Dec 8
Reading Time: 3 minutes

For many SaaS businesses, it’s easy to obsess over tracking every performance metric out there. But, the problem with this is that it is neither productive nor efficient.

Did you know the most successful SaaS businesses narrow their focus to just a few key metrics? You’ve likely heard the acronym KPI, which is short for Key Performance Indicator. The term is a fancy way to refer to the metrics that are most critical for tracking the success of your business.

A set of KPIs will be different for every business. But, there are a few KPIs every SaaS business should track.

Churn Rate
Churn measures the number of people who cancel their subscriptions or leave a service within a certain time period (i.e. every month). Every industry has different reasons for customer churn, but in SaaS, the number one churn driver is a lack of use. Also, your churn rate can quickly get out of control if you are not tracking it.

If you have a high churn rate, the best way to combat it is to talk to your customers. Your business can conduct user interviews and use surveys to get a better understanding of how you can improve your product. Another way to fight churn is by keeping your customers informed (via email and social media) when you release new features and product updates.

Monthly Recurring Revenue (MRR)
Monthly recurring revenue is the amount of total revenue you had during the month from recurring subscriptions. Tracking monthly recurring revenue allows you to see exactly how your business is doing month-to-month. It also keeps your SaaS business focused on the present.

MRR is a simple but powerful metric that supplies insight when analyzing new sales, upsells, renewals, and churn on a monthly basis. Having annual plans on top of your regular monthly plans can also complicate things for tracking MRR. Upgrades and downgrades can also become tedious to track.

Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) shows how much you have to spend to get one new customer from a particular source. To calculate CAC, add up your entire marketing and sales expenses over a month and divide that by the total number of customers you gained in the same period.

It is also a good idea to go a step further and segment CAC by acquisition channel. This will help SaaS businesses test new channels for growth and determine if the acquisition cost is too high for certain ones. Typically, you will want to lower acquisition costs as much as possible.

Customer Lifetime Value (CLTV)
Customer Lifetime Value measures the average amount that a customer is worth during their relationship with your business. A SaaS businesses CAC should never be higher than its average CLTV. According to HubSpot, “a healthy business should have a CLV that is at least three times greater than its CAC. Any lower (say, a 1:1 ratio) and you’re spending too much money.”

We’ve written about Customer Lifetime Value and how to calculate it before so we won’t go into too much detail. You can read more about it here: Calculating Customer Lifetime Value.

By tracking just a few KPIs a SaaS business can drive higher quality traffic, improve on-site engagement and, most importantly, increase conversions and sales. But, every SaaS business is different and you need to calculate the metrics above based on your unique circumstances and then examine ways to improve them. Ultimately, this will allow you to make the most of your time and money to drive your business decisions and strategies in the most effective way.

Dec 1
Reading Time: 2 minutes

Holiday sales are typically viewed as one-time transactions, but your relationship with these shoppers doesn’t have to end once the seasonal rush is over. While it may be tougher to convert seasonal shoppers into repeat customers, it costs considerably less to try and keep them versus attracting and converting new ones. The holiday shopping season actually provides a unique opportunity to hook seasonal shoppers and convert them into returning and loyal customers.

The following are 3 tips on how to convert seasonal one-time shoppers into repeat customers:

Email Marketing
Many businesses make the mistake of blasting new customers with promotional emails right off the bat, but this is not best practice. You will not develop a worthwhile and lasting relationship with new customers by doing this. Nurturing emails actually get 10 times more responses than regular promotional emails. So, you should try to send a welcome email to any new customer within a few days of their purchase. This will warm them up to your brand and messaging.

Takeaway: Focus on creating nurturing emails for your new customers to keep them more engaged and receptive to future promotional emails.

Segment Customers
Segment your new customers from your regular customers, and create a communication plan for each. You should define a clear communication strategy for each segment and target them separately. For example, send out targeted emails to new customers to tempt them back to your site and focus your messaging on converting them into a life-long customer. For regular customers, send personalized cross-sell and upsell product recommendations, or even a seasonal promotion based on their past purchases.

Takeaway: Regular customers should be receiving different targeted emails or ads than those who have only purchased from you during the holiday months.

Reconnect in January
As we mentioned earlier, it is not best practice to bombard new seasonal customers with promotional emails right after they make a purchase. Instead, focus on encouraging old and new customers to come back with special promotions in January and throughout the new year. It is also a good idea to follow up with new customers to see if their purchase was well received and send them an incentive to make that all important second purchase.

Takeaway: Focus on reconnecting with new customers in January with incentives to bring them back.

Don’t let your seasonal shoppers turn into one-and-done sales. Focus your efforts on staying relevant and keeping customers engaged even after the holiday shopping season. With just a few key strategies in place, you can successfully convert your seasonal one-time shoppers into year-long customers.