The most valuable marketing metrics for any B2B organization are the ones that help you measure the effectiveness of your marketing efforts and make data-driven decisions to improve your results. But for Software-as-a-Service (SaaS) companies, the most valuable metrics to track aren’t the same as those at companies whose sales model is based on moving physical units or securing one-time purchases.
Let’s take a look at why SaaS companies need to track metrics differently – and why they may need to track different metrics altogether.
Why SaaS Marketing Metrics Are Unique
SaaS B2B marketing has several unique characteristics that distinguish it from other B2B marketing strategies. These characteristics reflect the distinct nature of the SaaS business model and the larger B2B sales process.
The B2B sales process is typically longer and more complex than the B2C sales process. For SaaS companies, that means product marketing plays a crucial role, as it helps to educate potential customers about the value of the product and drive adoption. Because of this, free trials are a mainstay of the SaaS marketing toolkit, and metrics that follow the adoption and conversion of free trials are vital.
Once a customer has converted, SaaS businesses are primarily focused on generating recurring revenue from their customers. For a SaaS B2B marketing metric to be valuable, it must measure the long-term value of customers, rather than simply the total amount of a particular deal. After all, a million-dollar deal for a SaaS company has a much different impact on cash flow than it does for a company that sells durable goods.
Finally, SaaS businesses rely on retaining existing customers to generate a sustainable revenue stream. This means that SaaS B2B marketing metrics must monitor customer churn and identify factors that contribute to that churn. Having these insights helps ensure a stable base of customers to keep the company’s financials secure. Actually, this is something all firms should do but many don’t.
The Most Valuable B2B SaaS Marketing Metrics
The unique nature of the SaaS sales model means these companies should track an optimized set of metrics. These metrics can be categorized into three main groups: acquisition, revenue, and retention:
Acquisition
Website traffic is a key metric for measuring the effectiveness of your online marketing efforts in terms of volume but is somewhat meaningless if your drivers of traffic are misplaced. GA4 will help identify those issues. IE hits are meaningless if they are the wrong type of traffic.
Lead generation is the process of identifying and generating interest in potential customers. Leads are typically generated through website forms, lead gen ads, email signups, or other online marketing campaigns. Leads are generally split into Marketing Qualified Leads (MQL) and Sales Qualified Leads (SQL). A high volume of either type of leads indicates that your marketing efforts are effective at attracting customers who are more likely to buy.
Customer acquisition cost (CAC) is the average cost of acquiring a new customer. It is calculated by dividing the total marketing spend by the number of new customers acquired. A lower than industry average CAC indicates that you are acquiring new customers efficiently.
Lead-to-customer conversion rate is the percentage of leads that convert into paying customers. It is calculated by dividing the number of new customers by the number of leads generated. A high conversion rate indicates that your sales team is effective at closing deals and or that they are the correct leads I the first place.
Lead velocity rate (LVR) is the speed at which leads move through your sales funnel. It is calculated by dividing the number of leads generated by the average number of days it takes to close them. A high LVR indicates that your sales process is efficient, and you are quickly turning leads into customers.
Activation rate is the percentage of free trial users who convert into paying customers. It is calculated by dividing the number of paying customers by the number of free trials started. A high activation rate indicates that your product is providing value to users and they are willing to pay for it. Further and importantly that they feel cared for in that trial period not just left to fend for themselves with zero engagement, this happens all too often.
Revenue metrics
Monthly recurring revenue (MRR) is the total recurring revenue you generate from your subscription-based business each month. It is a key metric for measuring the growth of your business. Annual recurring revenue (ARR) is the same but annual.
Average revenue per user (ARPU) is the average monthly revenue you generate from each paying customer. It is calculated by dividing total MRR by the number of paying customers. This is an important stat as the sales team can focus in on higher revue customers.
Retention metrics
Customer churn rate is the percentage of customers who cancel their subscriptions each month. It is a key metric for measuring the health of your business. Similarly, Customer lifetime value (CLV) is vital , this is the total revenue you can expect to generate from a customer over their lifetime. It is calculated by multiplying the average revenue per user (ARPU) by the average customer lifetime. A high CLV naturally leads to confidence I the product, the service and an increase of marketing budget.
