SaaS Metrics Your Company Requires
June 22, 2023
The SaaS market proliferates every year, and global reports show that the revenue growth of SaaS companies is directly related to the measure of marketing effectiveness. However, inbound tactics like blogs and e-books aren't attracting users anymore. Interactive content is the need of the time. So here we have something that works flawlessly – SaaS metrics.
Tracking key metrics is crucial to ensure your company's growth and success.
Therefore, below we'll consider which of them you'll definitely need to track.
LTV
Simply put, Customer Lifetime Value (LTV) is a fundamental SaaS metric that measures the total revenue received from a specific customer over their account's lifetime. It's a critical indicator for analyzing commercial applications and accurately predicting a business's bottom line.
Regularly monitoring LTV can provide valuable insights into the quality of traffic from each channel, user acquisition costs, and the impact of product changes on revenue per user. Growing LTV means that the product meets customers' needs, and they're willing to pay more for your service.
In addition, it's helpful to consider LTV in the context of different user segments: by country, language, and the period from the registration moment.
What's LTV for?
Calculating LTV provides numerous benefits to a SaaS company. If you still doubt whether it's essential, then analyze right now what this will give you:
Knowing the customer's lifetime value, you can predict the approximate profit from a particular business or line of activity. It'll be possible to assess the ROI more accurately and determine the currently appropriate customer acquisition cost (CAC) and retention.
The formation of marketing and advertising budget will be more balanced. The LTV ratio will help analyze the ROMI indicator because these metrics are interconnected. You'll understand how quickly you can recoup your marketing investment.
You'll be able to determine whether your customers' loyalty is increasing or decreasing, as well as the purchasing power of the target audience in the market.
CAC
Every enterprise proprietor requires to comprehend the Customer Acquisition Cost (CAC). If you understand how to calculate this metric precisely, you can gain total efficiency from promotion campaigns and anticipate marketing funding for the future.
Comprehending the definition of this indicator will allow you to uncover the most suitable tracks to attract new consumers at the most inferior possible price. CAC is an indicator that defines how much a new customer costs.
Why is it essential to calculate CAC?
Companies often spend money on customer promotion at the very beginning of their journey. As a result, they can't cover marketing costs. Why? Because they don't start counting LTV and CAC on time. With the indicator, you can understand how productively the company is moving towards its goal.
You shouldn't be afraid to try various marketing strategies for the first few months and spend money on advertising. LTV at the beginning of the journey is almost impossible to calculate. However, with constant purchases, LTV will only grow, while CAC will remain unchanged.
Thanks to CAC control, you'll be able to:
- make the business bigger;
- increase profits;
- reduce costs;
- find the perfect marketing strategy.
CPL
Cost per Lead (CPL) is a critical marketing metric that indicates how much the company pays for each attracted lead. If you need to learn how to calculate the lead's cost in a target or context, then use a simple and convenient online CPL calculator. The result is in front of your eyes for a couple of seconds.
What's CPL for?
The primary purpose of CPL in marketing is to:
- Estimate how much an actual client costs you, taking into account the size of conversions to a sale;
- Understand whether it's necessary to optimize the advertising campaign, review lead generation channels and marketing budget;
- Analyze which advertising will help increase profits and how much you need to spend on it;
- See if the product's price matches the financial costs that the company incurs in attracting leads and customers.
CPO
CPO indicates the cost of placing one order on the site. Marketers constantly use such a metric to evaluate the effectiveness of marketing campaigns and various advertising channels.
Additionally, CPO helps analyze the profitability of marketing actions and cut off unprofitable advertising channels while focusing on those that bring the most profit.
What's CPO for?
Calculating the cost of placing an order is necessary to:
- assess the performance of various advertising channels and campaigns;
- determine the cost of acquiring a single customer;
- analyze the profitability of marketing initiatives to drive sales, including identifying and eliminating
- unprofitable advertising channels and testing marketing hypotheses and creative strategies.
ROI
In SaaS metrics, ROI (Return on Investment) is a crucial financial indicator that measures the profitability of a project or product. In simple terms, the investment payback.
Investment is understood as a contribution directly to the business, that is, the cost of employee salaries, premises rental, marketing, the purchase of raw materials and materials, and the purchase of software and services necessary for work.
What's ROI for?
The ROI metric is necessary for SaaS businesses to:
- find out how effective your campaign is;
- determine the break-even point and start working on increasing the profitability of the project;
- analyze the effectiveness of various channels and products of the company in order to invest in the
- future only in profitable areas and ideas;
- close a loss-making line of business before it leads to significant capital losses.
ROMI
ROMI is the return on investment in marketing (only the advertising budget, excluding the product cost). It indicates the return on investment invested in marketing campaigns and other activities to promote a brand and specific products. ROMI is a universal and most typical metric. It'll help determine which advertising channel is worth investing money in and which ones to refuse.
What's ROMI for?
You need to know the value of Return On Marketing Investment to:
- see how much net profit the company obtains after deducting marketing costs;
- analyze the significance of ongoing marketing campaigns and advertising in particular;
- evaluate the effectiveness of different channels for attracting target audience: contextual, targeted, teaser, banner, native advertising, as well as email campaigns;
- track the promotion profitability through content marketing and attracting bloggers to advertise products.
Final thoughts
In conclusion, SaaS metrics are critical to the growth and success of any SaaS company. The metrics written above provide valuable insights into the quality of traffic from each channel, user acquisition costs, and the impact of product changes on revenue per user.
Remember: effective marketing increases target audience loyalty and brand awareness and reduces purchase time. If you have any questions, please write to us. Our experts will certainly help you figure it out!
