Facts and figures are no substitute for visionary leadership and big picture analysis—but they do form the building blocks of intelligent, strategic decision making. Data-driven SaaS and MarTech leaders rely on certain metrics to inform their marketing efforts, adjusting the four P’s of marketing (Price, Product, Promotions, and Placement) based on what the data tells them.
If you’re a leader in the MarTech space, here are seven essential metrics we recommend you track…
Customer Acquisition Cost
Customer acquisition cost is the total cost for acquiring a new customer, and tracking your average cost per acquisition will help inform your marketing and advertising strategies. An acceptable cost per acquisition, of course, will vary depending on your average selling price and Customer Lifetime Value (see below). You’ll also want to consider your current level of funding and your burn rate, since you don’t want to run out of money before becoming profitable (or winning a new round of funding at the very least).
Average Selling Price
Average Selling Price (ASP) is derived by simply dividing your total sales revenue by the number of products sold. For example, if you sold 100 annual software subscriptions last year to produce $100,000 in total revenue, your average selling price per contract is $1,000.
Average Selling Price is an important metric for determining your approach to hiring Sales staff, Customer Service reps, and Customer Support staff. The bigger your ASP, the more money you can spend on outside Sale reps to have them wine and dine potential customers (if that’s part of your business model). A higher ASP also means you can, and probably should, spend more money on Customer Service reps to create a smooth onboarding process. Lastly, a high ASP often means live, highly-trained Customer Support reps to address any end-user issues.
By contrast, a low ASP implies a lower-touch sales, onboarding, and support experience—with greater automation and self-help features.
Average Sales Cycle
Sales cycle length tends to be closely related to average selling price, since higher-priced products tend to have a longer sales cycle. It makes sense if you think about it in your everyday life. You’ll undoubtedly spend more time thinking about your purchase when buying a new car than you would buying a tube of toothpaste—even if you’re obsessed with oral hygiene.
Just like ASP, average sales cycle length will inform how much you spend on your sales efforts. The longer the sales cycle, the more money you’re likely to spend hiring sales staff and training them to understand what is likely a complex and nuanced product (or suite of products).
Customer Lifetime Value
Customer Lifetime Value (CLV) is the total value a customer produces in their entire lifetime as your customer. Average CLV is an important benchmark because once you know what it is, you can make an effort to improve and track it. The more you increase your CLV, the more profitable your business will become—since acquiring a new customer is up to 25 times more expensive than retaining one.
Combining an excellent product with a seamless User Experience (UX) goes a long way toward increasing CLV, and you can achieve that by collecting Voice of the Customer (VOC) data in the form of Net Promoter Score (NPS) and Customer Effort Score (CES) surveys. We’ll cover both these metrics at the end of this list.
READ MORE: SaaS MRR: It’s Much More Than Monthly Recurring Revenue
Churn measures the percentage of users who stopped using your product within a specific time frame. Let’s say you wanted to measure your churn rate for the previous quarter, for example. If you started with 1,000 customers and only 900 of those customers remained with you at the end of the quarter, your churn rate would be 10%.
1,000 – 900 = 100 Lost Customers
100 ÷ 1,000 = 10% Customer Churn
This example calculates churn as a percentage of customers lost, but you can also calculate churn in terms of revenue. If you do that, you’ll sometimes end up with a negative churn. Negative churn a good thing because it means you’re gaining revenue from that subset of customers faster than you’re losing it.
How does a negative churn rate happen? If existing customers start spending money on new features and upgrades, they can counteract the negative churn from customers downgrading or closing their accounts.
Net Promoter Score
Net Promoter Score (NPS) is a metric created by Bain & Company, and it has become a favorite among SaaS companies. NPS asks customers to measure how likely they are to recommend your brand to a friend or colleague on a scale of 0-10, and each respondent is then grouped into a category based on that response.
- Customers who responded 0-6 = Detractors
- Customers who responded 7-8 = Passives
- Customers who responded 9-10 = Promoters
To calculate your NPS, take the percentage of Promoters and subtract it from the percentage of detractors. So, if you look at a sample size of 100 (for the sake of simplicity) and:
- 50 customers rated you 9-10 (Promoters)
- 25 customers rated you 7-8 (Passives)
- 25 customers rated you 0-6 (Detractors)
Your Net Promoter score would be 25.
50% promoters – 25% detractors = 25 NPS
The beautiful thing about NPS is that it’s gained such popularity in marketing that you can find published data on other companies’ NPS scores. For example, Apple has an NPS that’s ranged from 63 to 72 in recent years (an impressive NPS, confirming that their fans really are as loyal as they seem).
NPS provides a benchmark for improvement, but it also provides Voice of the Customer (VOC) data to help you improve. That’s because every legitimate NPS survey comes with a follow-up question, asking customers what they loved (or what could be improved) about the experience. Use this open-ended data to explore ways you can improve your products, service, and marketing, and to have Customer Support reps (or their managers) follow up with specific customers regarding their negative complaints.
Customer Effort Score
Customer Effort Score (CES) is a metric that evaluates how much effort customers expend trying to do things like:
- Use a specific feature
- Get help from Customer Support
CES is a valuable metric because, as studies have shown, simplifying the customer experience has a bigger impact on your churn rate and overall CLV than delighting your customers.
Don’t get me wrong—wowing your customers will improve their experience and help you stand out in a crowded market, but it’s not nearly as important as making their lives easier.
After all, isn’t that why we use SaaS and MarTech products in the first place? To solve a problem and make our lives easier? Measuring (and working to improve) your CES will help you solve problems more effectively and boost your bottom line.
Making the case for improvement
All these metrics affect one another, and a solid MarTech leader needs to synthesize all this data to construct a coherent marketing strategy. This includes creating a viable case to fellow leaders, investors, and even rank-and-file employees for why you do what you do—since buy-in is integral to success.
You may have an intuitive sense of where to set your product pricing, how to market your products, how to keep your customers, and how to make the experience as seamless as possible. These seven metrics allow you to test your intuitions, benchmark your success, continually improve, and get your entire organization on the same page. In other words, if you make these seven metrics a key part of your marketing strategy, you’ll set your business up for success.