Key takeaways:

• If you want to grow, you have to track SaaS marketing metrics and KPIs
• Acquiring a new customer is more expensive than keeping an existing one.
• You should regularly review the metrics you’re tracking to see if they’re still relevant.

You want to regularly review your SaaS marketing metrics to see if your marketing campaigns and strategies are actually performing. Your marketing strategy’s success (and your next promotion) largely depend on the KPIs you’re measuring and how you use the insights you glean from the metrics.

Since you obviously want your marketing efforts to be worth it, it might make you want to track as many KPIs as possible. But before you get too obsessed with every detail that could indicate success and start tracking 20+ KPIs, ask yourself this: What are we trying to achieve? How does this particular metric help us attain our goals?

In an industry as competitive as SaaS, you need to stay ahead of the competition. That means optimizing your marketing campaigns to ensure growth year over year. Otherwise, your SaaS company has a 92% likelihood of failure. Not cool!

Your revenue must grow for your business to scale. In order for it to do that, you’ll want to focus on improving your products and services, increasing customer acquisition and retention, and growing your customer base, all of which will ultimately improve your ROI.

So, what are the top SaaS marketing KPIs you should be tracking and the metrics you should be measuring? Let’s explore them together.

Key SaaS Marketing KPIs You Should Track

There are certain KPIs that really matter for growing SaaS brands. Claiming a slice of the almost $57 billion SaaS market isn’t going to be easy without tracking them. Here are five extremely important KPIs to watch to predict success.

• Show Me the Money! Customer Acquisition Cost (CAC)

Do you spend all of your money acquiring new customers? If yes, take a moment of silence for your marketing budget.

Customer acquisition cost is the money you spend to obtain a new customer. It’s calculated by combining the money spent on marketing and sales divided by the total number of customers. Use this metric to determine whether your business model is profitable and sustainable.

Customer Acquisition Cost = Amount spent acquiring new customers/Number of new customers

For instance, if you spent $150,000 and acquired 1,000 new customers, your CAC would be $150. CAC is a very valuable metric.

• What Are They Worth to You? Customer Lifetime Value (CLV)

The total revenue a company can expect from a single customer throughout their relationship is indicated by the customer lifetime value (CLV). How much is a particular customer worth to your business?

You determine a reasonable CLV for a particular customer by comparing their revenue value to the average customer’s lifespan. A customer who continues to buy for an extended period will have a higher CLV. Keep such a client happy; wash their feet. Just kidding, but seriously, offer them the best customer service and they’ll never leave you. At least, not for someone else!

Customer Lifetime Value (CLV) = Customer value × Average customer lifespan where

Customer Value = Average purchase value × Average number of purchases

The CLV metric helps you identify areas to improve and the ideal customers to target. Consequently, you’ll increase revenue and boost loyalty and retention by knowing it.

• The Classic Cost Versus Benefit Scenario: Customer Lifetime Value to Customer Acquisition Cost Ratio (LTV: CAC)

This metric compares your customer’s lifetime value to how much you spent acquiring them. It measures how profitable your business is. You calculate the ratio by dividing LTV by CAC.

LTV: CAC = LTV/CAC

If the value is less than one, you’re spending too much on customers that are not increasing your revenue. You may be looking at six figure returns but, unfortunately, they’re all zeros. Conversely, a higher value means your customer acquisition campaigns are paying; you’re finally reaping where you sowed! A healthy business with a product:market fit should aim for a ratio of 3:1 then try to knock that out of the park.

• The All Powerful Return on Investment (ROI)

ROI measures how much money you made compared to how much you spent. That is the total profit (or loss) compared to the total marketing expenditure.

Sounds simple, right? Not in the real world. You have to determine whether other factors resulted in sales and not necessarily your marketing campaign. Additionally, which campaign resulted in which sales?

When calculated accurately, ROI results can help you make appropriate marketing decisions. They help you identify the best performing marketing channels and thus, increase revenue.

• Did You Entice Them Enough to Stay? Visitor-to-Lead Conversion Rate

How many of your website’s visitors have converted to leads? Or do people leave as soon as they come? Visitor-to-lead conversion rate measures the number of site visitors that have taken a specific action and completed the desired goal.

Depending on your business goals, it could be subscribing to your newsletter, downloading a lead magnet such as a marketing report, or contacting you. This metric helps you determine how appealing your solution or value proposition is. If it’s low, you’re doing something wrong.

Divide the total conversions by the total number of visitors x 100 to calculate the value.

Conversion Rate = (Total conversions/Total site visitors) × 100

These metrics will help you see if you’re actually growing. Without tracking them, you’re just bobbing around in the dark.

3 Metrics You Need to Get Religious About (That Aren’t The Ones We Do)

We focus on the above, advertising-and-acquisition-centric metrics. However, there are a few more that you should think about that you’re going to need to measure on your own (look, we can’t be great at everything).

Here are three to prioritize, below, but you probably already know them. We just need to make this article long enough for Google to rank it for that “SEO stuff” we hear about.

1. Forget Churning and Burning – Customer Churn Rate

Customer churn rate measures the number of customers you have lost over a given period. In the SaaS industry, this might mean the percentage of customers who don’t renew their subscriptions or cancel them altogether.

Losing customers obviously impacts your revenue (and makes you sad), making it an essential metric to track. This metric can also provide valuable insights on customer loyalty and satisfaction, competition, and pricing. If you’re losing more customers than you’re acquiring, you might be guilty of something.

To calculate it, divide the number of customers you’ve lost by the total number at the beginning of that period times 100.

Customer Churn Rate = (Lost customers/Total customers) × 100

If you had 1,000 customers at the start of the quarter and lost 100 along the way, your customer churn rate would be: Customer Churn Rate = (100/1000) × 100, which is 10%

It’s common to lose some customers along the way. But a high customer churn rate will increase your customer acquisition rate, which brings us to the next significant metric.

2. Do Your Customers Like You? Customer Retention Rate

This is the rate at which you attract and hold on to customers. Or do customers hold on to you?

A high retention rate can translate to high recurring income from recurring purchases and subscriptions, cross-sells, and upsells. If your customers stick with you, they’re satisfied with your services/products and are more likely to refer others to you.

Here’s the formula for calculating the retention rate:

Customer Retention rate = (Total number of customers at the end of a period – Customers acquired/The number of customers at the start of the period) × 100

High retention rates can also reduce customer acquisition costs as acquiring a new customer is more expensive than retaining one. Treat your customers to good service and they will reward you for it.

3. Keep Up – Monthly Recurring Revenue (MRR)

MRR is the revenue a company expects to make from its customers every month. It is the monthly subscription revenue for most SaaS companies.

Tracking MRR metrics enables you to forecast and plan for your finances and measure growth and profitability. Incorrect MRR figures mean you’re misjudging your growth and you don’t want that.

Calculating MRR is easy as you only need to multiply the average revenue per customer by the number of recurring customers. You don’t need to be an accountant to do it.

Measuring KPIs and metrics can be overwhelming, but it’s necessary to understand how your business is doing. If you don’t track the numbers, you won’t know where you stand or how to keep up.

Track Your Metrics. Grow Your SaaS Business to the Moon

Efficiently measuring and monitoring your SaaS marketing KPIs can help you set goals and measure your progress in meeting them. It will help you know where to improve and can inform significant marketing decisions.

These metrics act as SaaS marketing benchmarks with which you can measure your company’s success. Review them regularly as your business grows to determine if they’re still relevant.

Sounds hard? Do you wish you were an AI bot?

Guess what: You don’t have to do this by yourself. Model B, an AI-enhanced performance advertising agency with an unmatched diversity of experience, thought, and culture in marketing, helps SaaS companies track significant marketing metrics and develop solutions for better results.

The ones we’re great at are your Cost-Per-Lead, Cost-Per-MQL, and, ultimately, your Customer Acquisition Cost. If we had to give an answer right now, we’d say 1:4 good leads convert to MQLs, and 1:3 great MQLs convert to revenue – but we can help you figure all that out (mind you, you’ll have to give us access to your CRM). For the other stuff – client churn and such – we’ll leave that to you.

You can rest assured that you’ll experience transformative results from the relentless pursuit of our client’s success, a rigorous approach to advertising, and unrivaled technology. Let’s talk if you’re looking for a reliable partner to help you grow your SaaS business.