Software as a Service (SaaS) Founder-CEOs, Co-founders, and CMOs need to keep a close eye on the following marketing metrics when it comes to tracking the healthy growth of a startup. 

What are the key SaaS marketing metrics? 

User acquisition metrics:

  • Customer acquisition cost (CAC): Working out the total cost of acquiring a customer; 
  • Customer lifetime value (CLTV), also known as Lifetime Value (LTV); potentially hard to calculate for newer companies, but this means what a customer is worth for as long as they stay with a SaaS provider; 
  • Churn rate: Generally speaking, lower churn rates are a sign that customers are happy (churn means customers aren’t happy and are leaving); 

Revenue metrics: 

  • Monthly recurring revenue (MRR): How much the company is generating every month;
  • Annualized run rate (ARR), also known as Annual Recurring Revenue: How much the company is making annually.

Marketing metrics:

  • Web traffic (volume): Track this using analytics tools of your choice, so you’ve got a clear idea of how much overall web traffic you’ve got coming in, and look for ways to increase it; 
  • Cost per click (CPC): Especially important if you are running Pay Per Click (PPC) advertising campaigns to generate new sales leads; 
  • Click through rate (CTR): Whether traffic is organic (e.g. content and social-driven) or via PPC campaigns, you need to establish what the click-through rate is (the percentage who click and spend time on web pages, compared to those who don’t). 

Although there are numerous other SaaS metrics, and many businesses turn these and others into SaaS KPIs (Key Performance Indicators), the above are the most important. 

As Paul Graham, of Y Combinator, says: “Startups are so hard that you can’t be pointed off to the side and hope to succeed. You have to know that growth is what you’re after. The good news is, if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face.”

Let’s look closer at these metrics, and crucially how startups and SaaS companies can get everything set-up to measure success throughout the customer journey. 

What is the typical customer journey for SaaS companies?

 

1: Define your metrics

Every startup and SaaS company will have its metrics. Measurements for success, and ways of tracking this data. CMOs and CEOs need a clear 360 overview of this information. Here is a table outlining the key metrics in more detail. 

Metrics CMOs need to measure Measurable metrics, in more detail
Web traffic (volume) This is measured through the number of Unique Website Visitors, and the average time they spend on key pages. Web traffic, generated through inbound marketing efforts (SEO, content marketing, social media) and advertising (PPC) is the best way to pull in potential sales leads.
Cost per click (CPC) With Pay Per Click (PPC) campaigns, usually run through Google Ads, you can set an overall budget, and a budget for every keyword used. Within this, you’ll always have a clear idea of what your CPC is, which is part of your Customer Acquisition Cost (CAC). 
Click through rate (CTR) This is a crucial metric, especially when measuring the various traffic streams to a website and the percentage of web visitors that click through from content, adverts, and email campaigns. Aim to find the normal rates for your sector/vertical, and measure campaigns and inbound marketing efforts against those. 
Customer acquisition cost (CAC) When working out the customer acquisition cost, you need to factor everything in. From advertising campaigns to any external agencies and freelancers, marketing software costs, to the annual salaries of marketing staffers. This metric is easier to get a handle on after at least 12 months of data, and the more customers you win, the lower the acquisition costs get. 
Customer lifetime value (CLTV), also known as lifetime value (LTV) Again, this is somewhat difficult to calculate until you’ve had customers for at least a year and can estimate how long they’ll remain customers. Once you know how much a customer is worth, say for 1 year, and know or can estimate how long they will need your product/services, then you can estimate the lifetime value. For example, if a customer is worth $1200 a year, and the average timescale is 3 years, they’re worth $3600.00. 
Churn rate Churn is another way of saying when a customer leaves. Ideally, growth rates should keep churn to a minimum. If you’re losing 5% of customers and revenue annually to churn, providing you are growing at a rate of say 15%, the loss of that 5% still gives you a healthy 10% annual growth rate. 
Monthly recurring revenue (MRR) Because SaaS businesses are subscription-based, it’s fairly easy to work out monthly revenue. Add up what customers are paying in a single month, and there’s the revenue figure. This is likely to keep increasing, and some customers will pay annually, in a lump sum, which is why you also need to know the ARR figure too (explained below). 
Annualized run rate, also known as annual recurring revenue (ARR) This is your total annual revenue, which many think is calculated as follows: MRR x 12 = ARR. 

However, when it comes to working out the ARR, as outlined above, it’s not quite as simple as the monthly figure x12, as the CEO of Buffer explains: 

“The way we’ve measured “Revenue” has been to take the total revenue we generated in the month and use that. For “Annual revenue run rate,” we simply multiplied monthly revenue by 12. Our revenue includes people who pay us monthly and also those who pay for the whole year in advance. This is where the miscalculation lies.”

“As a recurring revenue (SaaS) business, we can’t guarantee we will get the same number of people paying for annual subscriptions month after month, and we are counting revenue that is in the future. The correct way is to ‘amortize’ and divide those annual payments by 12.”

“In this way, we’re only counting the next 12 months of actual recurring revenue we have already acquired.” Joel Gascoigne, CEO & Founder, Buffer

When trying to work out ARR, remember to take into account those paying every month, and annually. Also, take away those likely to stop subscribing, based on current churn rates. This should give you a fairly accurate ARR. 

SaaS CMOs and CEOs could also run a projections spreadsheet, based on the potential value of new customers entering the pipeline, so you can start to project forward. But don’t count this into actual revenue, until a client starts paying. 

Next, we look at the various steps SaaS CEOs and marketing teams need to take to drive forward growth. 

 

2: Setup traffic and user analytics dashboard

Website and mobile app analytics are useful, to ensure you’ve got a clear idea of the volume of traffic, time people spend on the website or in the app, and click-through rates. But this is only one part of the overall marketing picture, albeit one of the best ways to track key SaaS metrics. 

Whenever possible, aim to bring all the metrics you need to track into a dashboard. To ensure that SaaS leaders can have a quick overview of where the numbers are going every month. When it comes to measuring SaaS metrics before you even put a strategy in place, you need a clear idea of the following: 

  • Is growth going up or down? 
  • What do the numbers look like at the top, middle, and bottom of the funnel (e.g. when a customer decides to buy, or not)? 
  • If you operate using a Freemium model: How many sign-ups vs. the percentage who stay as paying customers? 
  • When it comes to marketing: what’s working and what isn’t? 
  • Can we then double down on what is working? 

Any dashboard needs to include all of the key SaaS metrics outlined in the section above. Make sure you’ve got a clear handle on MRR, ARR, growth and churn rates, and of course, conversion rates. If you’ve got salespeople playing a role in the sales/marketing funnel, then it helps to understand their conversion rates too. 

 

3: Outline your strategy 

Once everything is set up to monitor growth activities, you need to design and implement a strategy. Base this on a few simple questions:

  • Who are our customers? 
  • Where are they? 
  • How do we reach them? 
  • What content or advertising would be useful to attract their attention? 
  • Once we’ve got their attention, how do we keep it? 
  • How do we convert them from being web visitors to paying customers? 

Every SaaS marketing strategy is unique, of course. There is no one-size-fits-all approach. However, many include similar components and are running up against the same challenges: Getting the attention of your target audience and converting as many as possible. 

As a former CMO of Slack says: 

“Marketing is the fuel to the fire. Once you’ve got great product/market fit, marketing, and all the different tools that we have, everything from advertising to nurturing to conversion rate marketing to split testing to positioning messaging, those are all the tools that can help just accelerate that growth further.” Bill Macaitis, former CMO of Slack

Normally, the first year or two in the lifecycle of any startup and software company is finding what works and what doesn’t. To measure everything as effectively as possible, you need analytics and a dashboard. That way, you can see whether the content is generating leads, or how many are coming through advertising and if social media is increasing traffic. 

 

4: Generate traffic 

Once you’ve decided on a marketing strategy to implement, you need to know how to move forward. Will you hire a marketing person, or work with an external agency, or freelancers, or a hybrid mix of the above? 

The aim of any marketing strategy should be to get traffic to the website and app if you have one. Once you’ve got visitors visiting, the aim should be to convert as many as possible. 

 

5: Monitor performance and increase conversion rates 

This is where you move from marketing into either sales or on-boarding, depending on the pricing model you operate. When software sells for a higher monthly price and therefore requires custom pricing for every new client, you often need salespeople. Whereas, those that operate on a lower-price freemium model often need a smooth onboarding process to generate the sort of conversion rates you need. 

This is where analytics plays such an important role. When you know what the figures are looking like, you can start to identify ways to increase conversion rates. Whether that means improving the user experience and onboarding, using AI-powered bots, FAQ sections, videos, instant demos, or other methods to generate more revenue. 

Benefits of measuring key SaaS marketing metrics 

Setting up a dashboard, or series of interconnected analytics systems is an essential part of monitoring SaaS marketing metrics. It’s a worthwhile investment, either right at the start of a growth journey, or as soon as you can invest in this. Once you know where you are with every measurable, you can improve and increase marketing activity, according to what’s working and what isn’t. When marketing is working, revenue, profits and the long-term value of every customer should keep increasing, alongside organic referrals. 

At Rampiq, we can help you get everything up and running on the analytics setup side and marketing metrics growth giving you the tools and expertise you need to measure and scale SaaS marketing metrics with confidence. Whether you are on track to win your first 100 customers or hit $10 million MRR, we are here for your every step of the way. 

 

Rampiq: Digital marketing, re-imagined. Get the most of online marketing for your business with Rampiq. We re-invented our agency to drive your online growth in a new, measurable, and transparent way. Contact us to find out more, and drive forward growth for your SaaS business.