In the fast-paced and highly competitive software-as-a-service (SaaS) industry, having clear visibility into key performance metrics is essential for guiding effective growth strategies. The right SaaS metrics shine a light on what’s working well, while also exposing problem areas that require optimization.
This article will provide an in-depth look at 11 of the most crucial SaaS marketing metrics that all high-growth companies track closely. Getting these core metrics right lays the foundation for scalable and sustainable customer acquisition, retention, and expansion. We’ll define each metric, explain how to calculate and analyze it, share industry benchmarks, and provide tips to improve performance.
Mastering these 11 SaaS metrics is vital for increasing new customer activations, reducing subscriber churn, maximizing lifetime value, and modelling profitable growth. Whether optimizing marketing spend, fine-tuning the customer journey, or realigning sales and marketing processes, having clear targets for these metrics is indispensable. Let’s dive in.
Customer Acquisition Cost
Customer acquisition cost (CAC) represents one of the most fundamental SaaS metrics, measuring the total sales and marketing expenses incurred to land each new paying customer. While an unprofitable CAC may power short term top-line growth, it spells disaster for achieving true SaaS profitability. Here’s what SaaS marketers need to know:
CAC refers to the total direct sales and marketing costs to acquire new paying customers, divided by the number of customers added in a given period. So if a company spent $120,000 in sales and marketing expenses last month, and added 300 new paying customers, the CAC would equal $400 ($120,000/300 customers).
When calculating CAC, it’s important to track both full (indirect) CAC across the entire company, as well as the CAC specifically from the marketing-generated pipeline. Marketing CAC isolates just the cost of leads and deals directly influenced by marketing. Both metrics provide important insights.
Ideal CAC targets vary significantly based on average deal size, sales cycle length, and gross margin levels. For enterprise SaaS selling to large businesses, a CAC of $5,000+ may be reasonable, while consumer apps often aim for under $100. Typical B2B SaaS targets fall somewhere in the middle from $500-$1500.
The key to optimizing CAC boils down to maximizing marketing’s contribution to sales pipeline and closely monitoring campaign costs. Expanding nurture and content syndication helps improve lead quality. Reviewing win/loss data identifies conversion bottlenecks. And attribution modeling ensures efficient marketing spend across top-funnel to bottom-funnel activities.
Also Read: 9 Marketing Automation Tips & Tools for SaaS Companies
New Customer Activations
Beyond just attracting customers cost effectively, activating newly signed up users at higher percentages directly drives recurring revenue growth. Here are activation best practices:
The new customer activation rate represents the percentage of new subscribers successfully onboarding and reaching initial value milestones like viewing key features or establishing fundamental workflows.
Set clear activation criteria and adopt cohort reporting to analyze activation rates over the customer lifecycle. Establish distinct onboarding processes for small vs large enterprise deals.
Personalize onboarding checklists for each customer segment. Identify adoption barriers through first-call resolution metrics and NPS surveys. Offer live ramp-up consulting and assign customer success managers to large deals.
The earlier customers experience core “aha!” moments, the faster product value is realized, increasing retention risk is reduced, and expansion revenue opportunities emerge.
Signup → Paid Conversion Rates
Before charging for access, most SaaS companies provide free trials or freemium tiers. But only a fraction of signups convert to paid accounts. Here’s how to size up trial conversion performance:
The signup-to-paid conversion rate represents the percentage of new free signups or trials that graduate to become paying subscribers within a designated period like 30, 60 or 90 days.
As a rule of thumb, aim for at least a 10-15% trial conversion rate within the first 30 days. Conversion rates naturally decline over longer periods as some leads go cold. SaaS products with extremely low friction and clear instant value potential can achieve over 25-30% in 30 days.
Optimize pricing page copy and proactive in-app messaging to convey value. Offer custom use case content to key segments during onboarding. Make submitting payment frictionless using pre-population and smart payment integrations. Personalize upgrade offers based on usage signals.
Tightening up the trial experience boosts short-term conversion while setting the stage for long-term retention.
Also Read: The Complete Guide to SaaS Product Marketing
Customer Churn Rates
While attracting new customers is crucial, losing existing ones too quickly destroys SaaS profitability. Monitoring churn provides an early diagnosis.
At the most fundamental level, the churn rate reflects the percentage of customers lost in a period. Churn can be measured by number of customers, but dollar churn is far more important, reflecting the revenue impact.
Dollar churn equals the recurring revenue lost from downgrades and cancellations, divided by the total recurring revenue at the start of the measured period. So 5% annual dollar churn means a company with $10 million in starting annual recurring revenue (ARR) lost $500K to cancellations over a year.
Leverage in-app engagements and email re-targeting to bring dormant users back and lower involuntary churn. Seek feedback from departed customers to fix pain points. Offer expanded use case support, promotional discounts and account reviews to retain customers.
Churn may indicate poor product-market fit or subpar customer success processes. Diagnosing and treating churn drivers is key to maximizing subscriber lifetime value.
Net Promoter Score (NPS)
Net Promoter Score provides another lens into customer sentiment through the likelihood to recommend:
NPS measures customer loyalty and satisfaction on a -100 to 100 point scale based on responses to “How likely are you to recommend our product to colleagues or friends?”, with promoters (9-10) minus detractors (0-6) producing the net score.
NPS equals the percentage of promoters minus the percentage of detractors from collected survey responses. An NPS of 20 reflects reasonably strong satisfaction, while anything under zero indicates serious issues.
Analyze NPS responses to guide account management and product changes. Track NPS trends over the customer lifecycle and benchmark across user segments. Set up quarterly relationship reviews for detractors to understand pain points.
Improving lagging NPS demonstrates customers’ increasing propensity to stay, expand and refer new business.
Also Read: A Developer’s Guide to Choosing the Best PaaS
Customer Retention Rates
Analyzing user drop-off by cohort highlights potential risk areas:
The customer retention rate reflects the percentage of customers retained over a designated period like months or years since initial signup.
Track retention rates for monthly or quarterly cohorts to spot trends. For example, customers from Q1 2020 would be analyzed separately from Q2 2020. Declining relative retention for more recent cohorts may reflect emerging pain points.
For healthy SaaS businesses, aim to retain at least 60-70% of customers over their first year, and 75-85% by year two with further improvement in future years. Significantly lagging benchmarks signal too much churn.
Leverage in-product messaging to reactivate churn risks. Offer customer success manager consultations, training webinars and “VIP” subscription packages to provide added value. Listen carefully to departing user feedback.
Monitoring cohort retention identifies opportunities to better support customers amid evolving needs.
Annual Contract Value
Annual contract value (ACV) measures active subscription revenue:
ACV equals the annualized recurring value of active customer subscriptions, reflecting the sum of monthly recurring revenue (MRR), quarterly payments, and annual payments normalized to a yearly run rate.
Calculate ACV for new customers added each cohort period. Also sum ACV across the entire existing customer base to model revenue expansion potential.
Growing ACV comes from signing larger customers, expanding MRR for existing subscribers via usage tiers and add-ons, and improving renewal and expansion rates on renewals.
ACV expansion also comes from landing larger enterprise deals with multi-year contracts at bigger seat counts or usage volumes. Assign account managers to nurture key accounts and identify upsell opportunities.
Continually expanding ACV provides the recurring fuel for profitable, scalable SaaS growth.
Also Read: A Comprehensive Guide to PaaS, SaaS, IaaS, and CaaS Cloud Computing
Marketing Sourced Revenue
For growth-stage SaaS businesses reliant on marketing channels for awareness and demand generation, accurately tracking marketing’s revenue impact is mandatory:
Marketing-influenced revenue ties closed businesses directly to marketing’s influence through assisted and influenced attribution models.
Use multi-touch attribution rather than flawed “last click” models to fairly divide revenue across first, middle and late funnel marketing interactions with sales prospects.
Set targets for marketing sourced pipeline and boil down metrics by highest converting channels, campaigns, geos and customer segments. Reallocate budgets to better-performing sources while culling laggards.
Doubling down on what’s demonstrably working for customer acquisition, while cutting ineffective areas, steers growth and optimizes CAC.
Top of Funnel Lead Volume
Driving significant volumes of fresh new prospects into the top of the marketing funnel lays the foundation for achieving customer acquisition goals:
Analyze website visitor trends, organic search traffic growth, and performance marketing response rates to gauge market appetite. Break out metrics by campaign source and landing page entry points.
Assess contact quality through bounce rates, time-on-site, funnel steps completed, and sales accepted rates. Also evaluate context like company, title, firmographic fit and expressed needs.
Double down on best-performing channels while reallocating from poor results. Expand long-tail SEO keywords, nurture flows and content syndication partners. Test new channel approaches.
Robust early-stage prospect interest and quality demonstrate a strong start to the pipeline growth engine.
Also Read: The Complete Guide to Funding Your SaaS Startup: Strategies and Best Practices
Active Trials
Beyond just attracting customers cost-effectively, activating newly signed-up users at higher percentages directly drives recurring revenue growth. Here are activation best practices:
The active trial rate represents the percentage of new signups actively evaluating the product through metrics like login frequency, core feature adoption and time spent in app.
Monitor the percentage of signups reaching engagement milestones day-by-day during initial trial periods. Analyze usage funnels to ID adoption fall-off points.
Optimize onboarding checklists for each customer segment. Identify adoption barriers through first-call resolution metrics and NPS surveys. Offer live ramp-up consulting and assign customer success managers to large deals.
Higher active trial rates signal better experiences, engagement and conversion potential.
Lead Velocity Rates
Faster times from prospect to closed customer accelerate revenue attainment and provide competitive advantage:
Lead velocity rate refers to the average number of days for prospects to move from initial contact to a closed deal. Velocity rates differ by channel source.
Monitor time-based funnel milestones across key stages to diagnose bottlenecks, including SQL-MQL hand-offs, and sales qualified to close intervals. Regions, reps and campaigns can then be compared.
Shorten sales cycles by defining ideal customer profiles to qualify best-fit leads faster. Equip reps with personalized messaging frameworks matched to prospect needs. Help sales connect use cases to ROI, integration capabilities and tech stack requirements.
By accelerating pipeline velocity, overall lead volume requirements are reduced to attain revenue goals.
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Conclusion- SaaS Marketing Metrics
For SaaS marketing and sales teams, implementing rigorous tracking across these 11 essential metrics provides unmatched visibility into funnel health, while exposing problem areas needing attention.
Consistently monitoring this metrics mix, setting clear targets, and taking action on trends unlock fuller business potential. Key focus areas include:
- Reducing CAC by doubling down on proven lead generation channels and campaigns while culling lagging results.
- Increasing activation rates through coordinated onboarding programs personalized to customer size and industry.
- Improving retention period-over-period by listening carefully to churn drivers and serving expanded use cases.
The leadership tenacity to act on metrics insights separates high-growth tech companies from stagnating peers. Consider which few metrics currently receive maximum executive attention to steer regular discussions and decisions. Responsibly tracking and improving these 11 SaaS marketing metrics fuels scalable and sustainable business growth.
