B2B SaaS Marketing and Sales Metrics

This is part five of our five-part series on SaaS marketing. Part one describes the SaaS formula and how marketing SaaS may differ from marketing for traditional products. In part two, part three, and part four we discussed marketing strategies that have proven highly successful for our clients. In this part, we review the special metrics that a SaaS marketer needs to track.

Asking Prevail Marketing what metrics you should be tracking is like asking a child how much ice cream they want... all of it!

We do not believe in guessing as to what is working and what may need to be tweaked, so we track over 400 key performance indicators (KPIs each month for every client. While, at the end of the day, the only metrics that matter are substantial increases in customers, revenue, and profitability, if you don't track all the intermediate KPIs, you will never reach your goals.

For B2B SaaS marketing, there are several additional intermediate metrics that we also track to help guide us in establishing an effective marketing/sales strategy.

Monthly Attribution (MA) - Knowing what lead sources are responsible for populating your funnel, at each stage of the buyers' journey, is critical in making the right choices. It will also help identify where leads are dropping off the sales funnel. This information will allow you to increase the activities that are working and decrease those that are not. It will also allow you to identify and fix issues with the migration of leads down the funnel. Prevail Marketing looks at the monthly attribution methods, and the number of leads at each stage, as well as the cost attributed to obtaining those leads. Here is a truncated look at how we track monthly attributions.

Customer Acquisition Costs (CAC) - CAC is a critical metric that helps businesses understand how much it costs to acquire a new customer. To calculate CAC, divide the total marketing and sales expenses by the number of new customers acquired within a specific time period.

We recommend that this first be calculated for every method of lead attribution each month so you can decide which marketing strategies are working and which are not.

Tracking CAC allows marketers and sales professionals to evaluate the effectiveness of their acquisition strategies and make necessary adjustments to optimize their marketing spend.

Conversion Rate - Conversion rate measures the percentage of website visitors or leads that take a desired action, such as signing up for a free trial or making a purchase. Tracking conversion rates at different stages of the marketing funnel provides insights into the effectiveness of marketing campaigns and helps identify areas for optimization. By continuously monitoring and optimizing conversion rates, marketers and sales professionals can improve lead generation and drive more revenue.

Lead-to-Customer Conversion Rate - Lead-to-customer conversion rate measures the percentage of leads that convert into paying customers. This metric is crucial for evaluating the effectiveness of the sales process and identifying potential bottlenecks. By analyzing the lead-to-customer conversion rate, marketers and sales professionals can identify areas for improvement, optimize lead nurturing strategies, and enhance overall sales performance.

Cost Per Lead (CPL) - B2B SaaS marketing is often a game of inches, and it is critical that you know how much each lead is costing you from each method of marketing. CPL measures the average cost of generating a single lead. By dividing the total marketing expenses by the number of leads generated within a specific time period, marketers and sales professionals can evaluate the efficiency and cost-effectiveness of their lead-generation strategies. Each month, we calculate the cost of obtaining sales-qualified leads for each marketing method. Here is a truncated example of how we track the CPL each month.

Customer Lifetime Value (CLV) - Customer lifetime value (CLV) is the predicted net profit generated by a customer throughout their entire relationship with a business. By calculating CLV, marketers and sales professionals can determine the long-term value of acquiring and retaining a customer. This metric is crucial for making informed decisions about resource allocation, customer segmentation, and pricing strategies.

Churn Rate - The churn rate measures the percentage of customers who cancel or stop using a product or service within a given time period. For B2B SaaS companies, reducing churn is essential for maintaining a healthy customer base and driving sustainable growth. By monitoring churn rates, marketers and sales professionals can identify potential issues and take proactive measures to improve customer satisfaction and retention.

Customer Retention Rate - This is the opposite of the churn rate or the percentage of customers who continue to be a customer.

Pending Diminution Percentage - This represents the percentage of clients who, by contract, are able to leave at the end of the month. This could be as high as 100% in your subscription program and is calculated on a month-to-month basis. Ideally, you will have multiple-year agreements which will lower the number and the risk.

Conversion Rate - Conversion rate measures the percentage of website visitors or leads that take a desired action, such as signing up for a free trial or making a purchase. Tracking conversion rates at different stages of the marketing funnel provides insights into the effectiveness of marketing campaigns and helps identify areas for optimization. By continuously monitoring and optimizing conversion rates, marketers and sales professionals can improve lead generation and drive more revenue.

Activation Rate - The activation rate is the percentage of your customers that go from newly acquired to performing an activity that signals they are using your software. Calculate the activation rate by dividing the number of users who complete an activity by the number of new users who signed up.

Monthly Recurring Revenue (MRR) - MRR measures how much revenue a SaaS company expects to receive monthly. MRR is a straightforward measure which is the aggregate of all the revenue that customers should be paying each month.

Annual Recurring Revenue (ARR) - ARR measures how much revenue a SaaS company expects to receive per year based on the current run rate. ARR is a straightforward measure that is the aggregate of all the revenue that customers should be paying each fiscal or calendar year.

Average Revenue Per Account (ARPA) - ARPA is the revenue each customer generates per account — remember, customers may have multiple users or sub-accounts. Calculate your ARPA by dividing your monthly recurring revenue (MRR) by your total accounts.

Return on Investment (ROI) - Return on investment (ROI) measures the profitability and effectiveness of marketing campaigns. By comparing the revenue generated from a campaign to the cost of running that campaign, marketers and sales professionals can determine the success and profitability of their marketing efforts. Tracking ROI helps in identifying high-performing campaigns and allocating resources to the most effective marketing channels.

Customer Engagement Score - The customer engagement score measures the interactions between your SaaS product and your customers. This is an early warning metric identifying clients who may no longer be actively using your product and are likely to leave.

Customer Satisfaction and Net Promoter Score (NPS) - Customer satisfaction and net promoter score (NPS) are essential metrics for measuring customer loyalty and advocacy. By conducting customer satisfaction surveys, and calculating NPS, marketers and sales professionals can gauge customer sentiment, identify areas for improvement, and measure the likelihood of customers recommending their product or service to others. Tracking customer satisfaction and NPS helps in building long-term customer relationships and driving positive word-of-mouth referrals.

Customer Health Score - Customer health scoring assigns different values to different signals of customer loyalty or customer churn, allowing them to reach out to customers at risk of churning with educational resources and additional support. This requires research. Look at the customers who churned in the last 12 months, and see if there were any common denominators that were tell-tale signs they were planning on leaving.

Conclusion

Tracking the right metrics and key performance indicators is crucial for every marketer and sales professional in the B2B SaaS industry. Remember, these are just the metrics that are unique to a SaaS company. Prevail Marketing tracks an additional 400 KPIs for each client each month. By monitoring ALL the metrics, we never have to guess what is working or what needs to be optimized for your account.