Ultimate Guide To B2B SaaS Analytics
The outlook for growth of the SaaS industry is huge. It’s expanding at a rate of 18% each year. With this growth, there is also a massive shift to a digital and self-serve model in B2B SaaS, which both buyers and sellers prefer over face-to-face human interactions.
Increasingly, with a focus on digital reality, the use of analytics to better understand customers and provide them value is becoming more critical. For B2B SaaS companies, tracking their business intelligence is not a choice but a necessity to survive in the competitive market.
Keep reading to learn about B2B SaaS analytics tools and metrics that you can use to track and improve your company’s health.
What Is B2B SaaS Analytics?
For B2B SaaS businesses, tracking, understanding, and improving analytics metrics and KPIs is essential to make data-driven decisions and drive business growth. The process by which these companies track and analyze their performance in various areas is called B2B SaaS analytics.
By implementing analytics tools, B2B SaaS companies can
- track customer engagement
- determine causes of churn
- project future revenue
- identify best campaigns and channels for traffic and conversions
- better allocate their resources for growth
B2B SaaS analytics can be differentiated by product, marketing, sales, and revenue:
- Product analytics is the process of collecting and analyzing data on how users interact with your product. This includes how and when customers realize your product’s value, how many of them churn, and how loyal and satisfied they are.
- Marketing analytics allows you to measure the impact of your marketing efforts. You can discover how many of your users convert, what sites they come from, and how much you should be spending on customer acquisition.
- Sales analytics enables you to predict the viability of efforts you would pursue as part of your sales strategy.
- Revenue analytics give insight into recurring revenue, profitability, and growth, which helps you forecast revenue and allocate your resources effectively.
Although many metrics measure performance in these areas, you should focus on the essential ones, which I’ll list below.
To evaluate marketing campaign performance, you should know how your strategies on different channels perform. The Revenue by Channel dashboard shows, for each channel, two key metrics that integrate well: LTV and ACV. This data is helpful for you to identify the channels with the most valuable customers.
As part of your content marketing strategy, it’s essential to know how your content impacts users’ actions on your site. With this unique dashboard, you can see the signups, expansions, and MRR gained from each blog post. Having access to this data will help you increase conversions and revenue.
Like blog posts, you can determine the best traffic sources to your site through the Sources that Drive Revenue dashboard. By focusing on the best traffic sources, you can increase signups, expansions, and MRR.
There may be patterns of churn based on different sources that people use to find your site. You can identify which referrer leads to the most churned users and revenue with the Churn by Referrer dashboard. This will help you direct your marketing efforts to the best-performing sources so that you can minimize churn and revenue loss.
It’s great to know your most successful blog posts, but there is another side to the coin. Not all your content will be as successful. With the Churn by Blog Post dashboard, you can see the posts with the most churned users and churned revenue.
B2B SaaS Analytics Metrics
In this section, I’ll go through the top product, marketing, sales, and revenue metrics that you should be tracking.
B2B SaaS Product Metrics
When a user reaches a specific action in the onboarding process known to provide value, the user becomes ‘activated.’
The activation rate refers to the number of users who completed the key action in the onboarding process in a given period. This metric is vaguely defined since key actions differ from one business to another. So when calculating this metric, the initial step is to determine what these actions are.
Activation rate is a crucial metric because it directly influences revenue. If customers realize the value of your product during the trial phase, only then do they become convinced to pay for it. The impact of activation on MRR is also the highest among the pirate metrics. Moreover, with this rate, you can also see how well you are spending on acquiring new customers.
Churn rate is the percentage at which customers stop using your service. There are many reasons why customers churn. It may be due to a failure to meet customers’ expectations, poor onboarding or customer service, or natural causes.
Higher churn indicates more customers and revenue lost. Therefore, the churn rate is crucial for measuring revenue and growth potential. Although some customer churn is inevitable, ideally, it should be low. A general benchmark is 5%-7% for annual churn in the SaaS industry.
To find the churn rate, divide the number of customers who churned in a period by the number of customers you had at the beginning of that period.
Net Promoter Score (NPS) is a widely used product metric that measures how satisfied, and loyal your customers are with a business or product. It is measured by asking a question that goes like, “How likely are you to recommend product X to a friend or colleague?”
Respondents answer this question on a scale of 0-10, where 0 is least likely, and 10 is very likely. Those who rate you 9-10 are the promoters, and those who rate you 0-6 are detractors. The NPS is found by subtracting the percentage of detractors from the percentage of promoters. The score can range from -100 to 100, where 40 is considered a good score for a SaaS.
Conversion rate is an essential metric for marketers. It measures the number of visitors to your site who take a desired action across different marketing channels. In general, after using a trial, this action marks becoming a paid customer. However, each business can define this action differently. It can be signup, demo request, or purchase.
Many factors can influence the conversion rate. These include your value proposition, the design of your landing page, and your traffic quality and relevance.
To find this metric, divide the number of conversions by the total number of visitors. A good conversion rate falls within 5-7% for SaaS businesses, while 8% and above is considered strong.
Customer Acquisition Cost (CAC), which is the cost of acquiring a new customer, is a crucial metric for SaaS businesses to improve ROI and profit margins. The costs that go into CAC are the number of new customers you acquired and your sales and marketing expenses, such as SEO, social media marketing, and salaries.
CAC is especially valuable when measured alongside customer lifetime value (LTV). By calculating the ratio CAC/LTV, you can decide how long it will take to cover CAC and profit from each customer. You spend just the right amount to acquire new customers in an ideal model while keeping a healthy LTV. An optimal ratio is 3:1. There isn’t an ideal figure for CAC alone since it depends on the business and industry.
Referral traffic is traffic to your site from other websites. When someone clicks on a link from another site or social media to your site, it is registered as referral traffic. The site that links to yours is known as the “referrer.” Some examples of referrers are search engines, social media channels, apps, newsletters, and affiliate links.
Referral traffic is important because it widens the exposure of your content and gets you potential buyers from trusted sources. When high-quality websites link to your site, it increases your domain authority and search rankings.
B2B SaaS Sales Metrics
Meetings per lead
This metric refers to the number of meetings scheduled with a lead before making a sale. An initial meeting begins at the interest stage when you want to make the prospect aware of your product. However, a single meeting doesn’t make a lead qualified right away, so you need an ongoing process to result in a qualified opportunity.
Demo win rate
Demos are a great way for SaaS companies to promote a product, increase interaction with customers and convince them that the product can help overcome their problems.
The demo win rate, also called demo-to-close conversion rate, is the number of demos you give that lead to conversions. It is influenced by how well your demo giving skills are, your targeting, and your follow-up strategy.
You can find this rate by dividing the number of demos that lead to a conversion by the total number of demos given over a time period.
ACV (annual contract value)
Annual contract value (ACV) represents the total revenue a contract brings in a year. This revenue can come from different sources, including monthly plans and multi-year subscription plans. Other costs such as signup and training may also be included in ACV.
By calculating ACV, you can understand the value of your customers and whether you are pursuing the right clients. Comparing this metric with customer acquisition cost (CAC) can reveal how long it will take you to make a profit from a contract.
B2B SaaS Revenue Metrics
Revenue growth rate
The revenue growth rate is a metric that shows how fast your SaaS is growing. It measures this through your revenue increase over a time period. A decline in revenue growth may be due to your onboarding, UX/UI, pricing and plans, or user churn. There are several revenue-driving channels that you can use to improve revenue growth. These are content marketing, email marketing, free trials, and giveaways.
The growth rate is an essential revenue metric because it indicates whether your SaaS is profitable and sustainable over time. A good growth rate is also attractive to investors. The “rule of 40” for SaaS businesses implies that the growth rate should be at least 40%.
Monthly recurring revenue (MRR) is the amount of revenue you expect at the end of each month. It does not include all the revenue you make per month since it’s limited to the revenue you get from recurring subscriptions.
SaaS businesses have a subscription-based business model, which makes tracking recurring revenue each month essential. It helps you forecast future revenue and make educated decisions on resource allocation, spending, and scaling.
MRR is also an indicator of growth. A trend of increasing MRR shows that you’re gaining more customers and revenue with each passing month. On the other hand, if MRR decreases over time, it indicates lost customers and revenue through cancellations and churns.
Customer lifetime value (LTV) shows you an estimate of how much revenue a customer will bring over their lifetime as a customer. There are many benefits of measuring LTV: it helps you predict future growth, determine the success of different marketing channels, and improves financial planning. Also, when used with CAC, it enables you to determine how much spending to allocate for the acquisition of a new customer.
LTV is a metric that is highly influenced by churn since it’s directly related to the lifespan of the customer. Though there are many ways to find LTV, one of them is to divide ARPU (average revenue per user) by the churn rate.
B2B SaaS analytics helps companies uncover vital insights for improved optimization and growth. With HockeyStack’s dashboards, you can figure out which of your content, channels, and sources drive the most and least revenue and which of them lead to the most churned users. That way, you will have the essential data to redirect your marketing efforts and maximize revenue. Together with the metrics and KPIs above, these tools are key to improving your SaaS analytics.