Marketing

Six Marketing Metrics Every SaaS Should Monitor

A list of the most important growth metrics for SaaS businesses

There have been plenty of awful marketing campaigns in the last few years. Whether it was Coca-Cola's confusing and completely unnecessary "New Coke" or that unsettling Burger King mascot, these campaigns didn't accomplish their goals of generating revenue and inspiring customer loyalty.

There are several ways to forecast and analyze the success of a marketing campaign in meeting these goals using metrics.

Here are six marketing-related metrics any SaaS should know:

Lead Velocity Rate

Lead velocity rate (LVR) is used to analyze the growth of qualified leads. A lead is a potential customer, but the differentiation between a qualified lead versus an unqualified lead is an essential aspect of this metric. A qualified lead is likely to make a purchase and become a customer. These leads are engaged, understand your product, and have demonstrated significant interest.

Signs the customer is a qualified lead:

  • They downloaded a demo
  • They have items in their shopping cart
  • They've reached out with additional questions
  • They've visited the site or clicked on advertisements several times

To calculate the LVR, you'll need access to the number of qualified leads you had this month and the number of qualified leads last month.

A common mistake with this metric is not to enforce consistent or stringent standards in what makes a "qualified lead." In marketing, sales is the ultimate goal. By including every lead in this calculator, the LVR could be a misleading metric.

Customer Lifetime Value

The customer lifetime value (CLV) is the average amount a customer will spend on your service.

A company can do this calculation by taking the average revenue per customer and multiplying it by the average customer lifetime.

A CLV can be bolstered through:

  • Building relationships with your customers
  • Promoting brand loyalty through marketing
  • Value-based pricing
  • Market analysis

CLV is necessary to determine a marketing strategy and plan the hiring of a marketing team. Any costs acquiring a customer should be significantly less than a business's CLV.

Customer Acquisition Cost

Customer acquisition cost  (CAC) calculates the average amount of money spent acquiring a new customer.

This can include the costs of:

  • Hiring marketing staff
  • Media advertisements
  • Research costs

The goal is to find the sweet spot where a company is gaining the most customers they can for the least amount of money.

One of the most important uses for the CAC metric is to compare it to the CLV. A CLV should always significantly exceed the CAC.

For example, if the CLV of a customer is $500, and the CAC is $1,000, the business will be losing money. As a result, this business will either need to lower its CAC or attempt to retain customers for a longer period of time.

Lead to Conversion Rate

The lead to conversion rate is the percentage of qualified leads that end in a purchase. The formula is:

For example, if Company A has 400 leads and 100 sales, the ratio of sales is 4:1. .25 x 100= 25%. Company A can forecast that 25% of all leads will become customers.

This metric is vital in estimating the relative monetary value of a lead, which can direct how much a company should spend on marketing.

Higher rates suggest successful marketing. However, each industry has a different average rate. This is another reason to perform market analysis. Market analysis will reveal important information about your industry to help you compare your company's performance with your competitors.

Monthly Recurring Revenue

Monthly recurring revenue is the predicted total revenue in a month. The formula is:

MRR takes into account upgrades and downgrades, as well as lost revenue from churn.

For example, Company B has 500 active subscribers, and the average billed amount is $10, the MRR would be $5000.

The importance of MRR comes from the fact that it forecasts rather than merely analyzes revenue. As a result, it can influence hiring decisions, marketing strategies, and business plans.

Share your MRR easily with stakeholders, using Causal's interactive and customizable models.

Revenue Churn

Revenue churn is the money that a business loses through from customer churn either monthly or annually.

There are two types of revenue churn:

Gross revenue churn

This describes what percentage of revenue is lost when a customer churns.

Net Revenue churn

Net Revenue Churn also describes the percentage of revenue lost when a customer churns, but also considers revenue gained from upgrades of existing customers in the calculation.

Revenue churn encompasses all types of churn, including:

  • Churn due to downgrades
  • Churn due to cancellations

Revenue churn is not to be mistaken by churn rate, which is the percentage of customers lost and doesn't provide information on revenue.

Want to utilize these metrics in marketing?

Create models of your metrics

Metrics don't need to be floating numbers attached to complicated and time-wasting spreadsheets. Create fast models to calculate and analyze your company's data with Causal. Our interactive and customizable models allow you and your stakeholders to see visual representatives of trends in churn, revenue, and other marketing-related metrics.

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