The short version
- Eight numbers tell you if SaaS marketing works: CAC, LTV, MRR, ARR, trial to paid, churn, retention and MQLs.
- Each KPI answers one question; tracked together they show where revenue leaks.
- Every metric here has a free calculator under our tools section, one click away.
If you are a founder of a SaaS business then there are a few marketing KPIs that you should always track! Just launching a great product is not the only thing that a successful founder does but they keep a track of different performance indicators that ensure long-term sustainable growth. This blog contains SaaS metrics for founders that will help you optimize marketing strategies and expand the business successfully.
Significance of SaaS Marketing KPIs
When we consider any traditional business then that mainly depends on one-time purchases but SaaS products are completely different as they are based on generating recurring revenue through subscriptions. That means for SaaS brands just bringing traffic to the website or acquiring customers for trials is not enough but they have to retain customers for increasing long-term value. That’s where the concept of SaaS marketing comes in and the need to track the right marketing KPIs for founders becomes essential. Here are a few reasons that tell you why knowing these SaaS marketing KPIs is important for founders:
Knowing the KPIs will allow you to measure the effectiveness of SaaS marketing techniques that you are applying.
When you are aware of the KPIs then it helps to create better customer acquisition strategies.
Definitely with the expansion of the customer base the churn rate reduces when you follow the metrics.
The marketing budget can be controlled and properly optimized when you work according to the KPIs.
List of SaaS Marketing KPIs
1. Customer Acquisition Cost (CAC)
One of the most important SaaS performance metrics is customer acquisition cost which tells the average amount that a particular company spends on acquiring a new customer. Things that come under CAC include SEO, sales and marketing expenses, paid advertisements, content marketing and agency fees, An efficient marketing strategy always ensures there is a lower CAC. If you find that the CAC is increasing with revenue growth then that is an indication that you need to further optimize your marketing campaigns.
2. Customer Lifetime Value (LTV)
The total revenue that a customer generates throughout their lifetime in a SaaS business is known as customer lifetime value which is again an important SaaS marketing metric that every founder must know. When LTV is higher that implies the customers have subscribed to the product for a long period. In fact you should compare LTV with CAC and determine that LTV is higher than the cost of acquisition.
3. Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is one of the key SaaS growth metrics that every founder must know. The predictable subscription amount that the business earns every month is the monthly recurring revenue. With this you get a clearer picture of your business and accordingly you can measure further growth.
4. Annual Recurring Revenue (ARR)
When you have opted for a SaaS marketing agency to work on the marketing of your business then as a founder you should keep track of the Annual Recurring Revenue of the business as it speaks about the health of your business. Just like monthly recurring revenue the annual recurring revenue is the predictable revenue that will be generated throughout the year.
5. Trial-to-Paid Conversion Rate
Most SaaS companies offer free trials or freemium plans to users.Often at the end of the trial period customers don’t opt to pay for premium plans. But that will not work for gaining maximum revenue because free trials are just a marketing technique to attract probable customers. As a founder of a SaaS product you must keep track of the trial-to-paid conversion rate because lower conversion means there are problems related to onboarding, educating users about the product or a lack of customer engagement.
6. Customer Churn Rate
Within a specific period of time if a customer prefers to cancel their subscription then that means their experience with the product is affected. The percentage of such customers is indicated through the churn rate. At times some SaaS companies have very strong customer acquisition but their churn rate is also high. When you plan a marketing strategy then you should plan to reduce the churn rate rather than acquiring new customers.
7. Customer Retention Rate
As mentioned the churn rate analyses the percentage of customers that a business lost similarly the customer retention rate analyses the percentage of customers who prefer to continue using the product. A higher customer retention rate indicates that customer satisfaction is high along with a smooth onboarding process.
8. Marketing Qualified Leads (MQLs)
Marketing Qualified Leads (MQLs) are one of the B2B SaaS marketing KPIs that every founder of SaaS companies must know. Actually this is the number that denotes the prospects who show interest in your product and are thus considered potential customers. Knowing about these leads allows you to apply the right SaaS marketing techniques to bring conversion.
Conclusion
The above-mentioned essential SaaS KPIs for startup founders are quite essential for sustainable business growth. Founders should not focus on social media engagement or traffic on the website rather their focus should be on the metrics that we have discussed in this blog. Upon monitoring these metrics, founders can partner with a specialized SaaS marketing agency to build a marketing strategy that helps in improving the metrics rather than just engaging in gaining likes on social media platforms.
Free resource
The SaaS scaling checklist
Track the right numbers from day one. The checklist pairs every KPI with the fix that moves it.
Get the checklistFrequently Asked Questions
1. What Are the Top KPIs for SaaS Companies?
The top KPIs for SaaS companies that every startup founder must follow include customer acquisition, retention, revenue growth, and also checking overall marketing effectiveness.
2. How to Track SaaS Marketing Performance?
Not just a single KPI can detect marketing performance but there are numerous marketing KPIs that you should follow like Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), Monthly Recurring Revenue (MRR), churn rate, and trial-to-paid conversion rate.
3. What Can Be Considered a Good Customer Acquisition Cost (CAC)?
Actually when we speak about a good CAC then that depends on your industry, pricing model, and Customer Lifetime Value. For sustainable profitability your LTV should be more than CAC.
4. When Should SaaS Founders Track Marketing KPIs?
To understand the marketing KPIs thoroughly you should keep track of metrics depending on the fact that they are created in a month or year.
