Since its launch in 1985, Microsoft Excel has, well, excelled. In 2011, Office 365 took Excel from disc to cloud, popularising Software as a Service (SaaS). Nowadays, SaaS companies are everywhere — Dropbox, Xero and even we at Tability offer subscription-based services that users can only access online.
The key to success in the SaaS industry lies in prioritising the customer by making the software user-friendly and constantly improving. And what better way to determine success than with metrics?
Metrics provide SaaS companies with the tools they need to progress. On that note, we’ve compiled 10 key metrics in SaaS to give your business a competitive edge.
Benefits of using SaaS metrics and KPIs
For SaaS businesses, adopting KPIs and Success Metrics is a critical factor in driving growth and staying ahead in a competitive landscape. These metrics play a pivotal role in enabling performance measurement, facilitating informed decision-making, and optimizing strategies. By embracing KPIs and Success Metrics, SaaS businesses can proactively assess their performance, identify areas for improvement, align their goals, and continuously innovate to meet evolving market demands, all while ensuring sustainable success.
Here are some of the benefit:
- Drive growth and competitive advantage
- Measure performance effectively
- Make data-driven decisions with confidence
- Optimize strategies for maximum impact
- Enhance customer experiences and satisfaction
The 10 SaaS KPIs and success metrics
#1 Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue measures the predictable and recurring revenue generated by the SaaS business within a month. It provides a clear view of the revenue stream and is crucial for assessing business growth and stability.
How to get this KPI:
- Stripe
- Chargebee
- Zuora
#2 Customer Acquisition Cost (CAC)
Customer Acquisition Cost calculates the average cost incurred to acquire a new customer. It helps evaluate the effectiveness of sales and marketing efforts, ensuring efficient allocation of resources.
How to get this KPI:
- HubSpot
- Google Ads
- Salesforce
#3 Churn Rate
Churn Rate measures the rate at which customers cancel or unsubscribe from the SaaS product or service. It helps identify customer retention issues and guides strategies to enhance user satisfaction and reduce churn.
How to get this KPI:
- Baremetrics
- ProfitWell
- Recurly
#4 Customer Lifetime Value (CLTV)
Customer Lifetime Value predicts the net revenue a business can expect to generate from a customer over their entire relationship. It assists in understanding the long-term value of customers and guides customer retention strategies.
How to get this KPI:
- Kissmetrics
- Clevertap
- HubSpot
#5 Monthly Active Users (MAU)
Monthly Active Users measures the number of unique users who actively engage with the SaaS product or service within a month. It provides insights into user engagement, product adoption, and customer satisfaction.
How to get this KPI:
- Mixpanel
- Amplitude
- Pendo
#6 Customer Satisfaction Score (CSS)
Customer Satisfaction Score assesses the satisfaction level of customers with the SaaS product or service. It helps identify areas for improvement, enhance customer experiences, and foster long-term customer loyalty.
How to get this KPI:
- Zendesk
- SurveyMonkey
- Qualtrics
#7 User Conversion Rate
User Conversion Rate measures the percentage of users who complete a desired action, such as signing up for a trial or making a purchase. It helps evaluate the effectiveness of conversion funnels and guides optimization efforts.
How to get this KPI:
- Google Analytics
- Optimizely
- Hotjar
#8 Average Revenue per User (ARPU)
Average Revenue per User calculates the average revenue generated by each customer or user. It provides insights into monetization effectiveness, customer value, and revenue growth potential.
How to get this KPI:
- Stripe
- Chargify
- Zuora
#9 Customer Retention Rate
Customer Retention Rate measures the percentage of customers who continue to use the SaaS product or service over a specific period. It helps gauge customer loyalty, assess the effectiveness of retention strategies, and drive long-term growth.
How to get this KPI:
- HubSpot
- Salesforce
- Mixpanel
#10 Net Promoter Score (NPS)
Net Promoter Score measures customer loyalty and satisfaction by gauging their likelihood to recommend the SaaS product or service to others. It provides insights into customer sentiment and helps drive referral growth.
How to get this KPI:
- Delighted
- Promoter.io
- Wootric
How to use SaaS metrics with OKRs
To maximize the impact of SaaS initiatives and drive organizational success, it is essential to combine your KPIs with Objectives and Key Results (OKRs). While OKRs provide a framework for setting ambitious goals and outlining desired outcomes, KPIs offer the necessary metrics to track progress and evaluate performance.
Here's how to effectively integrate SaaS KPIs with OKRs:
- Align KPIs with OKRs: Select measurable KPIs that directly contribute to achieving the desired outcomes outlined in the OKRs.
- Set ambitious targets: Establish specific and challenging targets for each KPI to drive continuous improvement aligned with OKRs.
- Monitor and track progress: Regularly monitor and track the performance of KPIs in relation to the corresponding OKRs.
- Analyze and evaluate results: Analyze the data collected from KPIs to evaluate the effectiveness of initiatives in achieving OKR outcomes.
- Make data-driven adjustments: Utilize insights from KPIs and OKR progress to optimize strategies, resource allocation, and interventions for better alignment and progress towards organizational goals.
Best tools to track OKRs with KPIs:
- Tability
- Google Sheet
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