This is Part 2 of my epic four-part series, taking a deep-dive into SaaS metrics. I’ll be covering KPIs for Growth, Marketing, Sales and Customer Success, and offering formulae, explanations and expert opinions for 50 essential metrics.
Section 2: Marketing Metrics
Rapid, large-scale customer acquisition is a pre-requisite for growth, and these marketing-specific SaaS metrics are designed to help you understand and improve your ability to generate new visitors, leads and customers.
As well as providing insight into customer acquisition, these SaaS metrics will help determine the quality of your leads. After all, marketing and sales shouldn’t exist in separate silos, and website visitors and leads don’t mean a thing unless they turn into paying customers.
With both functions having a crucial (and overlapping) role to play in achieving growth, it’s important to choose metrics that cover both camps.
Let’s say you have a goal of 100 new customers this year. In order to reach those 100 customers, you might need 200 engaged, ready-to-buy leads: after all, not everybody you start a conversation with ends up a paying customer.
Working backwards, to generate those 200 sales-qualified leads, you might need to collect the contact details of 400 people, some of whom will have a serious interest in your products, while others will require a bit more time to reach the same place. To generate those 400 leads, you might need 2,000 website visitors.
Understanding how this progression through the sales funnel happens allows you to predict the number of visitors and leads you’ll need to actually hit your sales targets, and gives direction to your marketing strategy.
1) Unique Website Visitors
Unique website visitors refers to the number of distinct people that visit your website over a particular period of time (commonly a month).
Visitors come in all shapes and sizes, from sales-ready buyers to sceptical researchers (and even a few people who’ve ended up on your site by mistake). In order to determine which visitors are which, and identify potential customers, it’s essential to learn more about them.
2) Email Subscribers
Email subscribers are visitors who’ve signed up for your newsletter, mailing list or blog updates. Though they’ve parted with their contact details, they haven’t shown any indication of sales intent, or interest in your SaaS product, making them distinct from leads.
Leads are visitors that have filled out a contact form on your website, usually in exchange for a download or free resource. In doing so, these visitors have parted with more than just their email address — often submitting their name, job title, business name or website address.
4) Marketing Qualified Leads (MQLS)
These are leads that fit the appropriate demographics of a customer, and demonstrate interest in your solution, either by viewing several product-focused pages on your website (like case studies or pricing pages), or engaging with more product-focused content offers.
5) Sales Qualified Leads (SQLS)
These are leads that meet the MQL qualification criteria, and have demonstrated sales-readiness — usually by requesting a sales conversation or free demo.
Opportunities are SQLs that have been handed over to your sales team, vetted, and deemed a genuine sales opportunity, kicking-off the sales process.
7) Paying Customers
These are people that have signed on the dotted line and committed to paying for your service for a particular length of time. Though more of a sales metric, it’s important to track how marketing-generated leads convert into paying customers, in order to assess the overall performance of your marketing strategy.
8) Free Trials & Demo Requests
Many SaaS products use free trials and demos to engage prospective customers, and it’s important to understand where these fit into the sales funnel.
Free Trial users are usually counted as MQLs: signing-up for anything “free” requires relatively little commitment from users, and simply kicking the tyres of your product provides no indication of sales intent.
Some SaaS products can be more complex, and require custom set-up before use. This often means that free trials aren’t viable, and instead, running product demos is a more effective way of proving out the value of your product.
Getting on the phone and sitting through a demo requires a greater commitment from your visitors, so demo requests are usually regarded as SQLs. Though the distinction isn’t always clear, it’s important to choose a simple, consistent rule for qualification, and stick to it.
Understanding Conversion Rates
There are two ways to generate more customers: increasing the number of people entering the sales funnel, and improving the rate at which visitors turn into leads, and leads turn into customers.
Though lead and customer acquisition should always be a priority, it’s often possible to generate more leads and customers, at a lower cost, by improving your conversion rates. The first step in improving conversion rates is to track them at crucial points of your sales funnel.
9) Visitor to Lead
The rate at which website visitors convert into leads. Tools like pop-ups, email subscriptions, free downloads and landing pages can all be used to convert anonymous visitors into identifiable leads, and it’s important to optimise this conversion rate over time.
10) Lead to Customer
This is an overarching conversion rate that looks at the rate at which leads convert into customers. Generating lots of poor-fit leads will lead to an extremely low conversion rate, and vice versa, so this can offer a very revealing insight into the quality of the leads you’re generating.
11) MQL to SQL
This shows the rate at which marketing-qualified leads turn into sales-qualified leads, and it can provide useful insights into lead quality and the performance of your sales development reps.
12) Free Trial to Paid Customer
This is the rate at which free trial users become paying customers. Small improvements to this figure will generate big improvements in revenue, so it’s important to continually optimise your free trial onboarding process.
13) Marketing Spend:Average Contract Value
The ratio of your marketing spend to Average Contract Value (which I’ll go into below) is useful for tracking how expenditure on marketing channels translates into sales revenue.
14) Month-on-Month MQL Growth Rate
Month-on-Month MQL Growth Rate refers to the rate at which Marketing Qualified Leads are growing over time.
For example, if we generated 100 marketing qualified leads last month, and 110 this month, we’d have month-on-month MQL growth of 10%.
15) Month-on-Month SQL Growth Rate
As well as tracking the MQL growth rate, we can also track the rate of growth of sales-qualified leads (SQLs):
For example, if we generated 50 sales qualified leads last month, and 60 this month, we’d have month-on-month SQL growth of 20%.
Stay tuned for: The Definitive Guide to SaaS Sales Metrics.
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