Marketing
SaaS Marketing

15 SaaS Metrics Marketers Must Track

January 25, 2023
9
min read
Contents

The SaaS industry is cruising like a rocket on an exponential growth trajectory. But with this growth, there comes competition.

This means growth is more vital for SaaS brands than it is for other companies in other industries.

According to a report by SaaS Capital, if a SaaS brand is valued a $2 million, they need to be growing at a rate of over 90% YOY to be in the top 25% of their peers.

So what's one way to ensure that you keep growing at the pace that's required to go above your competitors? Use data.

SaaS companies have no shortage of data. What's critical is to track the right SaaS metrics. Because if you're analyzing the irrelevant SaaS metrics, you'll never be able to identify the points where you need to work.

In this guide, we have listed some of the essential SaaS metrics that you should keep an eye on.

Let's dive right in!

Activation Rate

The first one on the list is the activation rate. It's the percentage of users who complete a specific action, such as signing up for a free trial or creating an account, after visiting a website.

For example, if 100 people visit a website and 10 of them sign up for a free trial, the activation rate would be 10%.

How to Calculate?

The activation rate is calculated by dividing the number of users who complete the desired action by the total number of visitors.

Why is it Important?

The activation rate is an indicator of how well a SaaS company is able to convert website visitors into paying customers.

A high activation rate suggests that the company is effectively capturing potential customers and that its website and sign-up process are effective.

On the other hand, a low activation rate suggests that the website or sign-up process may need to be optimized in order to improve conversions.

Active Customers

Active customers are the number of paying customers who are currently using the SaaS product. These are customers who have not canceled their subscription or whose subscription has not expired.

How to Calculate?

Active customers can be calculated by subtracting the number of canceled or lost customers from the total number of paying customers.

Active Customers = Total No. of Customers - No. of Customers Who Stopped Paying

Why is it Important?

Active customers are an indicator of a SaaS company's customer base and how well it is retaining its customers.

A high number of active customers suggests that the company is effectively retaining its customers and that its product is valuable to them.

A low number of active customers, on the other hand, suggests that the company may need to improve its product or customer service in order to retain customers.

Monthly Unique Visitors

Monthly unique visitors refer to the number of unique and distinct individuals who visit the SaaS company's website in a given month. This metric does not include repeat visitors and only counts each individual once.

How to Calculate?

Monthly unique visitors can be calculated by using website analytics tools, such as Google Analytics. These tools provide data on website traffic, including the number of unique visitors.

Google Analytics Dashboard

Why is it Important?

Monthly unique visitors are an indicator of a SaaS company's website traffic and how well it is reaching its target audience.

When the number of unique visitors is high, it suggests that the company's website is effectively reaching its target audience and that its marketing efforts are working.

If it's low, the company may need to revamp its website and try different SaaS marketing strategies to reach more potential customers.

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the amount of money a SaaS company has to spend to acquire a new customer. This includes costs such as sales and marketing expenses.

And mind you, numbers show that the cost of acquisition per customer is the highest for SaaS companies.

How to Calculate?

CAC can be calculated by dividing the total amount of money spent on sales and marketing efforts by the number of new customers acquired during that period.

For example, if a SaaS company spends $1000 on sales and marketing efforts and acquires 10 new customers, the CAC would be $100 per customer.

Why is it Important?

CAC is an important SaaS metric for understanding the efficiency and effectiveness of a SaaS company's sales and marketing efforts.

A low CAC means that the company is effectively acquiring new customers without having to spend much.

On the other hand, a high CAC suggests that marketing efforts may need to be optimized. For example, conducting customer research (again) to target the audience who are more likely to purchase from you.

Customer Lifetime Value

Customer Lifetime Value (CLV) is the total amount of money a customer is expected to spend on a SaaS product over the course of their lifetime.

How to Calculate?

CLV can be calculated by multiplying the average revenue per customer by the average customer lifespan.

Why is it Important?

CLV is an important metric for understanding the long-term value of a SaaS company's customers.

A high CLV suggests that a SaaS company's customers are valuable and that efforts should be made to retain them.

It not only helps in driving repeat sales but also gives SaaS companies a good foundation to forecast future sales with more accuracy.

Average Revenue Per Account (ARPA)

Average Revenue Per Account (ARPA) is the average amount of revenue a SaaS company generates from a single customer account.

How to Calculate?

ARPA can be calculated by dividing the total revenue (specific period) by the number of active customer accounts during that period.

Why is it Important?

Tracking ARPA can help SaaS businesses identify the best-performing sources (social network, PPC, referral, direct) by tracking each source's customers separately.

It's also a great SaaS metric to compare how a company is performing against its competitors, identify which pricing strategy works the best, monitor revenue fluctuations, and much more.

LTV-to-CAC Ratio

LTV-to-CAC ratio is the ratio of a customer's lifetime value (the total revenue a customer generates over their lifetime) to the cost of acquiring them (the expenses incurred by the company to acquire a customer).

An ideal benchmark for LTV to CAC ratio is 3:1, and if it's higher, it indicates that your SaaS business model is fantastic.

How to Calculate?

You can calculate the LTV-to-CAC ratio by dividing the lifetime value of the customer by the customer acquisition cost.

Why is it Important?

The LTV-to-CAC ratio is important because it helps determine if the revenue generated from a customer over their lifetime will cover the cost of acquiring them.

A ratio of greater than one means that the customer is profitable, while a ratio of less than one means that the customer is not profitable.

Customer Retention Rate

Customer Retention Rate is the percentage of customers who continue to use a SaaS product over a certain period of time.

How to Calculate?

The Customer Retention Rate can be calculated by dividing the number of customers at the end of a period by the number of customers at the beginning of that period and then multiplying by 100. For example, if a company starts a period with 100 customers and ends with 80 customers, the retention rate would be (80/100) x 100 = 80%.

Why is it Important?

According to Forbes, it cost almost 5 times more to acquire new customers than to retain them. And when the retention rate is high, you’ll be able to spend more on customer acquisition.

The customer Retention Rate is an indicator of how well a SaaS company is doing at retaining its customers.

A report by Mixpanel suggests that the acceptable user retention score for the SaaS industry is above 35 percent.

By tracking the retention rate, SaaS companies can make the right changes in their product or customer service to ensure that the customers stay with them.

Monthly and Annual Recurring Revenue

Monthly Recurring Revenue (MRR) is the amount of revenue a SaaS company generates each month from its recurring revenue streams. And Annual Recurring Revenue (ARR) is the annual equivalent of MRR.

How to Calculate?

MRR can be calculated by multiplying the number of paying customers by the average revenue per customer.

And to calculate ARR simply multiply $725,000 by 12, which is $8,700,000.

Why is it Important?

MRR and ARR are important metrics for understanding a SaaS company's revenue streams. They indicate the predictability and stability of a company's revenue, which can help in forecasting future revenue and making business decisions.

Conversion Rate

Conversion rate is the percentage of website visitors who take a desired action, such as making a purchase or signing up for a free trial.

How to Calculate?

The conversion rate is calculated by dividing the number of conversions by the number of website visitors and multiplying by 100.

Why is it Important?

The conversion rate is an indicator of how well a SaaS company is able to convert website visitors into paying customers. A high conversion rate suggests that the website and sales process are effective, while a low conversion rate suggests that improvements may need to be made.

Churn Rate

The churn rate is the percentage of customers who cancel their subscription or stop using a SaaS product over a certain period of time.

How to Calculate?

The churn rate is calculated by dividing the number of customers who cancel or stop using the product by the total number of customers and multiplying by 100.

Why is it Important?

The churn rate is an indicator of how well a SaaS company is retaining its customers. A low churn rate suggests that the company's product is valuable to its customers and that efforts are being made to retain them.

On the other hand, a high churn rate suggests that the company needs to improve its product or customer service in order to retain customers.

Expansion and Contraction MRR

Expansion MRR is the additional revenue generated from existing customers through

upgrades or additional purchases.

How to Calculate?

Expansion MRR can be calculated by summing up the additional revenue from upgrades or additional purchases from existing customers. And Contraction MRR can be calculated by summing up the lost revenue from downgrades or cancelled subscriptions from existing customers.

Why is it Important?

Expansion and contraction MRR are important metrics for understanding the revenue growth from existing customers.

They indicate the ability of a company to increase or decrease revenue from its current customer base, which can affect overall revenue growth.

Net Promoter Score (NPS)

Net Promoter Score (NPS) is a customer satisfaction metric that measures the likelihood of customers to recommend a product or service to others.

How to Calculate?

NPS is calculated by asking customers to rate their likelihood of recommending the product or service on a scale of 0-10.

Customers who rate the product or service 9 or 10 are considered "Promoters," those who rate it 7 or 8 are "Passives," and those who rate it 0-6 are "Detractors."

NPS is then calculated by subtracting the percentage of Detractors from the percentage of Promoters.

Why is it Important?

NPS is important because it provides a quick and easy way to measure customer satisfaction and loyalty.

A high NPS score indicates that customers are satisfied and likely to recommend the product or service to others, while a low NPS score suggests that improvements are needed to increase customer satisfaction.

Average First Response Time

The average first response time is the amount of time it takes for a SaaS company to respond to a customer's inquiry or request.

How to Calculate?

The average first response time can be calculated by measuring the time from when a customer inquiry or request is received to when it is first responded to.

Why is it Important?

The average first response is essential because it indicates the level of customer service provided by a SaaS company.

A quick first response time suggests that the company is responsive and attentive to customer needs, while a slow first response time suggests that improvements are needed to increase customer satisfaction.

Product Qualified Leads (PQLs)

Product Qualified Leads (PQLs) are potential customers who have shown interest in a SaaS company's product and have met certain criteria that indicate they are likely to become paying customers.

How to Calculate?

PQLs can be identified by using a combination of data, such as website behavior, product usage, and demographic information, to determine which potential customers are most likely to become paying customers.

Why is it Important?

PQLs are important because they indicate which potential customers are most likely to become paying customers. By identifying PQLs, SaaS companies can focus their sales and marketing efforts on these individuals, increasing the chances of converting them into paying customers.

On a Concluding Note

That's all for this guide. Tracking the right SaaS metrics is crucial for SaaS brands to make data-driven decisions and drive growth. By monitoring the above-mentioned metrics, SaaS companies can identify areas that need improvement and optimize their strategies to drive growth.

Recommended articles