For any business, SaaS or not, being able to define and monitor marketing metrics is critical to your success. Those metrics are key to identifying opportunities for moving forward, while also giving insight into the health and effectiveness of any marketing campaigns you’re running.
When you need bigger budgets and want to accelerate the growth of your SaaS platform, having a scorecard tailored to your initiative can help you get the job done.
I’ve learned a few things in recent years while leading the charge on my own SaaS ventures, like ContentMarketer.io:
- Obsessing over metrics is OK, as long as they’re the right metrics
- Not all metrics are important to all SaaS, or all campaigns
- Don’t get caught up in vanity metrics
- Don’t get so obsessive about metrics that you can’t see the forest for the trees
“Tracking marketing is a cultural thing,” says Stuart MacDonald, former CMO at FreshBooks. “Either tracking matters or it doesn’t. You’re in one camp or the other. Either you’re analytical and data-driven, or you go by what you think works. People who go by gut are wrong.”
I’ve made a list of the 10 most relevant metrics to SaaS businesses, but remember that every business is different. You may not need to track all 10, all of the time. Utilize what’s most relevant to you and your campaigns.
1. Unique Visitors/Traffic
In most circles, you’ll be told that anything relating to traffic, even unique traffic, is a vanity metric and isn’t really something you should necessarily focus on. That’s true to a point, and this is as close as I’ll get to discussing vanity metrics.
The problem with vanity metrics is that they don’t really give you any concept of the value of the traffic that you’re getting, so there are very few actionable insights that can be gleaned from them.
But I’m not talking about general traffic here. Unique visitors paint a picture of the accessibility of your website and the number of new, unique visits you’re getting from various sources. It’s not necessarily a metric you’ll watch obsessively, but it’s worth watching.
2. Gross Margin
Stay with me. I know you feel like we’re immediately getting off marketing and into financial metrics, but your gross margin has a lot to do with marketing – specifically, where the prices of your products are concerned and the cost of your marketing campaigns in the overall operational cost to deliver those products.
Your gross margin is the percentage of your revenue that you keep after you subtract the costs associated with delivery and service. The formula looks like this:
(Gross Margin(%) = Revenue – Cost of Goods Sold/Revenue)
For example: Your SaaS generated $5,000,000 in revenue, and the total cost to deliver the service was $1,000,000. Your gross margin would be ($5,000,000-$1,000,000)/$5,000,000 = .80 (or 80%).
If intensive marketing is cutting deeply into the gross margin, or your price can be adjusted to improve your gross margin, then consider what you can do to make changes.
3. Customer Acquisition Cost
While we’re talking about marketing cost, you also want to track your Customer Acquisition Cost (CAC). You can find out how much it costs to acquire each of your customers in a given period by dividing your total sales and marketing spends by the number of new customers added for that time period.
For example: You spent $300,000 between sales and marketing in a 30-day period where you acquired 200 customers. Your CAC would be $1,500.
When you’re determining your CAC, you should take into account all expenses related to that activity. This includes any personnel-related expenses, including the salary and benefits of the team(s) involved.
4. Lifetime Value and CAC
For SaaS companies, the Customer Lifetime Value (CLTV) as it relates to your CAC may be one of the most important metrics as you work on growing your business. The CLTV/CAC ratio summarizes a lot of information – anticipated lifetime revenue per customer, customer churn, and sales and marketing costs – into a single number that provides some of the strongest insight into the effectiveness of your customer acquisition strategy and campaigns.
Generally speaking, it’s good to have a CLTV that is 3x the Customer Acquisition Cost, or greater. If it’s lower, you can develop or refine retention campaigns to reduce CAC or improve CLTV.
“Time and money are your scarcest resources,” says Matt Trifiro, CMO at Mesosphere. “You want to make sure you’re allocating them in highest-impact areas. Data reveals impact, and with data, you can bring more science to your decisions.”
5. Customer Churn
You could put churn in another division of your organization: some people say it’s a customer service or operational metric. That could be true, but it’s more appropriate to say that it applies to every division. If you were to market your product to people who don’t really need it, then you could expect a higher churn rate.
You can calculate churn either in customers or in revenue. Either will tell you how much business you’ve lost in a given window of time.
For example: Take your total customers gained for the last 30 days – let’s say 1000. Now take the number of customers you lost for that period (we’ll say 150). Divide the number of customers lost by the number of customers gained to get your churn rate.
In this case, 150/1000 = 15%
“You can acquire some measure of knowledge from various research techniques but nothing beats living, breathing, and feeling the same things your prospects do,” writes John Jantsch in his book Referral Engine.
6. New Customers
This one can be a satisfying metric and it’s fairly straightforward. Revenue is often the number Operations looks at for deciding success, but for marketing, it’s extremely useful to know how many new customers you gained over a given period – and more importantly, where those new customers came from.
7. Leads
Make sure everyone is on board and understands how leads are defined in your organization in terms of where they fit into the sales funnel. In this case, I’m referring to leads as top-of-the-funnel leads, which mean they’re not qualified. They’re in the early stage of interest.
That means they’re not ready for free trials or a product purchase. They haven’t shown immediate interest in the product/service itself, but they’re beginning to digest your content and linger.
8. Qualified Leads
Your qualified leads are your middle-of-the-funnel leads. These are the ones who are actively involved in a demo and/or have signaled a desire to learn more about your product.
When you’re looking at leads vs. qualified leads, this is where you’re watching your conversion metrics on the content marketing campaigns or ads you’ve created to see how those leads roll over.
9. Qualified Leads to Customers
Like I mentioned above, conversion is key. If you’re not converting leads to qualified leads and then to customers, you’ve got a conversion issue that you need to address. You’ll likely have various conversion points to watch, including percentage of trial signups that make a purchase, number of leads that turn into trials, etc.
10. Unique Visits to Qualified Leads
By itself, traffic like unique visits is a vanity metric unless you apply it to the bigger picture. In this case, you are going to compare those unique visits you get for a given period with the number of people who opt-in in some form to become a qualified lead.
Once you identify this conversion rate, you can start optimizing your campaigns and messaging to improve those conversion rates and move more of those unique visits deeper into your funnel.
What metrics do you use to track the success of your SaaS? Share in the comments below:
