Marketers have their hands full with metrics. Today, there's a metric for everything under the sun; it's hard to track what's important and what you should be tracking. The problem is that most people don't know they are missing out on valuable information that can help them better determine how effective their marketing efforts are and how to adapt them to meet a company's needs.
Using SaaS metrics can help marketers organize and compare their findings to see which tactics perform best at each stage of the marketing process. Below are some SaaS metrics and examples of how they would be used to help improve marketing effectiveness.
SaaS Marketing Metrics
Customer acquisition cost is the key metric for measuring the effectiveness of your marketing campaigns. It's an estimate of how much you spend on acquiring one new customer. CAC is a key determinant for whether or not your SaaS company can succeed in the long run. Ideally, you want to pay less than LTV (lifetime value) to acquire each customer.
The CAC Payback Period metric indicates how long it takes for CAC to recoup a given customer's revenue. A short payback period is ideal because a high percentage of customers generate enough revenue to cover their acquisition costs quickly. Longer payback periods indicate that many customers are simply not generating the necessary revenue to cover their acquisition costs, which may result in losses and unsustainable business operations over time.
SaaS Sales Metrics
Sales metrics are often overlooked and under-invested in by B2B SaaS marketers. However, they are critical to overall marketing success as they help provide insights into how well your sales and marketing teams are working together.
- Pipeline Velocity. Overall pipeline velocity tracks the amount of revenue generated from the leads sourced by marketing. This helps you understand if your top-of-funnel volume matches the amount of demand that your sales team can convert at each stage in the process. If this velocity is too low, it indicates that your sales team may have problems converting leads or there is a disconnect between what is being sold and what customers want.
- Pipeline Conversion Rate: Understanding what percentage of pipeline converts to closed business lets you see how well your sales team is doing at closing deals once they have been qualified by marketing. A high conversion rate indicates sales and vice versa are pursuing the most potential deals.
- Sales Efficiency: Tracking quota attainment helps you understand how much revenue a rep generates relative to their quota goals for a given period (monthly or quarterly). This metric shows whether or not reps are either overachieving or underperforming compared to their projected goals/quota targets.
- Forecast Accuracy: Tracking forecast accuracy shows how accurate a rep's predictions were regarding what deals would actually close during a specific time period (monthly, quarterly, annually). In other words, do they make good predictions? If not, why not?
SaaS Financial Metrics
You will want to look at several metrics to understand how well your marketing efforts translate into dollars. Below we have listed a few important ones.
- Monthly Recurring Revenue is the price per month times the number of customers you have signed up.
- Lifetime Value tells you how much money you can expect from a customer over time if they stay with your SaaS company.
- Customer Acquisition Cost is the amount of money it takes to get a new customer for your SaaS product or service. This includes all expenses, like advertising and discounts.
- CAC Payback tells you how long it takes for your company to make back the cost of getting one new customer through marketing and sales activities. For example, if it costs $100 each time a visitor signs up for your free trial and then pays for a subscription, CAC payback will be two months if the average customer spends $50 per month on subscriptions.
If you know what metrics to look at, you'll have the information you need to make intelligent decisions.
As a manager, you cannot be expected to be in touch with your team and what's going on without looking at metrics. Relevant metrics tell the story of a department or a company, and it can help not just managers but also marketers understand where they stand.
Metrics aren't always obvious, however. So you may have to ask yourself: "Which metrics should I track?" "How do I ensure they're actionable?" "How do I know if they're working for me?"
Once you learn how to use these tools effectively, metrics become part of your culture and your identity as an organization.