Having a product that solves a problem, that has a good user experience and an attractive price is not enough to have a successful business. It is necessary to always be aware of the metrics resulting from all the recorded data to be able to analyze and understand if you are progressing as expected or if your company is stagnant while the competition takes off.
In this article, we present some of the most important metrics to be analyzed and also focus on specific points that, when not considered, hinder reading and distort the results of the analyzes performed.
Lead velocity rate
The first metric is very important to always be clear: the generation of qualified leads, can define the success or failure of your business
Prospecting the right leads is a job that always requires an analysis of who is coming, whether organically or paid, to your SaaS business. Lead Velocity Rate (LVR) is used to understand the progress of qualified lead generation. The idea is to measure the growth of these leads once a month, always comparing with the previous month, and find out if the situation is advancing, regressing, or just stagnating.
If used in the right way, and with the right frequency, it will help you to better understand your company's situation and also give you insights into what you need to do to improve. Real-time monitoring of performance.
Important: Before reviewing this metric, determine what you define as a qualified lead and what lead generation demand is expected by your current strategy.
Lead Conversion Rate
The volume of leads generated is a point of interest for the growth of any business, however, completing it is necessary: conversion efficiency.
The conversion of a lead happens when he starts paying for your product or service, in the case of a freemium product, it happens when the customer chooses to pay for something that he already uses for free, even if limited.
The goal is to convert as many qualified leads into paying customers as possible. Each market area has its own variables to calculate the high, satisfactory and bad rate of this conversion.
The idea is to find out as much as possible about the conversion rates of your competitors and other companies, which, despite not directly competing with your business, are in the same market area.
The billing model can also affect, freemium products and services usually have lower conversion rates for paying customers than the free-trial model for example.
Customer Acquisition Cost
Every business should pay close attention to this metric, as it shows whether you are making money or not (there is also the Monthly Recurring Revenue, more on this metric later on).
When thinking about a SaaS model, two things need to be defined for this metric to make sense:
What is the lifespan of your product for your consumer?
Is there money to build a large customer base in the beginning and profit later?
With the answers to these two questions, the customer acquisition cost will be the amount you spend for each new customer to come along. Yes, people don't become consumers for free, you need to pay for it.
Calculate how much you spend and how many customers you get in a given period, if it is a month, it is the money value divided by the number of customers purchased.
ex: in one month, $2000 was spent on Google ADS, and 200 people were converted into paying consumers, so the acquisition cost per customer is $10.
And use this number to define if the amount charged for the product or service is worth it or is low.
Important: The total amount spent per month for the company to function should not be taken into account in the CAC, only what is allocated for marketing, whether via Google ADS, Social ADS, email marketing, etc.
Monthly Recurring Revenue (MMR)
Here begins the metric that also encompasses the previous one, monthly recurring revenue (MMR) is the company's gross monthly income, not net profit. From this amount will be deducted all expenses to keep the company operating as web services, employees, marketing, and everything else.
To calculate the MMR, if your business is a subscription SaaS, simply put the number of customers x the amount paid for them in the account and you will have your MMR (if the amount is annual, just divide the result by 12).
Satisfied and loyal customers tend to renew their subscriptions and continue using your product, this metric is efficient to show if there is dissatisfaction, whether in the product itself, in the amount charged, or even in the support.
Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a method used to find out how satisfied your consumers are with your product through a score that reveals whether they would recommend your product to other people or simply switch to one that appears to be a little better.
A standard question for the method test is used:
“On a scale of 0-10, how likely are you to recommend us to a friend?
Consumer responses will fall into three categories:
0-6 Detractors: Unhappy customers. They would easily exchange your product or service for another.
7-8 Passives: Moderate satisfied but not enough to promote it. This one in particular deserves attention because it isn't loyal and any other competitor that appears and shows more value than your business, can hook you.
9-10 Promoters: Highly satisfied & Loyal. This type of customer is an enthusiast of your product or service and will help you grow by referring you to others.
The Calculation is % Promoter Customers - % Detractors = Your NPS SCORE.
Imagine a customer satisfaction survey with 10 consumer responses.
0,6 (60% promoters) - 0,2 (20% detractors) = 0,4 x 10 = 40
See the scores:
70 or more: Excellent
50 to 69: Strong but can increase more
49 or less: needs improvement urgently
Below 0: Bad, very bad!
Now that you know the importance of these metrics, practice analyzing them frequently to always improve your SaaS business performance!