Have you ever considered what marketing metrics are the most important for your SaaS business?
How about the metrics that are so vital they make-or-break companies on a daily basis?
A solid understanding of the marketing metrics we’ll discuss today can help you get a better view of your marketing efforts and whether or not they’ve been fruitful. Keeping tight control over your CAC, LTV:CAC, and the other metrics below will help your company grow.
Don’t know what those acronyms mean? Don’t worry, we’ll explain below.
Let’s dive in:
#1 – Customer Acquisition Cost
One could argue that this is among the single most important metrics for a SaaS business to understand – or any business for that matter. The Customer Acquisition Cost (CAC) is the total average expenditure your company must spend in order to gain a new customer or client.
This, as you can imagine, should always remain lower than the lifetime value of the customer, i.e., you paid less to acquire the customer than the revenue generated by the customer. A low CAC is a very good thing indeed.
CAC can be caculated by evaluating your total marketing costs (per month, quarter, or annually) and comparing it to the number of new customers you gained during that time period.
For example, let’s imagine that your marketing costs are 10,000 per month and you generate 20 customers per month. This means that each customer cost you $500 to acquire.
#2 – Ratio of Customer Lifetime Value to Customer Acquisition Cost
As we briefly mentioned above, the ratio of your CAC to their lifetime value is of vital importance.
Abbreviated as LTV:CAC, the Ratio of Lifetime Value to Customer Acquisition Cost is a metric that measures how much income a customer generates over the duration of their working relationship with you and compares it to how much you had to spend to acquire that customer.
Continuing on the example used above, let’s say that you spend $500 to acquire a customer. Their LTV should always exceed $500. If it doesn’t, you’re in the red.
#3 – Time to Payback Customer Acquisition Value
Now that we understand the relationship between Customer Acquisition Cost and Lifetime Customer Value, it’s time that we throw one more very important metric into the mix.
How long does it take for the CAC:LTV ratio to stabilize?
In other words, after you’ve acquired a customer, how many months does it take for them to begin generating positive revenue?
For example, if you’ve paid $500 to acquire a customer and their monthly payment to you for your SaaS is $100, we can extrapolate that the time to “pay back” their CAC is 5 months.
Time to payback CAC is calculated by dividing your customer revenue by their acquisition cost.
#4 – Marketing Originated Customer Percentage
This is a metric that shows what amount of your customer base have been acquired through lead-based marketing.
It’s helpful to understand the Marketing Originated Customer percentage because it can give you an idea of how successfully you’re converting leads into paying customers. This is an excellent way to measure the success of your sales team.
In order to determine this metric, you determine your total new customers in a given time period, usually a month. You then figure out how many of those customers started as a lead.
By subtracting the total number of lead-based customers by your overall total new customers, you can determine how many were acquired from leads and how many were not.
#5 – Marketing Influenced Customer Percentage
This metric describes the number of customers that interacted with your marketing (or sales team) during the buying cycle. To determine this metric, you again divide your total new customers that were influenced by your marketing subtract that figure from those who did not.
Marketing Influence Customer Percentage helps you understand your overall marketing influence and how well it’s contributing to converting leads into sales. Needless to say, the higher the percentage of customers that interacted with your marketing and ultimately became paying customers, the better.
How to Rocket-Fuel Your SaaS Marketing
What would it mean for your business if the metrics we discussed here today started to skyrocket?
If you’d like to learn more about marketing your SaaS business, the team of experienced experts at Birst Group have the insider scoop you need to get an edge over your competition. With industry-leading techniques and the latest technologies, we can help you connect with your target audience like never before.
To learn more about how we can help enhance your SaaS marketing efforts, please feel encouraged to contact ustoday.