers lost over a certain time period by the total number of customers at the start of that time period.
- Revenue churn is the rate at which a company loses money and the higher it gets, the faster you lose your customers. You can calculate the revenue churn by dividing the net revenue lost from current customers during a defined time frame by the total revenue at the beginning of that period.
Since churn rates are a leading indicator of whether or not a business will fail, marketing experts from a web development company New York advise that they are among the most important indicators to monitor on a regular basis. You may optimize your marketing plan for growth, revenue retention, and customer retention once you’ve reduced your churn rate.
#2 Monthly recurring revenue (MRR) & Annual recurring revenue (ARR)
Monthly recurring revenue (MRR) & Annual recurring revenue (ARR) are two very important SaaS marketing metrics you should keep an eye on. How much money you make from your current customers every month is known as Monthly recurring revenue (MRR). Multiplying your average revenue per user by the number of monthly subscribers will give you an image of your MRR while your ARR is simply your MRR multiplied by twelve.
A SaaS company’s ability to serve its clients well can be gauged in part by looking at metrics like MRR and ARR. You can also research client satisfaction using these metrics. A recent survey found that 62% of consumers would pay more to have a better customer service experience. Providing additional value with your service will enhance the likelihood that your consumers will continue to pay you on a monthly or annual basis.
#3 Lead Velocity Rate (LVR)
Lead Velocity Rate (LVR) shows if your company’s marketing efforts lead to growth. It’s the percentage of growth in the number of your leads each month. This metric helps you figure out your long-term growth potential. Using your velocity rate, you can make more accurate assessments and plans.
#4 Customer acquisition cost (CAC)
Customer acquisition cost (CAC) is the cost of taking on a new customer and it also takes into account the cost of marketing, the sales team, and extra costs such as hiring web design services NYC. Most of the time, SaaS marketing metrics track CAC in relation to customer lifetime value (CLV or LTV). In this article, we’ll separate them to make it easier to understand, but when you’re analyzing, you need to think about CAC and CLV together.
You can measure CAC, even though it seems hard: divide the total amount you spent on sales and marketing in a month by the number of new customers you got in the same time period. The money spent goes to pay the employers’ salaries and cover other costs. And that’s it! You have your CAC.
#5 Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric that shows how satisfied your customers are with your product and how much value they get out of it. By asking them, “How likely are you to recommend our product to a friend or coworker?” you can figure out if you need to improve your service or future marketing campaigns based on their feedback.
Summary of metrics and formulas
Users at start of month – Users at end of month / Users at start of month = Customer Churn
(Recurring Revenue lost in last 30 days / Recurring Revenue 30 days ago) x 100 = Monthly Revenue Churn
Avg Revenue per User x Number of Users = Monthly Recurring Revenue (MRR)
(Avg Revenue per User x Number of Users) x 12 = Annual Recurring Revenue (ARR)
(Qualified Leads this Month – Qualified Leads Last Month) / Qualified Leads Last Month x100 = Lead Velocity Rate (LVR)
(Cost of Sales + Cost of Marketing) / New Customers Acquired = Customer Acquisition Cost (CAC)
Promoter % – Detractor % = Net Promoter Score (NPS)
Start expanding your list of metrics
The world is always changing, and so is the world of SaaS marketing. If you want your business to keep making money, you need to adapt to and keep an eye on changes in the industry. Even though it’s hard to keep up with how SaaS is always changing, there are a lot of SaaS marketing metrics that can cut down the time it takes to add the latest changes to your game plan.