Successfully growing any biz is challenging. Growing a Software as a Service, or SaaS, company is often daunting.
The majority of SaaS companies struggle to reach a point where they flat line or fail to have predictable revenue growth – even though having this growth is crucial to their lifeblood.
You need to make data-driven decisions when it comes to sales, marketing, and services operations. These decisions are based on the information you gathered from certain marketing metrics.
Clearly defined and monitored inbound marketing metrics are crucial to the success of any SaaS company, regardless of its size.
These metrics will not only measure the effectiveness of your marketing campaigns, but they will also help explore risk and find new opportunities to accelerate your company’s growth.
The key to using these SaaS marketing metrics is to track the right ones.
While there are countless metrics that you can track, certain ones are more helpful. Some are quite effective when it comes to developing a strategy that will get you the results and sales you desire.
We've laid out a list of the metrics we think are critical for gathering data to inform your marketing and sales teams.
Number Of Visits Before Free Trial
The process of getting someone to move from being a visitor to signing up for a free trial has any number of steps.
However, one of the most important metrics you can keep track of is how many times (on average) a person visits prior to signing up for a free trial or some other product or service offered.
When you know how many visits it takes for a new customer to actually take action and sign up for your product, you can begin using A/B testing to run experiments that could affect this number.
You can implement various methods and tactics to see if you can reduce the number of visits it takes to actually convert someone.
If you are able to accomplish this goal, your CAC (discussed below) may actually decrease, as well.
Another important metric to measure is how well your individual website pages are performing. Do some pages on your site convert better than others?
While you need to have conversion opportunities on each page of your website (this is obvious), you will also have some pages that are more “convincing” than others.
If you discover that most of your pages convert at 2 to 3 percent, but that one stands out with a conversion rate of 30 to 35 percent, you'll realize you need to drive more traffic to that page.
You also might find it's worth replicating the strategies applied to that "successful" page on other areas of your site if possible in order to increase their submission rate.
After all, if something works, you should take advantage of it.
Customer Acquisition Cost (CAC)
The customer acquisition cost is how much you pay to “buy” each of your customers. To determine the costs to acquire a customer, you will divide your total marketing and sales spending by the total number of new customers you had over a certain period.
For example, if your company spent $200,000 in marketing and sales efforts during the previous year and added a total of 200 new customers, your company’s CAC would be $1,000.
Keep in mind that when trying to figure out this number, you need to include all related expenses.
These include the cost of writing content, cost of your sales team (including salaries, benefits, bonuses, etc.), cost of the time you spend in meetings, cost of your software, etc.
Lifetime Value (LTV)
The customer lifetime value looks at the average revenue earned per account along with what your customers will usually spend with you over long periods of time. Sure, they may buy a $15 product to start.
However, they may also spend upwards of $2,000 every year with you for the next 5 years if they have a good experience. Your LTV for that client would be upwards of $10,000, not just the $15 they initially came to you for.
To calculate your LTV you will need to calculate your average customer lifetime. You can use the formula 1/customer churn rate (in years or months).
Once you have determined this value, you can compare the LTV:CAC ratio, which will provide you with even more insight into your customer acquisition costs.
Lifetime value of your customers can even give you ideas on how to reduce your spending (and achieve even better results) in the future.
It is essential that you find out where your best leads are coming from.
For example, are they derived from organic search results, or are they coming from referrals from an article you're featured in, a Facebook advertising campaign, LinkedIn Groups or another source?
When you narrow down where your lead sources come from, you can see where you should focus your time, energy, and effort, as well as where you should focus more of your marketing budget.
If one strategy clearly emerges as the leader above all other sources, you should take advantage of it.
You can eliminate the others while still generating the leads you need in a more effective and (often) affordable manner - or, you can completely address how you're handling your other sources and see if that has any effect on bringing in more traffic.
CTA Click Through Rate
By now, you understand how important your calls to action (CTAs) are. However, you can’t just put them on your site and expect to achieve the desired results.
Take some time to measure what CTAs are driving results and action, and which ones aren’t.
Click Through Rate evaluates how often someone sees your CTA and clicks on it. Frequently clicked CTAs are signs of good content!
Once you know which of your CTAs perform better than others, you can take the needed actions to incorporate that CTA into other sections of your site.
Page Scroll Heatmap
For example, if you have a landing page with high traffic but low conversion, the scroll heatmap will show you how much of the page your visitors actually see.
You might find out in this situation that only 20 out of 2,000 visitors scroll to the bottom of the page where your form is visible.
That would mean that all other visitors leave before they could even convert! That tells you something on your page is not clicking with your audience.
So what should you do? If you think it's critical for people to read what's on the page itself, you likely need to change the text so it's more narrow and specific to what they need to read on the page.
It's likely not connecting with them or providing enough information for "why" they need to continue reading this page. You can also move your form up to the top of the page and see if that increases your conversion rate (HINT: It will).
Landing pages with forms at the top of the page have a higher chance of converting because all 2,000 of those site visitors will now see the form instead of just 20.
Page Click Heatmap
This is similar to the page scroll heatmap.
You can use the same tools listed above (Hotjar and Lucky Orange) to track what unique visitors to your website click on when engaging with you.
This metric will help you discover if people click on words or phrases, or if they are more drawn to images, etc.
This information gives you a better understanding of what your visitors actually search for and how you can reach them better.
For example, if most of your visitors click on images, you can add more imagery to the page to increase the conversion percentage.
If you find they are clicking on words or phrases that don't actually have any links or features tied to them, that is an obvious sign that people want to know more information about something.
So - Give it to them! What happens if they click on a word or image and that opens up into a pop-up explainer video? Or perhaps goes to a landing page to download more information?
The Effectiveness of Your Funnel
You must have a sales funnel in place that effectively moves your leads toward conversion. In addition, you need to track a number of factors related to your sales funnel, including leads, MQLs, SQLs, and new opportunities.
Also, make sure you have a dashboard set up to monitor where your visitors are in the buying cycle.
When you have this information available, you can see what you need to accomplish to push a lead into the next step of the buying cycle. Without this information, you are essentially “flying blind.”
You may even be sending visitors information or emails that will turn them away from your product or service for good.
One of the best ways to keep track of your funnel engagement and determine what is going on with each phase is by using a tool such as Databox.
With this tool, you will have access to an easy-to-use and easy-to-understand dashboard that contains all the information need about your funnel.
Tips for Monitoring These Key Metrics Effectively
Steering your SaaS business without any of the above in place is likely going to lead you astray. Some companies can operate that way, but it's quite difficult.
If you have a board or investors who want to know how well you're performing, you will absolutely love the opportunity to give them a clear insight into real-time statistics about the status of the company.
Once you know your key metrics, you need to make sure you can check them at any time. You also need to pull monthly or weekly reports.
When a change occurs, you must know how that affects your overall performance.
As mentioned before, a great tool like Databox will give you great reporting.
Even if you don’t use this tool for your marketing strategy, you will find others out there that are equally effective at helping you keep track of the most important metrics to your business growth.
We also love HubSpot Reports, Kissmetrics (which is great for your app data as well!), Grow, and Klipfolio.
Remember that by measuring these metrics and using the data collected, you can also significantly improve customer service, customer satisfaction and the average revenue per account.