If you run a B2B SaaS business, you know how unpredictable things are and how difficult it is to scale your business.
Dealing with subscription non-renewals and churn is crucial for a SaaS business, given how easy it is for customers to switch to a competitor.
That’s why you need robust SaaS analytics to draw valuable insights and make data-driven decisions that help you grow your business.
In this article, we will tell you everything you need to know about SaaS analytics, including what it is and which metrics you should track.
SaaS analytics helps you understand and evaluate how customers use your SaaS product and how satisfied they are with your products and services.
It involves collecting, analyzing, and drawing insights from all the subscription data generated by your SaaS business.
This could be data related to product usage, revenue data, number of accounts, churn rate, retention, and more.
SaaS analytics is something for which you need a specialized software solution, as tracking SaaS metrics manually is not feasible. We recommend using a good subscription management solution with built-in SaaS analytics functionality.
After all, it’s better to use technology to your advantage, especially when you have so many great options available in the market. Younium is one such subscription management and SaaS analytics platform that you can consider for this purpose.
SaaS analytics allows you to track key subscription business metrics and evaluate your business performance on numerous parameters. It offers insights that help you improve your business and provide a better experience to your customers.
Let’s discuss some of the most important benefits of SaaS analytics.
For B2B SaaS businesses, keeping their products best-in-class is a key distinguishing factor. As such, B2B SaaS businesses take product innovation and development very seriously and SaaS analytics helps with that.
With the help of SaaS analytics, you can identify issues with your product and user interface, which may be causing customer dissatisfaction and even churn.
Just like with any other data analytics, SaaS analytics also help with data-driven business decision-making. The only thing is that this term is used specifically for SaaS businesses.
SaaS analytics provide you with insight into different aspects of your business, such as revenue growth, customer satisfaction, product usage, and more.
These actionable insights are what will drive your business decisions, from streamlining financial processes to cash flow management. So make sure you invest in a good SaaS analytics software solution.
SaaS analytics helps you identify issues with your product or service. You can use these insights to improve your services to deliver a better customer experience.
For example, if most of your customers struggle to use your SaaS product to its full potential because of a clunky UI, then you can improve it to resolve that issue. This will help customers use your SaaS product effectively and have a great experience.
This, in turn, improves customer satisfaction and encourages them to stay on for longer.
SaaS analytics is extremely useful in churn analysis, which is an important process in any Saas business. Here’s why.
SaaS analytics helps you track churn metrics like revenue churn and customer churn. This allows you to stay on top of things to identify causes of churn and fix them.
SaaS analytics also tracks metrics like product and feature usage, which helps you identify inactive or at-risk customers who are likely to churn. You can use customer retention strategies to retain these at-risk customers and reduce churn for your business.
With more and more B2B SaaS businesses coming up in every possible niche, staying ahead of the curve has become more crucial than ever. With the help of SaaS analytics, you can proactively identify potential issues and fix them, thus enhancing customer experience.
SaaS analytics can help you improve your product, user experience, customer support, and everything else.
By regularly monitoring key subscription metrics and resolving issues, you can ensure that your product and service are the absolute best and better than what your competitors offer. This, in turn, improves customer retention as well.
If you want to grow your SaaS business, you need to ensure that your product is performing at optimal levels and that customers are happy with it.
SaaS analytics software solutions help you with that by tracking key SaaS KPIs (key performance indicators) that provide insights into various areas of your business.
Here are some of the most important SaaS metrics that you should consider tracking.
Recurring revenue is one of the essential B2B SaaS metrics that all businesses should track. It helps you predict the steady stream of revenue that you will get from your clients within a time period.
As evident, Monthly Recurring Revenue (MRR) calculates this for a month while Annual Recurring Revenue calculates this for a year.
Now, let’s look at how SaaS analytics software solutions calculate these.
You can calculate MRR in two ways:
To calculate ARR, you simply need to multiply MRR by 12 or add the MRR for all 12 months.
Lastly, another recurring revenue metric you should track is the net recurring revenue (NRR). Unlike MRR, this also considers the revenue expansion and contraction within a month.
Here’s the formula for calculating NRR.
Using a good SaaS analytics tool helps with these calculations and you don’t have to do it manually.
CMRR is the expected revenue your company will get from a new contract or a change in an existing contract with a customer. This is different from MRR because the latter considers fluctuations in revenue due to churn or upsells.
CMRR only calculates the revenue your company is contractually obligated to receive in a month.
Here’s the formula:
CMRR = No. of Contracts * Average Monthly Revenue per Contract
This metric measures how much revenue a typical client account generates for your business on average, within a period.
The goal for every SaaS business is to increase ARPA as that will help you boost overall business revenue. A higher ARPA indicates that clients are opting for higher-tier plans and spending more on their subscriptions, on average.
You can calculate this separately for new and existing clients to identify trends.
As we’ve discussed, ARPA is also used in the calculation of MRR, making it one of the crucial SaaS metrics for you to track using your SaaS analytics solution.
This metric is similar to CMRR but considers an annual time period. You can calculate using the booking values of customer contracts. It measures how much revenue a new booking will generate in a year.
Similar to CMRR, ACV considers the contract value and not the monthly fluctuations. As such, ACV will remain constant unless there’s a change in the contract terms for a client.
Tracking bookings, CMRR, and ACV might seem tedious to do manually. However, using a robust SaaS analytics and subscription management platform like Younium makes it simple and helps you cut tedious tasks to make your life easier.
This measures your company's total cost of winning a new customer or account. This includes all your marketing, advertising, and sales expenses in the pursuit of winning new customers.
It’s fairly simple to calculate, once you can figure out your marketing costs for customer acquisition.
Here’s the formula for calculating CAC:
CAC = Periodic Expenses on Customer Acquisition / No. of Customers Acquired in the Period
Why does it matter?
This gives you an idea of how much you’re spending on acquiring new customers and if it’s worth the benefit you’re getting. A high CAC is bad for your SaaS business and you need to take immediate action to reduce it.
This could involve creating more targeted, high-converting marketing campaigns, optimizing your sales process, or something else. You could also focus more on customer retention to get more benefits from the customers that you acquire.
As such, CAC should not be measured in a silo and should be considered alongside other SaaS metrics, such as customer lifetime value (CLTV) and payback period. We’ll discuss these metrics next.
This metric is used in conjunction with CAC and is used to measure how long it will take your B2B SaaS company to recover the amount you spent on acquiring a new customer.
Here’s how you calculate it:
Payback period = CAC/MRR From a Customer
Basically, you divide your average customer acquisition cost with the monthly revenue you generate from a customer to calculate the payback period.
Let’s say you spend $1000 on acquiring each new customer. Now, you won two accounts, one with a monthly plan value of $100 and another with a monthly plan value of $200.
This means that you can recover the CAC faster from the second customer.
It’s simple: customers on higher-tier subscriptions are more beneficial for your business as you can recover your CAC faster from these customers.
But what if these customers leave before the payback period?
Well, then you’ll be at a net loss and your customer acquisition efforts will be wasted. To get a more holistic picture of this cost-benefit analysis, we use CLV or LTV and LTV: CAC Ratio, which we’ll discuss next.
The customer lifetime value is a number that shows the total revenue your company will generate on average from a customer. Of course, the LTV will differ from customer to customer, but tracking this individually is tedious.
That’s why businesses track the average customer lifetime value, as it’s easier to track. Of course, using a good SaaS analytics software solution would make it even simpler and enhance business intelligence.
Here’s the formula for calculating this SaaS metric.
LTV = (Annual Revenue Per User × Average Customer Lifetime in Years)
Tracking LTV helps you in various business aspects, such as:
Overall, LTV is an important metric you should track using SaaS analytics tools. It will guide your strategic business decisions and help you improve your marketing and customer retention efforts.
While customer acquisition cost and customer lifetime value are both important metrics, they’re even more useful when assessed in relation to each other.
This ratio assesses both metrics to get a more holistic view of whether your marketing initiatives drive sustainable business growth and boost revenue.
So, how does it work?
Well, let’s consider you spend $1000 on acquiring a new customer and generate a revenue of $1000 over the customer’s lifetime. Yes, it’s not a loss, but you also gain nothing.
Ideally, you should opt for a ratio higher than 3:1, because then you’ll gain more from a customer than what you spent on winning them over. Of course, the higher your LTV, the more profitable your marketing efforts will be and you’ll get a higher return on investment.
Here’s a visual that explains the concept.
This is a great metric to use if you want to track how effective a newly launched feature is and how much customers love it.
It’s measured as the share of customers who use a particular feature. While that sounds simple, it’s almost impossible to track manually. You absolutely need a SaaS analytics platform or a subscription management software solution with built-in analytics to track this.
This metric helps you assess the usability and usefulness of product features and helps you improve your product in the long run.
For instance, if there’s a feature that barely anyone uses, then chances are that it’s either not useful or needs to be improved to be more effective.
Just like the adoption rate measures the usefulness of new features, this metric assesses the effectiveness of your overall SaaS product.
You can track three different metrics for this—daily active users (DAU), weekly active users (WAU), and monthly active users (MAU). To calculate these find the number of unique users in the set period.
Now, let’s discuss why this SaaS analytics metric is so important.
Overall, it’s important for every SaaS business to track its active users using a good SaaS analytics platform as it provides invaluable insights. We recommend you invest in a B2B subscription management hub that provides in-depth analytics.
This may seem very similar to the adoption rate metric discussed above, but there’s a slight difference. Unlike the adoption rate, which measures the adoption of a new feature, this one measures the frequency with which customers use existing features.
It’s great for assessing which features are popular among customers and which ones they don’t find useful.
Here’s how you can calculate it:
Feature Usage Rate = (No. of Feature Users/ Total Users) * 100
Identifying top-performing and low-performing features helps with your ongoing product enhancement efforts, so make sure you track this metric.
This is probably one of the most important metrics that all SaaS analytics software solutions must track.
It tracks how many customers stop doing business with you or cancel their subscriptions within a given time period.
Here’s the formula for calculating the customer churn rate.
Let’s say you start with 100 customers at the beginning of the period and lose 10 of them over the course of the year. Your customer churn rate will be 10%.
As you can guess, a high customer churn rate is bad for your business. It shows that customers are not satisfied with your product, service, or overall user experience.
If you want to learn more about the different reasons why customers churn, the image below shares a few.
If your customer churn rate is high, you need to figure out which of these is the root cause and fix it to improve customer retention.
While customer churn is an important SaaS analytics metric, it doesn’t always give you the complete picture. This is because not all customers are equal and some accounts are more valuable for your SaaS business than others.
For instance, a customer on your most expensive subscription plan and an annual contract is more valuable than a first-time customer who’s trying your basic monthly plan. If you lose the first customer, you’ll lose a lot more revenue than what you’ll lose with the latter.
That’s why, it’s important to calculate revenue churn, along with customer churn to get a more holistic view of the situation.
Revenue churn is measured as the revenue lost in a period and you can calculate it monthly, quarterly, annually, and so on. Here’s the formula to calculate the revenue churn rate.
As the name suggests, this metric tracks the number of customers your business was able to retain during a period. You should track this annually, though it is possible to track it more frequently if needed, especially for early-stage startups.
Here is the formula for calculating the customer retention rate for a SaaS business.
Customer Retention Rate = (No. of Customers at the End of a Period - No. of New Customers) / Total Customers at the Start of the Period
This is, of course, an important metric because it shows how effective your product actually is. If it’s not up to the mark, customers will churn. A poor retention rate could also indicate poor customer service or experience.
In any case, a low retention rate is a big red flag and you should take immediate action to improve it.
NPS measures customer loyalty by asking them how likely they are to recommend your SaaS product to their friends.
You can do this by sending a short survey where customers can rate their likelihood of recommending your brand on a scale of 1 to 10.
Here’s what this scale looks like:
Image via Gmail
People who rate 9 or 10 are loyal customers who are willing to promote your brand. Those who rate 7 or 8 are sort of neutral but can be persuaded to become a promoter. However, a rating of 6 or below is generally not considered good.
Once you get the responses, you can calculate the score using the formula below.
Image via Retently
If your business has more promoters than detractors, you’ll have a positive NPS, which is good for your business. This shows that most of your customers are happy with your SaaS product and will even recommend it to others.
While NPS tests a customer’s likelihood of promoting your brand, CSAT measures how satisfied they are with your product or customer service.
Similar to NPS, you need to send user feedback collection surveys, with a different scale, to calculate this score. It is a five-point scale ranging from extremely dissatisfied to extremely satisfied.
Here’s what the scale looks like, along with the formula for calculating CSAT.
Image via Touchpoint
A low CSAT is problematic and indicates that most of your customers are dissatisfied with your product, customer service, or overall experience with your brand. In this case, you need to dig deeper and find the cause of this dissatisfaction and fix it.
This is another metric that you can use to identify satisfied and dissatisfied customers, which is useful in customer segmentation for various business purposes.
For instance, you could send more detailed feedback collection surveys to dissatisfied customers or ask satisfied customers for referrals.
This is a SaaS analytics metric that measures the efficiency of your marketing and sales efforts. It basically calculates the return on investment on your sales and marketing spend.
Here is the formula for calculating the SaS magic number for your business.
Magic Number = Revenue Growth in a Period / Sales and Marketing Expenses During the Period
A high number shows that your sales and marketing efforts are effectively generating revenue and driving business growth and vice versa.
If you have a low magic number, you need to streamline your sales and marketing processes and make them more targeted.
SaaS analytics refers to the process of tracking key metrics that measure the performance of a SaaS business. Basically, when you collect and analyze the data points generated by your B2B SaaS business, the process is called SaaS analytics.
However, given that tracking SaaS metrics manually is extremely difficult, most businesses use specialized SaaS analytics software solutions. So, in contemporary use, SaaS analytics is used to refer to the insights and reports generated by these tools to help SaaS businesses track their key metrics.
2. Is Google Analytics a SaaS analytics platform?Google Analytics is a popular web analytics platform that businesses use to track their site’s user experience and overall performance. However, it is not a SaaS analytics platform.
SaaS analytics platforms specialize in tracking and analyzing the data generated by SaaS businesses. They track various key metrics for your business, such as revenue, churn, product usage, customer satisfaction, and more.
Google Analytics doesn’t track these SaaS metrics, so it’s not a SaaS analytics platform.
3. What is SAS analytics used for?SaaS analytics is used to measure the performance of a SaaS business in various aspects, such as revenue growth, customer retention, and customer satisfaction. It provides in-depth insights into the workings of a SaaS business to help make data-driven decisions.
4. Which are the most important SaaS metrics I should track?Here are some of the most important metrics you should track using your SaaS analytics platform:
Use a good subscription management software solution with built-in SaaS analytics and in-depth reporting capabilities. Younium is one such solution that you can consider. It provides robust SaaS analytics and tracks all important revenue, churn, and financial metrics for a B2B SaaS business.
5. How can Younium help with my SaaS analytics?Younium is an end-to-end B2B subscription management solution with built-in analytics capabilities. It can help you track key SaaS metrics and get customized reports based on your preferences.
You can use it to track all important B2B SaaS metrics related to bookings, revenue, subscriptions, billing, and more. It offers advanced analytics and is a complete SaaS analytics solution for all types of B2B businesses.
By now, you should be well aware of what SaaS analytics is, why it’s important, and which metrics you should track. Use this in-depth guide to SaaS analytics as your reference, whenever required.
We recommend using a subscription management tool that offers in-depth SaaS analytics and tracks all important metrics. Younium is a great option for B2B SaaS companies that want an all-in-one, one-stop solution for their subscription management and SaaS data analytics needs.
It provides a single source of truth for all your customer-facing teams. This ensures that everyone has access to updated and accurate data on customers, enabling them to deliver better customer experiences.
It also helps you stay on top of key metrics and regularly keep improving your products and services to drive business growth. If you want to learn more about Younium, request a demo today!