So you’ve built an amazing SaaS product and now you’re ready to unleash it on the world. Congrats! But how do you know if your product is actually succeeding? Sure, you have a vision of success in your head, but you need to define some key metrics to track to make sure your product is gaining traction and keeping customers happy.
As an entrepreneur, it’s easy to get caught up in the excitement of launching your product and forget that the real work is just beginning. You need to establish benchmarks to work towards and closely monitor some key indicators of success. We’re talking beyond just sales and revenue. Things like activation rates, churn rates, customer satisfaction, and more.
In this guide, we’ll walk through the key SaaS metrics you should be tracking to gain valuable insights into how your product is performing and make sure you’re achieving sustainable growth. Because at the end of the day, data-driven decisions will be crucial to the success of your business. So roll up your sleeves, log into your analytics platform of choice, and let’s dive into the metrics that matter for your SaaS product.
Identify Your Key Metrics for Tracking SaaS Product Success
To know if your SaaS product is succeeding, you need to identify the key metrics that matter most. Some of the top metrics to track include:
Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR): This shows how much consistent income your subscriptions are generating. Aim for steady growth month over month and year over year.
Churn rate: The percentage of customers that cancel their subscriptions. Lower is better here, so work to keep people happy and engaged. If churn creeps up, it’s time to investigate why.
Customer Lifetime Value (LTV): How much an average customer spends during their time with you. The higher the better, as it means you can afford to spend more on acquiring new customers. Calculate LTV versus your customer acquisition cost to ensure you’re making a good profit.
Growth: Track new signups, active users, page views, time on site, social media followers, and any other metrics showing how you’re expanding. Strong, sustained growth is key.
Engagement: See how often people use your product. Lots of logins, time spent in-app, features used, and tasks completed mean you’ve built something people want and need. Low engagement signals the opposite and requires improvement.
By regularly reviewing these SaaS metrics, you’ll gain valuable insight into how your product is performing, catch any dips early, and be able to make data-driven decisions to optimize success. Keep at it, learn from the numbers, and you’ll soon be growing by leaps and bounds!
Measure Monthly Recurring Revenue (MRR) and Churn
To know if your SaaS business is on the right track, you need to measure the metrics that really matter. Two of the most important are monthly recurring revenue (MRR) and churn rate.
MRR refers to the revenue you can count on each month from subscribers. It’s calculated by multiplying your monthly subscription fee by the number of customers. MRR is key because it shows how much cash flow your business is generating to fund growth. Aim for steady MRR growth month over month.
Churn rate measures how many customers you lose in a given time period. Lower is better.You can calculate monthly churn rate by dividing the number of canceled subscriptions in a month by your total number of customers at the start of that month. An “acceptable” churn rate is around 5% per month, but lower than 3% is ideal.
To reduce churn, focus on keeping your customers happy. Send surveys to get feedback, address any issues quickly, and improve your product. You should also analyze why people are canceling to fix any holes in your customer experience.
Tracking MRR and churn is how you know if your SaaS is succeeding or struggling. But don’t just monitor the numbers – take action to positively impact them each month. Offer discounts and promotions to boost MRR. Improve your product and support to decrease churn. The effort will pay off with a thriving, sustainable business.
Monitor Customer Acquisition Cost (CAC)
Track New Customer Acquisition
To determine if your SaaS product is gaining traction, monitor how many new customers you’re acquiring and at what cost. Calculate your customer acquisition cost (CAC) by dividing your total sales and marketing expenses by the number of new customers in a given period. For example, if you spent $120,000 over 3 months and gained 400 new customers, your CAC would be $300 ($120,000 / 400 customers).
Aim for a CAC that’s significantly less than the lifetime value of a customer. If your CAC is higher, you’ll need to make adjustments to bring in new clients more efficiently. Some ways to lower your CAC include:
Focus your marketing efforts on the channels that drive the most new signups. Double down on the platforms, content, ads and partnerships that resonate most with your target audience.
Optimize your conversion funnel by making it as easy as possible for visitors to become trial users or paying customers. Ensure your messaging, calls-to-action and signup process are clear, compelling and streamlined.
Target high-quality leads that match your ideal customer profile. Don’t waste resources chasing after prospects unlikely to convert or renew.
Refine your onboarding process to increase free trial or first-month retention rates. The more customers you keep after acquisition, the lower your overall CAC will be.
Renegotiate with partners or agencies to improve your cost per acquisition. Look for ways to boost lead volume or conversion rates within the same budget.
Keeping a close eye on your CAC and making ongoing improvements to new customer generation is key to scaling your SaaS business in a sustainable way. With regular monitoring and optimization, you can achieve steady growth at an efficient cost.
Track Customer Satisfaction and Net Promoter Score (NPS)
To really understand how your SaaS product is performing, you need to measure customer satisfaction. Two of the best ways to do this are through customer surveys and calculating your Net Promoter Score or NPS.
Customer Surveys
Send out regular surveys to get feedback directly from your customers. Ask questions like:
How satisfied are you with our product?
How likely are you to recommend us to a friend or colleague?
What features or improvements would you like to see?
Review the responses and look for trends. See what you’re doing well and where there’s room for improvement. Then take action on that feedback. Your customers will appreciate that you’re listening.
Calculate Your Net Promoter Score (NPS)
Your NPS is a simple measure of how willing your customers would be to recommend your product or service to others. To calculate it, send out a one-question survey:
-On a scale of 0 to 10, how likely are you to recommend [product name] to a friend or colleague?
Responses of 9 or 10 are “promoters,” 7 or 8 are “passives,” and 0 to 6 are “detractors.” Subtract the percentage of detractors from the percentage of promoters to get your NPS. For example, if you have 40% promoters, 50% passives, and 10% detractors, your NPS would be 30.
The higher your NPS, the more loyal and satisfied your customer base. A positive score means you have more promoters than detractors. Track your NPS over time to see how well you’re meeting customer needs and make improvements to your product, marketing or customer service based on customer feedback.
Monitoring customer satisfaction and your Net Promoter Score are two of the most important metrics for measuring the success and growth of your SaaS product. Paying close attention to these KPIs will help ensure your product meets customer needs so you can build a loyal customer base and a thriving business.
Analyze Product Usage and Engagement
To determine if your SaaS product is successful, you need to analyze how customers are using it and how engaged they are. Some of the key metrics to track include:
Usage Frequency
How often are customers logging in and using your product? If usage is high, that’s a good sign they find it valuable. Check things like:
Daily/weekly/monthly active users: The number of unique users who log in and interact with your product over a time period. Aim for these numbers to be steady or increasing.
Session duration: The average length of time users spend in your product per login. Longer session times mean higher engagement.
Feature adoption: See which features are being used the most. Focus development efforts on improving and expanding high-usage features.
User Engagement
Engaged customers are happy customers. Look at:
In-app messages and notifications: Track open and click-through rates to see how users engage with your messaging. Optimize content and targeting to improve rates over time.
Social shares: The number of times content from your app is shared on social media. Higher shares indicate users find your content valuable and share-worthy.
NPS or CSAT scores: Net Promoter Score (NPS) or Customer Satisfaction (CSAT) surveys provide direct feedback on how your customers feel about your product. Aim for scores of 8 or above out of 10.
Churn rate: The percentage of customers who cancel their subscription over a time period. Lower churn means higher satisfaction and engagement. Aim for less than 5% monthly churn.
Conversion Metrics
Finally, see how well your product converts casual users into long-term customers through:
Free trial conversion: The percentage of free trial users who convert to paying subscribers. Shoot for at least 30-40% conversion.
Upgrade conversion: The percentage of customers who upgrade to a higher-tier subscription plan. Higher upgrade rates show your product’s ability to grow with customers over time.
Tracking and optimizing these key metrics will help ensure your SaaS product is delivering value, keeping customers engaged, and continuing to grow and succeed. Focus on the numbers, listen to your users, and make improvements to build the best product experience.
Conclusion
So there you have it, the key metrics you need to be tracking to measure the success of your SaaS product. While it can feel overwhelming with so many numbers to monitor, focus on the ones that really matter: churn rate, monthly recurring revenue, customer acquisition cost, lifetime value, and net promoter score. Keep a close eye on these, optimize where needed, and your SaaS business will be thriving in no time. Remember, data is only as good as the insights you gain from it and the actions you take as a result. Spend time analyzing the numbers, understanding trends, and making changes to improve the customer experience. Do that, and you’ll build a sustainable, scalable SaaS product that stands out in the crowded market. Keep up the good work!
