Last editedAug 20222 min read
The subscription-based SaaS business model requires more in-depth data analysis than traditional businesses because payment for the product does not arrive in full at the moment of purchase. So it is vital to comprehend SaaS startup metrics and how they help you understand the health of your business.
Here is a quick guide to the top 6 key metrics for SaaS businesses.
User engagement metrics
Understanding your customers’ behaviour is one of the most important SaaS startup metrics. You need to know how they are accessing your site, why some are signing up and why others are bouncing. The three key SaaS metrics are:
You can split traffic metrics into two parts: organic traffic representing visitors who find your website through a search, and paid traffic coming to your website via a pay-per-click advert. Other sources of paid traffic include sponsored content and social media adverts.
For SaaS businesses, seek deeper insights into the traffic numbers, such as the average time spent on your website and how many pages they visit while there. Also log the number of repeat visits and any direct engagement such as sign-ups or downloads.
Find out how many leads are turning into paying customers, and break these leads up into categories. A lead might visit your website via a link in a newsletter or from your blog, or they might have filled out a form to receive something free. As an SaaS business, you may also have leads who are using part of your free-to-use product but have yet to purchase.
Knowing which leads are dominating your conversion rate lets you know where to focus your attention.
Similar to the conversion rate, the activation rate gives useful insight into which parts of your website or service are generating activity. The activation rate represents the number of users taking a specific action. User behaviour analytics and user journey mapping then tell you which actions correlate to conversions, SaaS subscriptions or other useful actions.
Once you understand which actions are resulting in more conversions, optimise your website so users are introduced to the valuable actions earlier on in the user journey.
Customer retention metrics
Converting a lead into a purchase is great, but the real money lies in retaining customers for repeat business. There are a few ways to measure this key SaaS growth metric, with these three top metrics:
retention and renewal rates
customer churn rate
feedback and CSATs
Retention and renewal rates
The retention rate refers to the number of customers who stay with you after their initial purchase, measured for a specific period. The renewal rate refers to the number of customers who renew their subscription, usually calculated as a percentage of those who are due for renewal.
Customer churn rate
As well as measuring the customers you keep, measure the number you lose as well. This is the customer churn rate and is calculated as the number of customers who abandon your service within a specified time frame.
The time frame involved will be determined by how often your customers are expected to purchase. Measure monthly subscriptions each month, but measure bimonthly or quarterly subscriptions annually.
Feedback and CSATs
Asking customers to rate their experience helps improving their experience hugely. Any kind of feedback is useful, and specific surveys at key moments can provide detailed insight while also letting your customers know that you plan to improve their experience.
One of the best key moments is shortly before they are due to resubscribe.
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