Like other industries, SaaS brands use key marketing metrics to assess performance. Most of these companies depend on key SaaS marketing metrics like online traffic to drive leads, so they commonly use digital channels such as Google, Facebook, and emails.
All these metrics are interconnected. While each can provide specific insight, we usually have to pair them with other indicators to get a complete picture. This article covers the most critical SaaS KPIs and explains how you can use them to your advantage.
24 B2B SaaS Marketing KPIs
Key SaaS metrics can help us analyze every segment of the company’s performance. The most important ones relate to monthly and annual recurring revenue. They show us how much money we make from our clients and are great for comparing performance from period to period.
“B2B SaaS brands use conversion rate to analyze their success rate.”
We can apply it to just about any operational or SaaS marketing process. Aside from that, managers should pay attention to customer acquisition cost as an indicator of the marketing team‘s success. Marketing spend, revenue per customer and customer retention rate are other metrics that help you assess marketing performance.
On top of that, we’ll also talk about sales and sales cycle metrics, website performance, leads’ progression through the funnel, and much more!
1. Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR)
Due to the nature of the business, ARR and MRR are the two most important metrics for a SaaS company. They’re also the most general ones indicating the overall health of a company while not providing any specific insights.
MRR shows us how we performed during the current month and allows us to compare things to the previous month. More importantly, we can use the marketing KPI as a SaaS marketing benchmark. We distinguish several types of MRR:
- New MRR (revenue from new subscribers)
- Expansion MMR (expansion revenue comes from plan upgrades)
- Reactivation MRR (revenue from past clients that subscribed for the next month)
- Contraction MRR (revenues lost from plan downgrades)
- Churned MRR (churn revenue represents losses from past clients that unsubscribed)
We can compare these MRR types with the same MRR from the previous period. That way, we can establish how much we gained or lost from different client actions.
“Although MRR is fantastic for assessing sales, it doesn’t tell us much about company profitability.”
This is why we need to analyze metrics such as new customer acquisition cost, customer churn rate, customer lifetime value, etc. Lastly, unlike MRR, we calculate ARR on an annual level. It uses the same principle but only during a longer period and is crucial for establishing average revenue.
2. Conversion Rate
Conversion rate is a crucial metric we use for almost any type of business or operation nowadays. It’s especially common for brands that rely on digital marketing, but we can also use it for traditional brick-and-mortar companies.
Conversion rate shows us how many users executed a specific action or achieved marketing goals. We can use the SaaS marketing metric to analyze almost any segment of the website and company performance.
In terms of SaaS, we most commonly use it to determine the percentage of website visitors that became customers. We also use it to compare trial users to paying customers. Conversion rate is a crucial efficiency metric that shows us at which rate we can close deals.
A good SaaS lead conversion rate should be between 5% and 10%.
3. Closed Won/Lost Deals
Closed won/lost deals compare deals that we make against deals that we lost. In a way, it’s an extension of the conversion rate, although it works slightly differently.
Most notably, for a company to consider a lead as a sales opportunity, they must put the person in the sales funnel. In other words, we shouldn’t consider random website visitors as prospects.
“SaaS companies usually lose prospects due to functionality or price.”
However, we should also consider other factors such as product not matching requirements, lack of budget, complexity, etc. Close won/lost deals are crucial for assessing the sales process and reps’ efficiency.
4. Customer Acquisition Cost (CAC)
Like other industries, SaaS brands rely on customer acquisition costs to assess business performance. The metric compares your total marketing expenses to the number of clients you’ve acquired during a specific period of time.
This SaaS marketing statistic is valuable as it shows us how much additional money we had to invest to gain a new subscriber. Total sales and marketing costs include advertising costs, employee salaries, software costs, and other overheads.
When analyzing the CAC ratio, businesses should only calculate the cost of marketing activities. You shouldn’t concern yourself with the usual operational expenses, such as office rent and utilities, as they don’t help increase the customer base.
5. Customer Lifetime Value (CLTV)
If you wish to better understand how CAC affects your business, you should also calculate customer lifetime value. The metric shows you how much money you can get from existing customers. In other words, it helps us calculate customer lifecycle.
Although evaluating customer value is tricky for specific industries, it’s straightforward for SaaS companies. You need to calculate the total sales for each software plan, sum them up, and divide them by the number of clients.
CLTV is especially important for assessing your future growth potential. Even if you have high customer acquisition costs and low customer value, it might pay off with a long customer lifetime. You might have negative results during the first year, but over time, you might steadily increase revenues through high customer retention.
According to the general theory, if you have a 1:1 ratio, you won’t achieve year-to-year business growth. Your SaaS brand will lose money if the ratio is below 1:1 in favor of customer acquisition cost. A ratio of 3:1 (customer lifetime value to customer acquisition cost) presumes that you have untapped growth potential.
6. Churn and Retention Rates
Churn rate and retention rate are two inversely proportional metrics. As customer retention increases, the churn rate decreases, and vice versa.
As you can tell by its name, retention shows how many clients we retained. The churn rate shows us how many subscribers we lost. We use retention rates for various industries, while churn rate primarily measures the performance of SaaS and other subscription-type products.
“A great monthly SaaS churn rate is between 3% and 8%.”
An excellent monthly retention rate is between 97% and 92%. The annual revenue churn rate is almost always lower than the monthly churn rate. So, a good SaaS provider has an annual churn between 32% and 50%.
These key metrics are important as they provide insight into customer satisfaction rates. Although you can increase retention through better customer service or lower pricing, most people remain loyal because of software quality and features.
“We can further break down churn into two metrics: voluntary and involuntary churn.”
The first category shows how many people stopped using the tool due to dissatisfaction. The involuntary category shows how many users we lost due to technical problems such as payment processing errors.
7. Marketing Qualified Leads (MQLs)
Marketing qualified lead is a higher tier of leads. That is, this is a segment of website visitors that are more likely to make a SaaS purchase. These users have a much higher rate of interaction with the site. Based on the previous customers’ behavior, there are strong indicators you can turn them into clients.
Here are a few main things that separate regular visitors from MQLs:
- Downloading a free trial or some other marketing material.
- Subscribing to the email list
- Contacting the call center
- Clicking on paid ads or social media links
- Spending a lot of time on a website or browsing numerous pages
- Adding SaaS product to the cart
- Leaving payment card details
- Adding SaaS products to the wishlist
Most website users have a basic interaction with a site. They might read a blog post or two, but that’s about that. On the other hand, with MQL, there are clear signs that a person is considering buying the product.
Even if users have been using the free version of SaaS for a while, you can still consider them potential customers.
8. Sales Accepted Lead (SAL)
Sales accepted or sales qualified lead is the next stage of your SaaS funnel. After qualifying a prospect, the next step you need to take is to reroute them to your sales team. They will engage the user and try to close them.
“Don’t be too hasty when moving MQL lead down the funnel.”
Engaging a prospect too early can easily backfire. So, you need to properly assess the visitor’s level of involvement. Here’s how to determine if it’s the right time to contact a prospect:
- Multiple engagements with the site, in particular, product pages.
- Opening newsletters for several weeks or months in a row.
- High level of engagement with Google ads and social media posts.
- Multiple contacts with customer support and asking product-related questions.
Lastly, you should try to minimize the drop-off from MQL to SAL. The more people you can retain within the marketing funnel, the better your sales numbers.
9. Product Qualified Lead (PQL)
Product-qualified leads are the easiest category of prospects to close. Unlike SQLs, which you qualify based on the website, email, and social media engagement, PQLs are qualified through SaaS usage. If a person interacts extensively with your tool, it’s easier to convert them into paying customers.
Given the nature of these leads,
“It’s much better to have more PQLs than SALs.”
But in practice, you’ll almost always have more SALs than PQLs. Like with sales accepted leads, your ability to close them depends on timing and how you interact with them.
10. Sales Stage Conversion Rate
The best way to assess the efficiency of your funnel is to perform a sales stage conversion rate analysis.
“The metric shows us the percentage of customers we managed to retain from one phase to another.”
As the prospect moves from MQL to SAL and, ultimately, the PQL phase, you’ll lose a significant amount of leads. Your job as a SaaS brand is to minimize losses by providing a high level of engagement and presenting your tool in the best light.
11. Signups and Activations
Although signups and activations aren’t as important as some other critical metrics on the list, it shows the level of interest in your SaaS products. Among others, it helps us classify the leads and push them down the funnel. Product activation, in particular, is crucial when distinguishing PQLs from the other target audience.
“The number of signups and activations can provide some interesting insights about the business.”
It’s especially important to compare the number of website visitors and the number of activations. When you increase the percentage of visitors who signup for SaaS, this might indicate improvements to your pipeline. It might also suggest higher brand awareness as people don’t have to interact with your website as much before trying out the product.
On the other hand, a lower number of signups shows that people still like the content on your site but don’t have much faith in your marketing automation tool. As you can presume, a high activation rate is a strong indicator of marketing efficiency.
12. Lead Velocity Rate
Lead velocity rate is another important SaaS metric for assessing your revenue growth. It shows how quickly you can generate new leads to your SaaS website, and, as such, it’s a good indication of your pipeline efficiency.
The metric can vary significantly from industry to industry and based on the company life cycle. New SaaS usually grow much faster, which is why they have higher lead velocity rates. Despite being a valuable metric, lead velocity rate doesn’t give you a full picture.
“If you wish to analyze a brand’s performance, you also need to consider conversion rate and lead acquisition cost.”
Depending on the situation, you can get better results by reducing lead acquisition costs or increasing conversion rates. Nevertheless, this doesn’t diminish the fact that a high lead velocity rate is crucial for scaling any business, including SaaS.
13. Sales Cycle Length
This metric shows us how many days it takes to close a lead. The average business sale cycle length is between 6 to 12 months. On the other hand, it takes 84 days for a SaaS business to sell a copy to a lead. Like in other industries,
“the higher value deals usually take more time to close and vice versa.”
According to HubSpot’s study from 2021, it takes 40 days to close a deal worth $5,000 or less. If a contract exceeds $100,000, it takes 170 for the complete sales cycle length. If you wish to calculate your average sales cycle length, you need to use this formula:
The best way to reduce average sales cycle length is by identifying gridlocks, efficiently overcoming objections, increasing brand trust, and creating a customized user experience.
14. Net Promoter Score (NTS)
Net promoter score is a marketing metric that assesses the likelihood that a user will recommend your SaaS. We measure this statistic with tools you can embed on your website or add to your emails. These widgets use 0 to 10 scales, where 10 represents high product satisfaction, and 0 is low.
“The metric differentiates three customer types: promoters, passives, and detractors.”
Clients that give you scores of 9 and 10 are promoters. They’re most likely to recommend your software to others, and they can serve as brand ambassadors.
Passives are users who give you scores of 7 and 8. These clients won’t necessarily promote your brand but won’t damage your reputation. Lastly, detractors range from 0 to 6, and they have a negative impact on sharing your brand messages.
If you wish to calculate your NPS, you should use the following formula:
Like other metrics on the list, you can use NPS for competitive analysis and assess how brand sentiment has changed over a specific time period. Having a positive score signifies high customer satisfaction and vice versa.
15. SaaS Free Trial Conversion Rate
SaaS companies rely on free trials to generate interest. Most companies use a 14 or 30-day model, which gives users just enough time to try the product’s basic features.
“Some companies get 100% of their clients via free trials.”
The average conversion rates can vary significantly depending on whether the company uses the opt-in or opt-out model. With the opt-in model, users don’t have to leave their credit card to start a trial. Conversely, opt-out requires that you leave payment data.
According to UserPilot, the average conversion rate for opt-ins is 25%, while the average conversion for opt-outs is 60%. Although opt-in SaaS gets more new subscribers due to the simpler process, opt-out users are much more serious about the product.
16. Landing Page Conversion Rate
Landing pages are the most important part of our website. Ideally, we should drive as much social and organic traffic as possible to increase our revenues. The landing page conversion rate metric helps us assess our unique offer. We can also use it to analyze the quality of our landing pages, including SEO and CRO practices.
In most cases,
“Low landing page conversion indicates high price or low brand authority.”
Even if you’re offering free trials, the users might be reluctant to try your software as they don’t trust your company. Alternatively, they might be dissuaded by the prices of paid plans.
17. Signup for Paid Conversion
Signup for paid conversion is a metric we mainly use for freemium plans. It tells us how much time it takes for an average user to spend money on our tool. We calculate signup to paid conversion over a 12-month period.
“The metric’s biggest flaw is that it doesn’t consider users that haven’t spent money.”
We might convert users relatively quickly, but we only convert a small percentage of them. In other words, the metric gives us a partial insight into our efficiency. Nevertheless, we can use signup to paid conversion to measure:
- Expected paid conversion
- Assess past acquisition efforts
- The speed at which we convert users
Most importantly, signup to paid conversion is necessary for predicting our cash flow.
18. The number of Active Trials
The number of active trials is a vital metric for freemium plans, but it can also provide some valuable insights for companies that use the paid model.
“Ideally, your company should have as many active trials as possible.”
This shows us that people are genuinely interested in your platform and wish to test it before making a purchase. If you wish to get better insights from these metrics, you need to couple them with free plan conversion rates and the value of the average contract.
19. Monthly Active Users (MUA)
MUA and the number of active trials go hand in hand. In the end, having numerous active trials won’t help your business if no one is using the software. Like the previous entry, we primarily use it to assess the performance of freemium plans.
“Monthly active users metric shows the level of user engagement.”
The general rule is that quality software has many more active users. Of course, the level of engagement will vary from account to account. As a SaaS marketer, you should always try to boost engagement levels to increase the likelihood that a user will purchase some product features.
20. Website Traffic
Website traffic is crucial for assessing the efficiency of any digital marketing strategy. Companies use it to gauge their ongoing SEO marketing campaign, but it can also show us how other marketing teams are performing. For example, we can use it to analyze the performance of our social media, email outreach, and content marketing teams.
“By analyzing Google Analytics data, we can assess how people interact with our brand.”
While not every person that lands on your site is a potential customer, high website traffic is a good indicator of your marketing efforts. If you wish to better understand traffic’s impact on the company, you should also consider conversion rates.
21. Bounce Rate
The bounce rate metric shows us how many people leave a website without clicking on a link. In other words, it’s a metric that shows the percentage of visitors who did a single-page browsing.
A high bounce rate indicates that people aren’t interested in anything else on your site besides the initial landing page. They might’ve arrived on your platform to read a blog post and get a quick answer to their question. As a SaaS marketer, it’s your job to entice them to stay on the site for as long as possible.
Bounce rates vary significantly depending on a site or page type:
- 20% – 45% for e-commerce and retail websites
- 25% – 55% for B2B SaaS websites
- 30% – 55% for lead generation websites
- 35% – 60% for non-commercial content websites
- 60% – 90% for blogs
- 60% – 90% for landing pages
E-commerce sites usually have the highest browsing rates. Visitors who land on their pages commonly check several products as they’re looking for a specific item. Similarly, business people take their time browsing SaaS websites as they usually want to learn more about the brand and its offer before engaging.
22. Customer Engagement
Customer engagement is a SaaS metric that tracks site visitors’ behavior. We can use it to extrapolate various conclusions. Among others, it shows us the level of product and service satisfaction, website design quality, content quality, brand loyalty, and so on.
“Brands should analyze macro and micro website metrics.”
Metrics such as time spent on site, bounce rate, pages per session, and click-through rate demonstrate the users’ satisfaction level. Generally speaking, SaaS brands that have good site indicators usually have higher sales and brand loyalty.
You should try to improve every page on the site and the overall website user experience. While having quality landing pages is crucial for your business’s success, every section of the site can provide some type of benefit.
“Customer engagement can serve as an indicator of customer success.”
Sometimes, people struggle to reach your landing pages or access your content. Low website stats might also indicate website issues or bad CRO practices.
23. Social Engagement
Social engagement is similar to website customer engagement. These metrics show us how people interact with our social media accounts. In particular:
- The number of likes and dislikes
- Thumbnail and link click-through rates
- Saves and downloads, and so on.
Although social media engagement isn’t as important as website engagement, it’s still crucial for brands that invest heavily in SMM campaigns. Social media helps SaaS brands build brand loyalty and strengthen relationships with clients.
24. Subscriber Growth Rate
The subscriber growth rate is especially important for brands that rely on newsletters as a promotional method. Brands also use this metric to measure the efficiency of their social media campaigns.
Increasing the number of subscribers is crucial for improving brand awareness. Having a loyal customer base can provide direct and indirect benefits to your marketing and sales. Depending on the level of engagement, we can consider some of these users as marketing-qualified leads.
Key SaaS Metrics: Last Thoughts
As mentioned in the article, most of these metrics work in unison. We often have to pair a metric with other indicators to attain complete insights.
SaaS KPIs don’t work in a vacuum. They are a bigger indication of the brand’s policies, and we can use them on a micro and macro level. Depending on your marketing strategy and business model, you might assign a higher value to some of them while disregarding others.
What are SaaS marketing metrics?
SaaS marketing metrics are indicators that tell us how our brand is performing. We use them to analyze sales, the number of product signups, customer lifetime value, website performance, and many other things.
Which SaaS metrics are most important?
Some of the most important SaaS metrics are customer acquisition cost, LTV-to-CAC ratio, customer lifetime value, and annual recurring revenue.
What are the three pillars of SaaS?
Besides having a high-quality product, every SaaS should focus on customer acquisition, conversion, and retention. These three pillars are crucial for any successful brand.