Introduction
The SaaS industry is booming in the 21st century. As per the official report from McKinsey, the global SaaS market stands at $3 trillion and is predicted to touch $10 trillion by 2030.
Therefore, companies operating in the SaaS, also known as the Software as a Service, ecosystem should have a deep knowledge of key marketing metrics used in this industry. By understanding key metrics, companies can make better business strategies and make future decisions.
Below, we have mentioned the SaaS marketing metrics that every business should know and follow:
Top 7 SaaS Marketing Criteria to Grow Your Business
1. Customer Acquisition Cost (CAC)
a) Definition of Customer Acquisition Cost
This is the total cost that businesses incur while acquiring a customer. The marketing and sales teams use this expense to draw in and win over customers. You can determine it by taking the total marketing and sales costs and dividing that figure by the number of new customers acquired during a specific time frame.
b) Relevance of Customer Acquisition Cost
When businesses know their CAC amount, they can identify the efficiency of their sales and marketing departments. A low customer acquisition cost (CAC) means the company is able to attract new customers with minimal spending. On the other hand, high CAC means the company has to shell out more capital in order to bring customers.
2. Customer Lifetime Value (CLV)
a) Definition of Customer Lifetime Value
This term calls for calculating the amount a business can expect from a single customer in terms of money over a period of time. Various factors need to be considered, including the average amount spent per purchase, how often customers make purchases, and the typical duration of their relationship with the product.
Basically, this medium helps businesses to keep partnerships with long-term customers and retain them:
b) Relevance of Customer Lifetime Value
Businesses can focus on resource allocation and preparing strategies to hold partnerships with more valuable customers. Furthermore, it also consititutes of looking for upselling and cross-selling opportunities.
As CLV increases, it will reflect that companies are enhancing their revenue and having more long-term customers.
3. Monthly Recurring Revenue (MRR)
a) Definition of Monthly Recurring Revenue
This is a core metric for SaaS companies. It highlights the steady and consistent income that comes from monthly subscriptions. Furthermore, it is a mixture of several revenues, like income from new subscriptions, upgrades, and cancellations.
b) Benefits of Tracking Monthly Recurring Revenue
SaaS companies, such as Salesforce and HubSpot, track this revenue. It is calculated in order to forecast future revenue and make informed decisions. Furthermore, organizations can measure the impact of marketing campaigns, product updates, and customer success with MRR.
4. Churn Rate
a) Understanding Churn Rate
In the SaaS model, several subscribers cancel their subscription plans during a specific time period and this is called the churn rate. There can be several reasons for this cancellation, such as people not liking the product or disliking the new upgrades and many other reasons.
Businesses can measure their churn rate by applying a formula that involves dividing the number of customers lost at a time by the total number of customers at the start of that specific time.
b) Relevance of Churn Rate
As stated earlier, churn rate can happen when there are issues in the product and service of the business. When there is a lower churn rate, it means customers are satisfied with the product and service. However, higher churn is a straight threat to the business revenue, and it means customers are dissatisfied with the product or service.
5. Lead Conversion Rate
a) Definition of Lead Conversion Rate
Lead conversion rate is the percentage of people who get converted into paying subscribers. However, finding good leads for a business takes a lot of effort, and turning them into paying customers is like climbing the tallest mountain.
Organizations can extract the value from this formula by dividing the number of conversions by the total number of leads. You will receive a value; multiply that value by 100.
b) Relevance of Lead Conversion Rate
When more people are turning into paying customers, the lead conversion rate is high. On the contrary, when people are not opting for your services from your lead conversion list, it means the lead conversion rate is low.
Read: A 15-Year-Old Boy Comes Up With Touch-Up Cup?
Basically, businesses need this term to improve their Return On Investment (ROI) and increase customer acquisition:
6. Net Promoter Score (NPS)
a) What is the Net Promoter Score?
If you are looking for a formula that can measure customer satisfaction and loyalty, it is called Net Promoter Score. You will get to know how many customers are interested in recommending your product and service to others.
The NPS questions are as follows: How much are you interested in telling other people about our product? How satisfied are you with the products and services we provide?
b) Benefits of Net Promoter Score
Every business wants its NPS to be growing with time. A higher Net Promoter Score (NPS) indicates that customers have a stronger loyalty to your products and services. On the contrary, lower NPS states that people are not interested in your business.
7. Customer Engagement Metrics
a) Understanding Engagement Metrics
A SaaS Development company should know about customer engagement metrics. The basic growth of any SaaS Development Company is customer engagement because if they can’t attract customers it would be impossible to generate the leads for their business. The term customer engagement metrics consists of various indicators that show how quickly customers interact with your product and services. You can judge the performance by calculating the time spent on logging, feature usage, remaining available on the platform, and many more.
b) Relevance of Engagement Metrics
Generally, a higher engagement metric means customers can easily access your platform. On the other hand, when you have lower engagement metrics, you should focus on several attributes.
Your main focus should be more customer satisfaction by providing a better customer experience and exemplary customer support. Furthermore, it would be recommended that you make your product better.
Concluding Words
With the help of a reputed SaaS Development Company you can build new strategies in order to win the hearts of your customers. We have mentioned the best metrics for your business in our blog, which you can apply to extract information. Furthermore, having core information at your end is better because you can make several new business decisions and apply them for the betterment of the customers.
