The SaaS surge in recent years has been the perfect primer for 2020’s work from home boom, with at least 30 percent of employees predicted to remain remote after the pandemic is over. With the right SaaS metrics and processes in place, you have your hands on valuable insight to maintain profitable, long-lasting relationships with your customers to ensure they live long and prosper.
In-person customer interactions may seem like yesteryear at this point, but the viability of a business is still reliant on a strong connection with customers. And that success starts with your customers’ success. Every SaaS company should be able to predict customer success to better manage revenue and profit. To demonstrate the return on investment (ROI) of your hard work, measuring customer success metrics is a must!
SaaS Metrics to Track Customer Success
When businesses invest time and energy into tracking customer success and understanding what’s working and what’s falling short, it helps to grow your product and keeps your customers thriving.
SaaS companies run a unique business model that is much more customer-focused than more traditional business models. This means they need a unique set of metrics to make sure that their business is on track and growing in a sustainable way.
Using SaaS metrics to figure out how well your users understand the full value of your product will help to answer some key questions. Are they happy with the way it works? Are they unaware of certain functionalities? Or are they just straight-up unsatisfied with the results they’ve had? These insights can provide valuable information on how successful and satisfied your users are with your product, which can help steer your roadmap going forward and prevent churn down the line.
Here are 5 key SaaS metrics and their formulas you should be focusing on to maximize the value for your customers in 2021:
- Customer Churn Rate– Calculates the number of customers a business lost within a given time period. It’s a metric the company as a whole should care about. Marketing, sales, and service departments should assess the data from churned customers for noteworthy insights.
Churned Customers in Period / Total Customers at Start of Period
- Customer Retention Cost– Helps determine how much you’re spending to retain a customer. Retention figures can be calculated using total purchases over a period mitigated by retention expenditures, churn, acquisition costs, and general overhead. The good news is that the costs associated with repeat business are usually significantly lower
# of Renewed Customers / # of Contracts Up For Renewal
- Net Promoter Score- This is the general health indicator for the business. It’s the percentage of customers rating their likelihood to recommend a company, a product, or a service. Getting customers to advocate for the business and share their success stories drives down the cost of acquisition (CAC) and supercharges the business.
(Number of Promoter Scores/Total Number of Respondents) – (Number of Detractor Scores/Total Number of Respondents)
- Customer Lifetime Value– The average amount of revenue a customer generates during their entire relationship with the company. It must account for customer acquisition costs (CAC), ongoing sales and marketing expenses, operating expenses, and the cost required to manufacture the product and services the company is selling. This metric is a great way to assess customer profitability in knowing how much you should be spending on customer acquisition.
Average Value of Sale × Number of Transactions × Retention Time Period × Profit Margin
- Renewal Rate- Measures the percentage of customers who renew their subscription at the end of the subscription period. A high Renewal Rate is indicative of customer success since it implies stable, recurring revenue from current customers. As a result, it allows you to focus more attention towards acquiring new customers.
(Dollar Value of Renewed Contracts + Growth) / Total Dollar Value of Contracts Up For Renewal.
The world of SaaS is one of engagement and collaboration. You want customers to be able to confidently move through your system and interact with it in a successful way. Use SaaS metrics for benchmarking and finding new ways to constantly improve.
So here’s to 2021: staying accurate, agile, and measuring with purpose.
“If you cannot measure it, you cannot improve it” – Lord Kelvin