Top 15 SaaS Marketing Metrics You Need to Track [+ Formulas]

Optimize your ROI with SaaS marketing metrics: key indicators that measure the effectiveness of your marketing efforts in driving business growth.

Here, you’ll find the top 15 SaaS marketing metrics to track:

1. Customer acquisition cost (CAC)
2. Customer lifetime value (CLV)
3. Marketing qualified lead (MQL)
4. Sales qualified lead (SQL)
5. Unique visitors
6. Activations
7. Lead to customer rate
8. Lead velocity rate
9. Freemium conversion rate
10. Customer churn rate
11. Revenue churn
12. Customer engagement
13. Net promoter score (NPS)
14. Annual recurring revenue (ARR)
15. Monthly recurring revenue (MRR)

We also cover:

• What are the top SaaS marketing metrics to track?
• How do you track marketing metrics?
• What should you do with the data?
• The importance of SaaS marketing metrics

The software-as-a-service (SaaS) world is brimming with potential metrics to track. But the goal isn’t just to gather numbers; it’s to:

• Drive actionable insights
• Bolster product improvement
• Improve acquisition
• Higher retention

…And ultimately increase your bottom line.

That’s why we’ve turned to the seasoned experts at HawkSEM, who bring years of experience navigating the SaaS landscape.

They’ve pinpointed the key metrics that are more than just numbers on a dashboard. These are the vital tools that drive sustained business growth.

What are SaaS marketing metrics?

SaaS marketing metrics are the quantifiable measurements used to track the performance of a SaaS business’s marketing efforts.

These metrics provide insight into how effective a company’s campaigns are and can inform future decisions about where to allocate resources.

For example, a SaaS company might use metrics like the number of sign-ups to determine the effectiveness of a new content marketing campaign.

If your data shows that social media marketing yields higher sign-ups than email marketing, consider dedicating more resources to that channel.

By tracking the most important metrics, your business can make informed decisions about its marketing spend and prioritize top-performing campaigns. Ultimately, it can save money and improve business growth (aka customer acquisition and revenue).

What are the top SaaS marketing metrics to track?

With all that in mind, let’s dive into specific SaaS marketing metrics that your business needs to track.

The metrics you track should align with your business goals. For instance, if increasing demo sign-ups is a priority, focus on lead form completions.

If you’re new to SaaS marketing, start by understanding key metrics to avoid vanity metrics. Not all metrics may be necessary; prioritize the most impactful ones based on your specific objectives.

1. Customer acquisition cost (CAC)

Customer acquisition cost (or cost per acquisition, CPA) is the cost of acquiring a customer. Tracking this metric will determine how much you must pay to get a new customer for your SaaS platform or tool.

Why is it important to track?

It helps you decide how much to spend on marketing and sales to make it worthwhile. This metric is an important benchmark For instance, it wouldn’t make sense to pay $10,000 to get one new customer if that customer will only spend $1,000 with your business over the life of the relationship.

The formula

Calculating the CAC ratio involves adding up the cost of the marketing and sales activities needed to acquire a customer and then dividing it by the number of new customers acquired during the given time period.

CAC = [Cost of Acquisition (CAC)] / [# of New Customers]

For example, if you spend $5,000 on marketing efforts per month and acquire ten customers monthly, then it costs you $500 to get a new customer.

2. Customer lifetime value (CLV)

Definition

Customer Lifetime Value represents the total revenue you can expect from a single customer throughout their relationship with your company.

It’s a critical metric that measures each customer’s financial value and helps assess how much can be spent to acquire similar customers.

Why is it important to track?

Tracking CLV helps you determine the long-term value generated by each customer, guiding how much you should invest in marketing and sales efforts.

A strong understanding of CLV enables you to make informed decisions about resource allocation to maximize ROI.

For instance, knowing that a customer’s lifetime value is significantly higher than the cost to acquire them justifies current marketing spending and helps plan future investments.

The formula

To calculate CLV, multiply the average revenue per customer by their average lifespan with your service:

CLV = Customer Value × Average Customer Lifespan

This metric, especially when compared to Customer Acquisition Cost (CAC), guides you to ensure that marketing investments are profitable. Aim to keep CAC well below CLV to ensure a healthy profit margin.

3. Marketing qualified lead (MQL)

Definition

A Marketing Qualified Lead is a prospective customer who meets specific criteria set by your marketing team.

For example, if you target CEOs of companies with 100 or more employees, anyone fitting this description would be considered an MQL.

Why is this important to track?

It tells you how effective your marketing is in attracting specific types of leads. If you’re getting a lot of unqualified leads, then it’s time to make changes to your SaaS marketing strategy. Maybe it’s the channel you’re using or the messaging that needs shifting.

The formula

To identify MQLs, first define the qualifying criteria based on your strategic goals (e.g., industry, company size, job title).

Then, track interactions such as content downloads, webinar sign-ups, or high engagement scores, which indicate interest

4. Sales qualified lead (SQL)

Definition

A sales-qualified lead is a prospect who’s ready to buy your product. You successfully attracted the lead to your business via your marketing efforts, and now they’re booking a demo with your sales team.

These leads are sales-qualified because they’re the most likely to turn into customers. This is critical to track because it determines if your campaigns attract people who’ll add to your business’s bottom line.

Why is it important to track?

Tracking SQLs is crucial because it helps gauge the effectiveness of your marketing in converting initial interest into potential sales.

This metric is vital for understanding which parts of your sales funnel are successfully driving leads to make purchasing decisions, directly impacting your business’s bottom line.

If your campaigns are not converting leads into SQLs, you might be investing in strategies that attract leads who are unlikely to convert, thus wasting resources.

The formula

To identify SQLs, monitor the transition of MQLs to the next stage, where they demonstrate purchase intent, such as requesting a quote or scheduling a sales appointment.

Note that an MQL is something you may want to track with SQLs because the former will ensure you’re tracking the right people who could one day convert, and the second will identify leads who are likely to convert now or sometime soon.

Sometimes, you don’t know who your SQLs are, so by tracking MQLs, you can monitor who’s becoming leads and identify who, out of the different groups, is converting the most (your SQLs).

ConversionIQ, HawkSEM’s proprietary software, excels at this. It analyzes leads to identify who’s converting the most and what content or channel they’re coming from.

5. Unique visitors

Definition

Unique visitors are a great way to monitor traffic to your website within a time frame (e.g., month, quarter, year). Total traffic shows everyone, including repeat visitors, and won’t depict how many people are new.

So, by tracking unique visits, you can see that 100K monthly visits come from 10K people.

Why is it important to track?

It prevents inflating your numbers and expectations. If only a few people (10k) are hiking up your number of site visits (100K), then you may believe your marketing campaigns are getting more attention than they are.

Note: a lot of visits from the same people is a good sign that you’re capturing attention and possibly getting people to consider purchasing your product (if they haven’t already).

The formula

To measure Unique Visitors, you can log into Google Analytics, which provides a straightforward way to view this metric.

• Log into your Google Analytics account.
• Navigate to the “Audience” section.
• Select “Overview” to view the report.

Here, you will see the metric labeled as “Users,” which represents Unique Visitors.

6. Activations

Definition

Activation is when a new customer uses your product for the first time. Believe it or not, some subscription-based customers make a purchase but never use the SaaS tool and end up canceling their plan.

This is bad for business because it decreases the lifetime value (LTV) of a customer.

Why is it important to track?

If you notice few people are activating, it may be time to enhance your customer support.

For instance, you can build an email campaign targeting new subscribers to ensure they understand how to use and get the most value from your platform (and hopefully stick around longer).

The formula

To calculate the Activation Rate, divide the number of activated users by the total number of registered users, then multiply the result by 100 to convert it into a percentage:

Activation Rate = (Number of Activated Users / Total Number of Registered Users) × 100

7. Lead to customer rate

Definition

Lead to customer rate is the average number of prospects that become customers.

For instance, if you have 100 leads per month and 20 converts into customers, then the lead-to-customer rate is 20%. The higher your lead-to-customer rate, the better.

Why is it important to track?

Lead to Customer Rate directly reflects the efficiency and effectiveness of your sales funnel.

A higher rate indicates a more effective conversion process, suggesting that your marketing efforts are well-targeted and that your sales team is successfully closing deals.

However, a low lead-to-customer rate can highlight areas in your funnel that may need improvement, such as lead qualification, sales tactics, or even the initial customer engagement strategies.

The formula

To calculate the lead-to-customer rate, you need to divide the number of customers by the number of leads.

Lead to customer rate = [Number of customers] / [Number of leads]

Tracking this is ideal if your marketing campaign focuses on lead generation efforts, and you need to determine how effective and profitable the strategy is.

8. Lead velocity rate

Definition

Lead Velocity Rate (LVR) measures the speed of getting new leads to your sales team.

After all, 100 new leads sound great, but not if it takes ten months to get them (especially if your SaaS rates are on the low end and need a lot of users to keep your business afloat).

Why is it important to track?

Tracking the Lead Velocity Rate (LVR) helps you to measure the growth and momentum of your lead generation over time.

A positive LVR indicates an increasing number of qualified leads each month, signaling effective marketing efforts and potential future revenue growth.

However, a stagnant or declining LVR can prompt a reevaluation of your marketing strategies, ensuring that your business remains competitive and responsive to market demands.

The formula

You calculate this by subtracting last month’s MQLs from this month’s MQLs and dividing the difference by last month’s MQLs. Then multiply by 100 to get the percentage.

LVR = (Number of qualified leads in the current month – Number of qualified leads last month) ÷ Number of qualified leads last month x 100

So, if this month you generated 750 MQLs and 500 MQLs last month, then it’d look like this:

750 – 500 = -250 MQLs

250 / 750 = .50

.50 x 100 = 50% lead velocity rate

In other words, your leads are increasing by 50% month-over-month (MoM). Monitoring this will determine whether your campaigns are increasing, maintaining, or decreasing in effectiveness.

9. Freemium conversion rate

Definition

A freemium conversion rate is when a customer converts from your free product to your paid product. It shows your marketing campaign’s target audience is on point.

These individuals may need your product but aren’t sure it’s the right fit, so they sign up for a free trial.

Then, once they see it’s just as your marketing campaign portrays, they switch to a premium plan.

Why is it important to track?

If you’re using free trials to generate MQLs, tracking freemium conversion rates is critical to ensure you’re not wasting time and money on the wrong audience or using the wrong messaging (e.g., focusing on the wrong pain points).

This may be the case if more people cancel after the freemium than switch to a paid plan.

The formula

To calculate the Freemium Conversion Rate:

• Count the number of customers who upgrade from a free trial or freemium plan to a paid plan within a specific time period.
• Divide this number by the total number of users on the free tier during the same period.
• Multiply the result by 100 to get the percentage:

Freemium Conversion Rate = (Number of Customers Who Converted to Paid / Total Number of Free Tier Users ) × 100

10. Customer churn rate

Definition

Customer churn rate is the percentage of customers who cancel their subscription to your product.

This metric is important to track because it tells you how well you retain customers and if they’re getting value from your product.

Why is it important to track?

If you have a high customer churn rate, it may be time to examine what’s causing it. Maybe it’s an issue with onboarding or a feature that doesn’t meet your customers’ needs.

By tracking customer churn, you can identify when there’s an issue and then use surveys or tools like Hotjar to find ways to improve.

The formula

There are a few different ways to calculate customer churn rate, but here is one of the simplest and most effective.

• Determine the number of customers at the start and end of the period.
• Calculate the midpoint number of customers by averaging the start and end totals:

Midpoint Customer Count = (Customers at Start + Customers at End / 2)

• Count the number of customers who have churned during the period.
• Divide the number of churned customers by the midpoint customer count:

Customer Churn Rate = (Number of Churned Customers / Midpoint Customer Count) × 100

11. Revenue churn

Definition

Revenue churn is the percentage of lost revenue due to customers canceling their subscriptions. It sounds a lot like customer churn, but there’s a difference.

Customer churn focuses on how many people leave, while revenue churn focuses on the amount of money the company is losing from churn.

For example, if you have a multi-tier product, then you’ll have some customers worth more than others. A customer paying $150 per month is worth more than three customers paying $30 per month.

However, if you only see a few people churning per month, you may think it’s no big deal. Yet, it’s your top-tier customers who are leaving, which hurts your revenue more.

Why is it important to track?

By calculating revenue churn, you get a complete picture of how many customers are leaving and the value they bring to (or take from) your business.

Then, you can take this information and look into why your top customers are leaving and how to keep them engaged (or refocus on another target audience if they’re not the right fit).

The formula

Here are the steps to take to calculate your revenue churn:

• Determine the total revenue lost from existing customers during a specific period. This includes cancellations and downgrades.
• Identify the total revenue at the beginning of that period.
• Divide the revenue lost by the total starting revenue.

Revenue Churn = (Revenue Lost from Existing Customers / Total Revenue at the Start of Period) × 100

12. Customer engagement

Definition

Customer engagement represents how much a subscriber uses your SaaS product. The more they use it, the more engaged they are.

You can use this metric to identify features that are the most popular to focus on making improvements in that area to keep users engaged.

Why is it important to track?

It can also be an indicator to remove a low-usage feature from your platform to free up development resources.

The goal is to find out how many days per week or month a customer logs in to your product, how many hours they spend on your platform each visit, and which features they engage with the most. Then, use the information to guide future product decisions.

The formula

Calculating customer engagement can vary widely depending on the specific needs and nature of your SaaS product or service. Here’s a general approach to get started:

• Choose relevant engagement metrics based on your product or service. For daily-use products, the frequency of logins might be crucial, whereas for others, the number of interactions per session might be more indicative of engagement.
• Define the parameters for each metric chosen. For example, define what constitutes an ‘active use’ or a ‘session’.
• Collect data over a defined period. Depending on your product’s expected usage patterns, this could be daily, weekly, or monthly.
• Calculate the average for each metric. For instance:

Frequency of Use = (Total Logins during the Period / Number of Unique Users during the Period)

Interactions per Session = (Total Interactions / Total Sessions)

13. Net promoter score (NPS)

Definition

A Net Promoter Score (NPS) gauges customer satisfaction. It’s a survey that asks customers how likely they are to recommend your product to others. The higher the score, the more likely a customer will recommend it to others.

Why is it important to track?

This is a great metric to measure because you can determine how satisfied your customers are and identify where improvements can be made to increase satisfaction and loyalty.

The formula

To create your NPS survey, you’ll need a tool like Survey Monkey to gather and analyze the data. Then, ask a series of questions that’ll get to the root of how your customers feel about your product.

Example questions in an NPS survey may include:

• How likely are you to recommend our product to a friend or colleague?
• Did you find X features useful?
• How frequently do you use our product?

Once you have your survey data, calculate the average score to see if your product is well-loved or not.

You’ll categorize responses into three areas (the highest score is 10):

• Promoters: Scores 9-10 are considered your avid customers who are likely to promote your product to others.
• Passives: Scores 7-8 are likely to be satisfied but aren’t enthusiastic about your product and are less likely to promote it to others.
• Detractors: Scores 0-6 are likely to be unhappy with your product and likely to say negative things about your product, causing reputational damage.

The goal is to quickly find detractors, and why they aren’t satisfied with your product, so you can fix it before your reputation suffers.

14. Annual recurring revenue (ARR)

Definition

Annual recurring revenue is the amount of revenue your business generates from recurring customers each year.

Tracking this helps you to understand your overall business performance and growth rate and forecast future revenue. This is ideal if you have annual contracts or plans with customers.

Why is it important to track?

It provides a clear and consistent measure of the predictable revenue generated from subscriptions over a year.

This metric is essential for assessing a business’s health and scalability. It allows management and investors to gauge financial stability, plan for future growth, and make informed strategic decisions.

The formula

You can calculate ARR by adding the annual revenue you get from all of your customers and multiplying by the number of years they’ll remain a customer. For example, if you have a five-year contract with a customer that’s worth $10,000, you’d divide $10K by five years, totaling $2K in annual recurring revenue.

ARR =  [Total contract revenue] / [Number of years]. 

You likely have annual revenue goals to meet, and you will need to use ARR to calculate whether you’re on track to meet them.

For instance, if your goal is to reach $300K by the end of the year, then you know you need to earn at least $25K per month.

If you run the numbers for a quarter and see that they are below, you can adjust your marketing and project spending to focus on areas that can boost revenue.

Your NPS survey could come in handy here!

15. Monthly recurring revenue (MRR)

Definition

Monthly recurring revenue is the amount of revenue your business generates from customers each month.

It gives you a quick view of the financial health of your company (or lack thereof). You calculate MRR by dividing the annual recurring revenue by twelve.

Why is it important to track?

Tracking MRR is ideal to keep a close eye on how your SaaS business is doing. Looking at weekly numbers is too soon to identify churn and engagement, and annual may be too long to spot issues to correct before it’s too late (e.g., a sudden uptick in churn due to a software bug).

The formula

MRR = (Number of customers x Average Revenue per User)

For example, if you have plans that are $199/mo and have 1,000 customers, then you’d multiply $199 by 10k, which gives you an MRR of $199K.

Or, if you have a mix of plans, you’ll need to calculate the average by adding the total and dividing it by the number of users.

So, if you have 1,000 people on a $199/mo plan and 500 people on a $299/mo plan, then you’d multiply each plan by its number of users, add the totals together, and divide the sum by the total number of users for both plans.

Here’s how it’d look:

$199 x 1,000 users = $199K 

$299 x 500 users= $149.5K

$199K + $149.5K = $348.5K

$348.5K / 1500 users = $232 recurring monthly revenue 

How do you track marketing metrics?

Tracking these key performance indicators (KPIs) is relatively easy when you have the right tools and help.

For example, you have Google Analytics, Mixpanel, and Heap to track user engagement and total revenue. Or, if you use customer relationship management (CRM) software like Salesforce or HubSpot, you can monitor customer acquisition, retention, and churn rates.

“Stats drawn directly from the Google Ads dashboard and Google Analytics are common,” says Steven Dang, VP of Growth and Strategy at HawkSEM.

“But it’s important for SaaS companies to configure their CRMs to track leads through the entire sales lifecycle and look at the impact/contribution from different marketing channels.”

Another option: leverage the knowledge and tools of a B2B SaaS digital marketing agency. HawkSEM works with SaaS companies, helping them to identify pitfalls, spot opportunities, and reach goals.

We use ConversionIQ to track key metrics and identify your ideal customer base and where they’re coming from.

With this information, our marketing team can build better campaigns that drive impressive results for your SaaS business.

What should you do with the data?

Once you have the data from your metrics, take action on the insights. Use this moment to identify areas of improvement, such as modifying a feature that receives frequent complaints.

For instance, if you see that customer acquisition is low, focus on improving marketing efforts to bring in more customers. If customer retention rates are low, look into customer service and product improvements to keep customers engaged.

Here are several tips from our expert, Dang:

• Follow a lead all the way from origination to sale whenever possible.
• Keep track of repeat sales or lifetime value if you have recurring or sticky revenue streams.
• Score or rate your leads if possible, and note any traits or factors that add to or detract from their quality.

Metrics aren’t just for building gorgeous charts — they’re meant to be actionable. So, be sure to pull insights from your data and use them to guide your next steps.

The importance of SaaS marketing metrics

When it comes to SaaS, the rules of engagement are different from those of traditional B2B product marketing. Here, you’re not just selling a physical product that customers walk away with. Instead, you’re offering a service—often on a subscription basis—that demands initial sign-ups as well as ongoing customer retention.

This is what fundamentally sets SaaS marketing apart and explains why the metrics SaaS marketers track are different from those in other industries.

From one-time purchases to lifelong customers

In traditional B2B product marketing, the transaction is typically a one-off: a customer buys a product, and the interaction often ends there. For example, think of a shoe store; the focus is on the immediate sale, not so much on the customer’s return. There’s little concern for customer lifetime value because the business model doesn’t depend on long-term customer engagement.

However, in SaaS marketing, the scenario is different. Subscription-based models thrive not just by acquiring customers but also by keeping them over time. For example, more than 27% of SaaS businesses with an Average Revenue Per Account (ARPA) of over $500 a month have a customer retention rate of over 85%.

This shift makes metrics like customer lifetime value (CLV) more important. CLV isn’t just a number — it’s a reflection of the long-term health and profitability of your SaaS business.

The role of upselling

Unlike physical product sales, where upselling may be limited, in SaaS, upselling can often make up a significant revenue stream.

As users grow accustomed to your service, there’s more opportunity to introduce them to higher-tier plans or additional features, enhancing both their experience and your revenue.

Understanding churn in SaaS

Customer churn, the percentage of customers who stop using your service over a specific period, is particularly relevant in SaaS.

Unlike businesses selling one-and-done products, SaaS companies face the ongoing challenge of keeping subscribers engaged and coming back for more.

This is not just about keeping the service running smoothly but continuously proving its value to the customer, making them see the worth in staying subscribed rather than moving on.

Building long-term customer relationships

The job of a SaaS marketer doesn’t end with converting a trial user into a paying customer.

In fact, that’s really where the job starts. You then have to nurture that relationship, using tailored marketing metrics and personalized service to turn new customers into lifelong patrons.

This involves:

• Understanding their needs
• Providing exceptional support
• Improving your offering
• Ensuring they get continuous value from your service

The takeaway

Monitoring the health of a SaaS business requires digging into the data to see what’s happening under the hood. But you need to track the right KPIs, or you’ll risk overlooking flaws in your product and marketing strategy.

It all begins with building a marketing strategy that aligns with your business goals. From here, you can identify the best marketing metrics to track for your campaigns.

 

This article has been updated and was originally published in March 2023.