Research shows that in 2023, the SaaS market is expected to be worth $208.1 billion—a 17.5% increase from 2022.
This predicted market growth leaves SaaS companies with no option but to revamp their marketing campaigns by leveraging the multitude of tools available to them and boosting their growth, whether it’s through paid searches or other mechanisms.
With the increasing competitiveness among SaaS businesses and the need to secure sustainable business growth, marketers must adopt data-driven marketing at scale to maintain their pipeline marketing.
Data-driven marketing enables digital marketers to analyse detailed marketing metrics to measure their work and strategies.
With these metrics, marketing teams can help sales and customer service teams achieve their goals by executing pipeline marketing, customer lifecycle, or full-funnel marketing strategies.
SaaS metrics have several different uses and they can significantly improve the ROI of your marketing efforts. While the type of marketing metrics you use may depend on the data you want to collect, there are a few metrics that should be included in every marketing strategy.
Customer lifetime value
This SaaS metric focuses on the total amount of revenue generated by a customer’s account over its lifetime. This metric is a useful indicator of how valuable a customer is to your SaaS business.
It can also help you create long-term engagement strategies for your customers, and it can be used to determine how long the customer will continue to do business with your company.
Once you know how much a customer is worth for one year, you can determine how long they may want your goods and services and estimate their lifetime value. For instance, if a customer is worth $1,200 a year and the average amount of time a customer is expected to remain with your business is 3 years, their value would be $3,600.
This metric, however, can be difficult to measure unless the customer has been with your business for at least a year.
Customer acquisition cost
Customer acquisition cost (CAC) is the ratio of how much money you spend acquiring a customer to the total number of customers you’ve acquired. The money spent could include the costs of SEO, social media marketing, paid advertising, and sales.
This is an important metric that every business should be aware of as it gives you an idea about how much effort you need to make to acquire a customer.
For a SaaS company to function properly, you should be profiting more from consumers than how much it costs to convert them. Ideally, the lifetime value of a customer must be at least 3 times their acquisition cost.
Churn rate
This refers to the percentage of customers who do not renew their subscription. For many SaaS businesses, it’s easier to keep existing customers than acquire new ones, so this metric can be valuable for keeping track of your current customers.
There are two kinds of churn rates: customer churn and revenue churn. Customer churn is the percentage of people who stop using your service every month while revenue churn is the percentage of profits you’ll lose when customers don’t renew their subscriptions.
The churn rate is usually calculated on a monthly or quarterly basis. If the churn rate is too high, there is a chance that your business might not survive in the long run, so it’s important to try to keep it as low as possible.
Trial sign-ups and leads
For budding SaaS companies, tracking trial sign-ups is important. This metric can help you understand how your company’s website is performing in terms of conversions and if your target audience is finding your website content relatable.
Trials can get you lots of potential leads, and your website can help you generate leads at different levels, such as marketing, qualified, and top-of-the-funnel leads.
While free trials are effective at getting new leads, according to Totango, 70% of customers who sign up for free trials may lose interest in the software if the provider does not provide any kind of support.
Sending a simple “welcome” email to customers after they sign up could help increase conversion rates.
Product qualified leads
This mostly applies to freemium business models. It enables SaaS businesses to pre-qualify potential customers based on how much they use their product.
A product-qualified lead is more likely to subscribe to your service than other leads because they’ve had some first-hand experience with the product. These leads have bought into the product more than others that only researched the product, received promotions, or been referred to your company.
The cost of customer acquisition can be very expensive, so having a well-planned product-qualified lead strategy could potentially reduce the customer acquisition cost and mitigate barriers that prevent a person from making a purchase.
Paid vs. organic traffic
Organic traffic is website traffic that comes from organic search engine rankings while paid traffic is the traffic you gain from sponsored links, pay-per-click ads, and purchased ads.
Organic traffic is more than eight times more likely to get clicked as compared to paid search results. However, organic traffic can take a while to grow and it’s less likely to lead to conversions compared to paid traffic.
Which type of traffic your SaaS company relies on depends on two factors: how quickly you want results and your budget.
If you have a high budget and need to see results quickly, you can focus on getting more paid traffic and if you’re not in a hurry to get more traffic and have a limited budget, you can try to grow your traffic organically.
Leverage data-driven marketing metrics
The amount of data and your SaaS business tracks can overwhelm you, especially with numbers continuously changing, and your ability to select the right metric and draw conclusions between different metrics becomes more difficult.
Knowing the most important metrics is a great start. Having the right visuals to help can also give you the ability to see the improvement areas more easily.