Beyond MRR: The Top 10 Metrics for SaaS Subscription Business Success
Mücahit M?hc?
Accelerating eComm Brands with Email & SMS Marketing || Ecommerce & DTC Retention & Lifecycle Marketing
In the first quarter of 2021, app-based subscription revenue in the App Store and Google Play reached $13 billion, up 34% from the same period in 2020. (Sensor Tower)
As a SaaS owner with a subscription-based business model, it's crucial to keep track of the right metrics to ensure long-term success. With so many different data points to consider, it can be overwhelming to know where to focus your attention. That's why I've compiled a list of the top 10 most important key metrics for your SaaS business, ranked by importance.
The top 10 most important key metrics for a SaaS owner with a subscription business model, ranked by importance:
And here are the three biggest problems you may face when trying to reach each key metric, ranked by likely impact on the key metric:
a. Low customer retention: If customers are churning at a high rate, it will be difficult to maintain or grow MRR.
b. Inadequate pricing strategy: If your pricing is too low or too high, it could negatively impact MRR.
c. Low conversion rate: If you're not converting enough potential customers into paying customers, it will be difficult to grow MRR.
2. Customer Lifetime Value (CLTV)
a. Low customer satisfaction: If customers are not satisfied with your product or service, they may not stick around long enough to generate a high CLTV.
b. Inadequate customer support: If your customer support is not responsive or helpful, it could negatively impact CLTV.
c. Limited product features: If your product lacks essential features, customers may not see the long-term value and churn early, impacting CLTV.
3. Churn Rate
a. Inadequate onboarding: If customers are not onboarded effectively, they may not see the value in your product and churn early.
b. Lack of product updates: If your product does not evolve with the needs of your customers, they may lose interest and churn.
c. Poor customer support: If customers do not receive adequate support when facing issues or challenges, they may be more likely to churn.
4. Customer Acquisition Cost (CAC)
a. Inefficient marketing channels: If you're not using the right channels to reach your target audience, your CAC may be too high.
b. Poor targeting: If you're not targeting the right audience with your marketing efforts, your CAC may be too high.
c. Inadequate messaging: If your messaging doesn't resonate with potential customers, they may not convert and your CAC may be too high.
5. Conversion Rate
a. Poor user experience: If your product or website is difficult to use or navigate, it may negatively impact your conversion rate.
b. Ineffective messaging: If your messaging is not clear or compelling, potential customers may not be motivated to convert.
c. Lack of social proof: If you don't have enough positive reviews or testimonials, potential customers may not trust your product or service enough to convert.
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6. Average Revenue Per User (ARPU)
a. Limited pricing tiers: If you don't have enough pricing tiers or options, customers may not be able to find a plan that fits their needs and ARPU may suffer.
b. Inadequate upselling: If you're not effectively upselling customers to higher pricing tiers or additional products, ARPU may be lower than it could be.
c. Low retention: If customers are churning at a high rate, ARPU will suffer as you lose potential revenue from those customers.
7. Gross Margin
a. Inefficient cost structure: If your cost structure is too high, it could negatively impact gross margin.
b. Inadequate pricing: If your pricing is too low, it may be difficult to maintain a healthy gross margin.
c. Ineffective cost management: If you're not managing costs effectively, it could negatively impact gross margin.
8. Customer Retention Rate
a. Poor customer support: If customers do not receive adequate support when facing issues or challenges, they may be more likely to churn.
b. Limited product features: If your product lacks essential features, customers may not see the long-term value and churn early.
c. Inadequate communication: If you're not communicating with customers effectively, they may not feel engaged and may churn as a result.
9. Referral Rate
a. Low customer satisfaction: If customers are not satisfied with your product or service, they may be less likely to refer others.
b. Ineffective referral program: If your referral program is not well-designed or incentivized, customers may be less likely to refer others.
c. Limited reach: If you're not reaching enough potential customers, your referral rate may suffer.
10. Payback Period
a. Inadequate pricing: If your pricing is too low, it may be difficult to achieve a positive payback period.
b. Low retention: If customers are churning at a high rate, it may be difficult to achieve a positive payback period.
c. Inefficient marketing channels: If you're not using the right marketing channels to reach your target audience, it may be difficult to achieve a positive payback period.
Subscription business model stats that highlight the growing popularity and impact of this model: