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Matrix of Metrics for SaaS…

It can be a crazy matrix of metrics to pass through when defining your success, or a better track to start with. Here is a quickfire framework and some more that have helped me in weaving past the spider web of graphs and piecharts.

Metrics Categories — Metrics can broadly be categories into 3 categories —

  1. Feature Related Metrics (FRM) — How many people are using the feature/app, how many people are engaged with it, and how many are dropping out of the engagement.
  2. Growth Related Metrics(GRM) — How many people are downloading the app, how many people are referring the app to their friends, and what is the feedback of the app.
  3. Money Related Metrics(MRM) — How much revenue we have made from download if it is a SAAS, or if it is Freemium then how much money have we made from in-app purchases.

Drilling down further on what would these metrics look like, we need to understand what they are telling us. They are telling us how successful your feature/product is, and their usage will differ with the industry you are in, so understand what industry you are in — are you a SaaS company, Social Media company, Ad tech company, FMCG, etc….

For this article and my sanity, I will concentrate on SaaS.

Metrics for SaaS — Software as a Service — think Salesforce, think Jira, think Netflix think all those software mostly hosted on cloud and you pay annual/monthly/weekly subscription. These can be B2B(Salesforce, Jira) or B2C (Netflix).

To understand their metrics we need to understand what success might look for them — SaaS companies thrive on continuous growth in subscription, i.e. ARR, but that is just the revenue side of it, what actually drives it?

Product Market Fit to start with, that measures if the product solves a specified problem of the users and will have those early adopters.

User Engagement, which tells the company how users are engaging with the product, what are they liking (double down on it) and what are they not (figure out what is missing from your product).

Annual Recurring Revenue, in a subscription model you don't sell once, but you sell the potential of software at the start, and after onboarding, you sell the performance of the software to generate recurring cycles of revenue and hope it also grows at the same time.

If you look at these three measures of success they do tie to our Feature, Growth, and Business metrics model.

The next step that comes is which metrics to choose -

In a sea of metrics, there are some of the metrics that make sense regardless of your actual business model.

Feature Related Metrics

  1. DAU — Daily Active Users(FRM) — measurement of users that are active in your product each day. While setting these metrics it is important to have sub metrics as well, sub metrics like — which country the users are accessing from, which device they are using to access, which client they belong to?. A trick in DAU is if you want to make it somewhat of a north star, you can define it as what exactly is that activity you want to monitor.
  2. Users completing a critical path(FRM)— in defining product-market fit, you will have that one problem statement, while there may be many features to supplement users in their journey, there will be one path that would lead them to the solution of that particular problem. It is important to know if the software is working as intended or is it distracting people from the actual solution, or is there an unknown problem that the software is solving, all those answers can be answered with this.
  3. The time it takes to complete the critical path(FRM) — the reason this has a separate bullet point is, in most cases with your software you don't want people to spend ages and trying to figure out what is happening. You need an effective and simple design that breaks all blockers to the solution. The only thing to remember here is the extreme data points, spending too little time is as bad as taking too much time, so have a rolling average or median to benchmark against and find out the possibilities to improve the path.
  4. Number of Downloads(GRM)— or a number of users that should be using your software. This tells you the total number of Sales has sold, from whichever channel. If you compare this with DAU you can find who is not using your software, why are they not using it, how can you re-onboard them?
  5. Net Promoter Score (GRM) — this is a standard as far as growing companies are concerned. It works on the basis that if your product is good people will be your advocate and sell to other users. There are many ways this can be measured, but monitoring is a bit tricky as it has to be a healthy mix of industry/stage benchmarking and intuition. So continuous development of this metric is very important to get a grasp of it.
  6. Dropout/Feature Churn (GRM) — this is something known as a counter metric and can be used to identify the blockers that your software poses in bringing value to your users. Dropout can be calculated as the Number of Downloads/day — DAU to find out if there is something wrong with your onboarding, or dropout in critical paths, to find out if a feature is upsetting your users.
  7. ARR (MRM) — Annual Recurring Revenue, although it is an overall, potential North Star, if you are in an early-stage startup it does makes sense to track the money coming in. This can also be rehashed for Freemium models with revenue via in-app purchases.

Assuming in setting up the metrics you involved your boss and team, and have got the buy-in from all, if not then that is how you can make sure that the metrics are well thought off, and communicated well.

There are a couple of more things that we need to discuss, mostly around how do you create hierarchy in metrics, how do you communicate company-wide, what frameworks you can use to do that, and how do you monitor with constant adaptation.

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Umang Shankar

14 years of understanding users, business, and products. Love AI as much as UX and want to see how either of them can match to provide a better world for all.