Key Performance Indicators, or KPIs in the further text, are critical indicators of evaluating SaaS marketing success. Compared to the SaaS metrics, which are only quantitative measurables on how a campaign goes, KPIs give us an insight into what really happens and why those numbers are the way they are.
As we previously said in our SaaS marketing metric guide, every KPI can be a metric, but it’s not the same the other way. So, you’ll probably see some of the metrics we mentioned in the previous article, but with a little difference – we’ll explain how they act as KPIs.
But before delving into the topic, we can now make some things clearer:
Metrics are simple performance measurements helping us track the progress toward goals. They are numbers only, without additional context. For example, the number of website visitors per month is a metric.
KPIs are directly linked to the goals and objectives, as they help you measure your progress and check if your efforts give the preferred results. So, when it comes to website traffic, the raw number is a metric, but the difference between the previous and this month is a KPI. For example, the traffic spike of 20% is a KPI in this case, but the total number of visitors is still a metric.
In this case, the KPI is closely related to the organization’s goal of increasing online visitors. On the other hand, the metric is merely a performance measurement that may be used to track progress toward the KPI.
Table of Contents
- Essential SaaS Marketing KPIs to Consider
- Additional SaaS Marketing KPIs You Need to Know
- How Can SaaS Businesses Use KPIs?
- How to Go from Goals to KPIs in SaaS B2B Landscape?
- What KPIs Should You Use for SaaS After the Launch?
- How Do SaaS Companies Measure Success?
- Why It’s Important to Track Metrics and KPIs for SaaS?
- How To Make the Most of the Numbers (Metrics & KPIs)?
- Conclusion on SaaS KPIs and Their Marketing Importance
Essential SaaS Marketing KPIs to Consider
So now, as all these things are clear to us, we can focus on the key SaaS KPIs regarding your marketing efforts.
Monthly Recurring Revenue (MRR)
MRR is one of the key KPIs when it comes to SaaS business evaluation. It monitors the ongoing stability and growth of subscription-based revenue streams, providing a picture of a company’s financial health. MRR indicates the predictable income created by ongoing subscriptions, providing insight into the revenue stream of a SaaS company.
SaaS MRR additionally indicates a healthy customer base and effective retention strategies. It’s important to monitor this KPI to identify eventual growth opportunities and adapt new marketing efforts to increase subscription revenue. As KPI, MRR is essential in tracking the SaaS company’s progress over time.
SaaS Marketing Campaign ROI
ROI, or return on investment, is often considered a SaaS KPI since marketers need to know how much money their campaign generated over a given period. ROI is a result of many other metrics like money spent on the campaign, generated revenue, and the difference between them, but also factors outside the campaign that may have influenced the result.
Sometimes, things happen while the campaign is active, like referrals, trades, niche events, or even SEO, that affect the outcome but aren’t a direct result of the particular campaign. So, the take is, you’ll need to examine all the metrics that affected this KPI in order to get a clearer image of how the campaign affected the revenue.
Customer Acquisition Cost
You may recognize this one as a SaaS marketing metric too, but in this context, it’s a KPI too. CAC refers to the total cost of your marketing and sales effort to acquire new customers compared to the number of acquired customers.
And while as a metric is a clear and direct number, as KPI, CAC shows us if it’s worth spending some amount of money on marketing efforts for that number of new customers. It also depends on the used channels and whether they produce fast or slow and steady results.
We must note that customer acquisition combines multiple channels and marketing approaches, so the CAC for different SaaS companies is different. Let’s say an acquired customer in an edtech-related SaaS product has a different cost compared to a medtech-related SaaS customer. But the cost itself combines the value spent in different channels and approaches, which makes CAC an essential SaaS marketing KPI.
Customer Lifetime Value (CLV or CLTV)
CLV or CLTV refers to Customer Lifetime Value – the total amount of money a SaaS company receives from one customer over their lifetime, i.e., the time a customer is using the product. It’s also related to customer retention and cost of acquisition because it shows the difference between costs or money spent until acquiring the customer and keeping them as clients for longer.
Also, sometimes you’ll find this KPI referred to as LTV or Lifetime Value, which is quite the same thing. In the means of SaaS, all of them make sense because you analyze the financial asset used to attract, convert, and nurture the particular customer.
As we said, as a raw number, the CLV metric shows the amount spent on retaining customers and fostering loyalty. But as KPI, a higher CLTV signifies strong customer relationships, sustainable growth, and a solid foundation for a thriving SaaS venture.
CLTV to CAC Ratio
As SaaS marketing KPIs, many metrics are combined so we can see their real value and purpose. This one is a clear example of a KPI based on two metrics: the profit you make from a customer and the money you spend to acquire that customer.
Still, you have to keep some things in mind, such as:
- In the ideal case, the average ratio would be 3:1
- Most SaaS companies target 4:1 ratios
- Some SaaS companies don’t go for high growth and their ratio is lower than 3:1
- Marketing channels used to acquire the customer may affect this ratio
- Organic marketing channels are cheaper compared to paid ones that raise CAC value
Customer Retention Rate
This KPI represents customer loyalty and the value they get from your SaaS product. It’s not a direct marketing KPI, but it surely offers some insights into how the user is using the product. It can be only a number, but that number, as KPI, indicates customer satisfaction, ongoing engagement, and the likelihood of renewing the monthly or annual plan for your product.
Surely, every company wants to acquire new customers, but retaining the existing ones reduces customer churn, improves profits, and ensures sustainable growth. So, we can say that as a core SaaS KPI, CRR measures and indicates both loyalty and SaaS company’s health and longevity.
Trial-to-Paid Conversion Rate
This KPI shows us if we have enough trial-to-paid customers as we set our goals. It showcases the effectiveness of your SaaS free trials and the ability to persuade the customers to pay for the whole product. We all know demos and free trials are great ways to acquire customers, but sometimes they simply give up in the first few days because the interface is not clear enough or they don’t understand the SaaS product capabilities.
As part of the marketing strategy, you need to show the customer why they need premium access, as the trial-to-paid rate is directly related to revenue growth. A high conversion rate indicates that your trial users perceive enough value in the product to invest financially.
But how to improve this rate? Make sure you learn from those who decided not to commit to the product after the trial and the reasons behind the decision. Also, pay attention to why the existing customers decided they needed full access to your SaaS product. That way, you can detect the opportunities to improve the SaaS performance and elevate the trial-to-paid conversion rate.
Lead-to-Customer Conversion Rate
This one is a fundamental SaaS marketing KPI that shows the effectiveness of your SaaS lead generation and sales efforts. It’s a direct result of a marketing campaign or sales activities, or even combined. It quantifies the percentage of generated leads that successfully transition into paying customers, offering a clear lens into the efficiency of your sales funnel.
It’s different from the trial-to-conversion rate because the lead-to-customer metric shows the number of leads who signed up for a trial or demo, but also those who immediately decided to purchase, no matter the trial/demo.
Still, it’s one of the essential SaaS marketing KPIs to track down to get a better insight into marketing and sales effectiveness, personalized nurturing campaigns, targeted content, and increasing revenue.
Gross margin is another vital KPI related to your SaaS business profitability. It’s the difference between total revenue and direct costs of providing the service. This way, you get a clear insight into your SaaS company’s financial health and efficiency.
By understanding the gross margin, you get to know how to achieve sustainable growth by balancing between generated revenue and controlled expenses. Based on this KPI, marketers, and sales employees can make informed decisions and relocate the resources to ensure long-term profitability.
Customer Expansion Rate
The customer expansion rate is pretty dynamic because it’s often accompanied by the ability to upsell and cross-selling to drive additional value and revenue.
So, in order to optimize this KPI, you need to strategically craft personalized offers, highlight the importance of complementary features, and surely deliver a perfect customer experience.
Additional SaaS Marketing KPIs You Need to Know
We mentioned quite a few SaaS KPIs you need to track through your marketing journey. As we said, not every SaaS is equal, as companies target different clients and industries. For example, a sales SaaS product is different from a productivity monitoring SaaS product, so while the goal is the same, their purpose is different.
That’s why some of the mentioned KPIs, and some of the ones we’ll include later, may or may not apply to a specific product. It’s up to you to determine what metrics are valuable and what KPIs to track in order to gain success.
So, here are a few more KPIs you need to be aware of too:
As a metric, it shows the number of visitors who came to your website. As KPI, it shows how much more or less visitors came after some campaign you’ve been working on.
It’s similar to website traffic. As a metric, leads refer to the number of generated leads through a campaign, but the KPI indicates if there was significant growth or just a small increase over time.
It’s the percentage of customers who canceled their subscription to your SaaS product after a given period. As KPI, it shows if the cancellations are a trend or isolated events, as well as some reasons why it happened in the first place.
Not every lead generated by your marketing campaign is equal. Some of them are indeed interested in your SaaS product and can incorporate it properly, while others may only waste time and resources.
Conversion Funnel Efficiency
This KPI helps you indicate the bottlenecks in your funnel, so you can fix them. As a result, you increase efficiency and generate more conversions.
Customer Satisfaction Score
Another KPI to track and optimize, so you can measure how satisfied the customers are with your product. This way, you identify eventual issues early and fix them in a timely manner.
How Can SaaS Businesses Use KPIs?
KPIs are a great way to measure progress, make informed decisions, and drive growth. While metrics are quantitative insights into marketing and sales, KPIs give context to those quantities, providing more information on overall SaaS success, customer engagement, and financial health.
By tracking the metrics and identifying the KPIs, SaaS companies can monitor their goals and detect areas for improvement. As a result of SaaS marketing KPIs, aligning between teams and common objectives is possible. By properly tracking the KPIs, SaaS companies can optimize their marketing strategies, allocate enough resources, and accomplish sustainable success.
How to Go from Goals to KPIs in SaaS B2B Landscape?
KPIs are a direct result of your goals, and you must understand what every indicator is about, so you can tie it to the specific goal. Initially, you need to identify the important metrics first and then translate them into goals and KPIs. Choose the KPIs that provide actionable insight into progress towards your goals.
So, going from goals to KPIs in a literal way is not really possible. The whole marketing and sales strategy for B2B SaaS is setting goals and metrics, identifying KPIs, tracking down the progress, and optimizing the strategy over and over again until it works the way we want.
What KPIs Should You Use for SaaS After the Launch?
If you’re starting a SaaS product right now, focus on growth, customer satisfaction, and revenue sustainability. That means you need to monitor indicators like MRR, customer retention, trial-to-paid conversions, user engagement, feature adoption, and churn rate.
As you gain more and more customers, you can incorporate other metrics and KPIs to optimize the marketing efforts and accomplish the wanted results.
How Do SaaS Companies Measure Success?
SaaS companies are focused on a combination of metrics and KPIs to measure overall success. Depending on the B2B SaaS product, they may track MRR, CLV, conversion rates, number of retaining customers, and margin growth.
These elements affect the overall business health, customer lifespan, and delivering value to the clients.
Why It’s Important to Track Metrics and KPIs for SaaS?
Tracking B2B SaaS marketing KPIs and metrics is essential for data-driven decisions and business optimization. This way, companies can:
- Understand user behavior and preferences
- Measure and evaluate the effectiveness of SaaS marketing campaigns
- Identify areas for improvement
- Measure the impact of updates and newly added features
- Allocate finances effectively to drive growth
- Monitor the business health and sustainability over time
- Deliver value that resonates with the new and existing customers
How To Make the Most of the Numbers (Metrics & KPIs)?
Making the most of metrics and KPIs in the SaaS industry requires a strategic approach and actionable decisions. Here are a few tips on how to do that:
- Align them with business goals to identify objectives, ensuring every tracked data is on point.
- Focusing on metrics and KPIs that are highly relevant for the specific B2B SaaS model and customer journey to understand user behaviors and engagement.
- Setting clear benchmarks based on historical data, industry standards, and the company’s goals.
- Consistently track and monitor metrics and KPIs to spot trends and anomalies on time.
- Metrics tell a story through numbers, but KPIs put those numbers in a contextual narrative to understand the different factors that affect the overall SaaS performance.
- Integrate data from various sources for better insight and uncovering the eventual hidden patterns.
- KPIs, together with the metrics, can drive actionable insights to improve the SaaS product and the company’s performance in general.
- As the SaaS industry evolves, KPIs and metrics will help you learn about the new technology trends, advancements, and, ultimately, new and more relevant metrics and KPIs to track.
Keep in mind KPIs, and metrics are more than just ordinary numbers. They give us essential insight into SaaS business performance, helping in making informed decisions and refining SaaS marketing strategy.
Conclusion on SaaS KPIs and Their Marketing Importance
The SaaS industry is pretty competitive, and KPIs help us guide through the business realms toward growth and success. By combining both quantitative and quantifiable markers, we can turn the data numbers into essential insights into how we perform in the highly-competitive SaaS market.
Businesses can respond in real time by meticulously measuring KPIs, leading them away from problems and toward opportunities. KPIs also lead to informed decisions and define the path of a SaaS enterprise, whether it’s nurturing leads, building client connections, or monitoring profitability.
So, don’t be afraid to embrace the potential KPIs brought to your business, so you can refine the marketing strategy and stay agile when it comes to ongoing growth. With every KPI, SaaS marketers build a road to sustainable success and innovation and strengthen the relationship between the product and customers.