Marketing has always been complex and using it to acquire new customers is not an easy task, regardless of your industry. While we made lots of progress from the days of TV ads and the era of Mad Men, marketing still remains an exciting but at the same time complex way to get to new customers. In recent years, we have a wide range of new marketing platforms and tools to work with, which doesn’t make things any easier either.
However, some things always remain the same. The success of your campaigns will be judged by these main marketing metrics. If you’re in the SaaS business, these will determine your success, no matter what product you sell or who your target audience is. Let’s get started.
1. Churn rate
Let’s start with the one that’s closest to us. In the SaaS industry, churn is one of the major reasons why many companies go bankrupt despite their huge growth and a seemingly phenomenal product. Put simply, churn is the ratio of existing customers that stop using your product or service. All companies have churn.
The problem is when your customer churn rate becomes so high that you can’t make up for it with new customers. For example, getting 100 new customers per month is not that great of a result if you lose 30 at the same time. Churn is known as the silent killer of SaaS (and other businesses), so make sure to track it religiously. Find reasons why your customers stop paying and aim to eliminate them so you can keep your churn within reasonable limits of a few percent.
If you’re in an industry such as eCommerce, churn should also be a major concern since it’s the exact opposite of what you want to achieve - customer retention. To solve this issue, you can look into shopper behavior and find ways to get them to purchase again. After all, a customer has a 27% probability to purchase again if they’ve shopped at your store once.
2. Customer acquisition cost
Many times, the most important piece of data a CMO needs to know is how much it costs to acquire a new customer. The customer acquisition cost (CAC) is the amount of money it takes for a business to acquire a new customer. Especially for CEOs and general managers, proving the return on investment of marketing activities is a major concern.
To calculate your CAC, add up all of your marketing salaries for a certain period, the cost of all your marketing activities and ad spends, the money you spend on marketing tools, etc. Finally, divide that number by the number of customers you acquired in that period and you’ll get your CAC. There is no universal rule as to what a good CAC is - as it depends on many factors. However, you should track it so you can find effective ways to reduce it over time.
3. Conversion rate
Everywhere you turn, you’ll see marketers discussing their conversion rates as one of the most important aspects of their job. On its own, a conversion doesn’t mean much - it simply means that a website visitor takes a certain action, i.e. they convert. A conversion could mean many things:
- A visitor converting to a free trial user
- A free trial user converting to a paid customer
- A paying customer upgrading to a more expensive plan
- A visitor requesting a demo
- A visitor leaving their phone number or email
- A customer purchasing after contacting your call center
The key to tracking conversions properly is designating what a conversion is and making it a crucial action for your business. In our case, the conversion from a visitor to a trial user is very important, as is the conversion from a free trial to a paid customer. There is sophisticated software for tracking these conversions, but a basic goal in Google Analytics will do a good enough job. Remember, it’s all about what constitutes a conversion.
In the world of SaaS, perhaps the most important conversion rate to track is that of free trials to paid customers, and it’s the one we track the most diligently at Better Proposals.
4. Time spent on site
No matter what you sell, you want your visitors to stay longer on your website. Longer visitor sessions mean one thing: the visitor finds your content engaging and they want to learn more. Ideally, you want the visitor to visit more than one page too.
The one thing marketers often forget is that the time a visitor spends on a website is a great ranking signal for Google and other search engines. The longer someone stays, the better your content and overall user experience. Ultimately, visitors that stick around longer translate to better SEO performance and better rankings on Google. Therefore, having people spend more time on your website has multiple benefits for your business.
The longer someone stays, the lower your bounce rate will be - which is another important marketing metric, which you want to keep as low as possible.
5. Customer lifetime value
When looking to acquire a new business, most investors will only look at a handful of metrics and one of them is the customer lifetime value or LTV. It’s the total amount of money a customer spends with you before they leave you for some reason. The more time they spend with you, the bigger the LTV. Ideally, you want your customers to stick around forever, but since that’s rarely the case, you want the CLV to be as big as possible.
A good ratio of CAC and LTV means that you’re running a healthy, profitable business and that the chances of things staying that way are pretty good. As a marketer, there are a few things you can do to increase LTV, such as improving your onboarding, working on your in-app messaging, nurturing your customers throughout their use of your app/service and more.
6. Monthly and annual recurring revenue
Monthly recurring revenue (MRR) and annual recurring revenue are the cornerstones of evaluating the health of a SaaS business. Since this business model is based on a subscription model, you want the volume of recurring payments to increase month after month. This means that:
- A) you’re acquiring a good number of new users and
- B) your churn is at an acceptable level and not staggering your growth.
For any business, an MRR or ARR which are stagnating or in the worst case, decreasing, mean that something is wrong with the product. A lot of times, this is something that the marketing team cannot fix on their own and it requires detailed investigation.
Even though it seems like there are hundreds of different data points to keep track of, watching out for just six of these metrics will be enough to know that your marketing efforts are paying off. Any business that has a firm grasp on them is bound to weather any storm and any marketer that keeps them in check is doing a great job.
About the author
Petra Odak is a Chief Marketing Officer at Better Proposals, a simple yet incredibly powerful proposal software tool that helps you send high-converting, web-based business proposals in minutes. She's a solution-oriented marketing enthusiast with more than 5 years of experience in various fields of marketing and project management.