If you are reading this article, chances are you are familiar with the SaaS business model. A SaaS business depends on recurring revenue from its subscription products usually in the following three ways:
- Acquiring paying subscribers
- Retaining existing subscribers
- Up-selling to higher margin subscription-based products
Each of these methods start with significant SaaS marketing efforts to drive traffic to the site.
And while plenty of time and effort should be focused on promoting and selling your subscription-based products, you need to analyze the results to know what marketing strategies were effective. So let’s dive deeper into how you can analyze your SaaS marketing efforts.
What is SaaS Marketing Analytics?
SaaS marketing analytics is the practice of measuring all SaaS marketing efforts with the goal of creating a feedback loop to inform marketing teams of the efficiency, effectiveness, and quality of their efforts. The scope of SaaS marketing analytics includes measuring traffic and the transition of this traffic in various states including visitors, leads, and qualified leads. In some instances, marketing analytics also includes measurement of churned, re-acquired, and up-sold customers.
Even though most SaaS marketing efforts are done online, the use of multiple marketing and automation tools create silos that that make it difficult to get a comprehensive view of marketing efforts. This is particularly exacerbated through the use of marketing automation products, web analytics services, and channel marketing services (e.g. email marketing, PPC management) that are very loosely integrated with each other. An ideal SaaS marketing analytics program espouses the creation of a single, reliable view of marketing activities that provides a CMO as well as an analyst level view of marketing activities.
Since SaaS is a sub-set of B2B digital marketing, this setup is very similar to that for B2B digital marketing analytics. However, there are some key differences. With SaaS, there is a stronger focus on the measurement of transition of user states from visitor to lead to qualified lead. Often the transition between two states doesn’t happen immediately. Instead, it could take multiple visits through multiple channels before a visitor turns into a lead. Attribution plays a key role in measuring the efficiency of marketing efforts and marketing budgets. Without a comprehensive analytics setup, it is impossible to gauge marketing efficiency for SaaS businesses.
What are the most important SaaS Marketing Analytics Metrics?
Depending on the marketing/analytics platform, there are a LOT of metrics available for marketers to measure their marketing efforts. However, there are a select few that your marketing team or your SaaS marketing agency should use to essentially measure performance from the micro level to the macro level. Here are the four sets of metrics:
Let’s take a closer look at these metrics.
This is probably the simplest of all metrics. Traffic refers to the number of users visiting the website. Popular web analytics tools such as Google Analytics have trained web analysts to think in terms of sessions. While this has made analytics simpler for the average analyst, it paints an incorrect picture of activity. This is particularly true in the business world where decisions are not made at the spur of the moment. SaaS and B2B decisions typically involve research and deliberation, and can take several visits across several days before a decision is made. As a result, a person-specific metric is more meaningful than an activity level metric.
When measuring traffic, measure in terms of visitors, leads, qualified leads, and current customers. Measuring these segments of traffic isn’t easy in Google Analytics, but it is possible. More on that in a future post.
The simplest definition of conversion is the percent of visitors that do the action that is being measured. So if 3 visitors out 100 of sign up for email newsletters, then the conversion rate for email signup is 3 percent.
You may have heard the saying “All data in aggregate is useless.” This idea applies to conversion as well when looking at it at a broad level. For example, if your SaaS website’s form conversion rate is 3 percent, there would be reason to celebrate if a sizeable portion of that were lead conversion. But it wouldn’t be such a big deal if most of these were ebook downloads.
So ideally, measure conversion in sets that are appropriate for your SaaS business. Typically, a SaaS business will have at least two levels of acquisitions – those that are not quite ready to sign up for the service, and those that are either signing up for free trials or those that have downloaded data sheets.
For our purposes, let’s call these leads and qualified leads. In this case, we will want to measure lead conversion and qualified lead conversion separately. Lead conversion should measure all downloads that are not strong indicators of interest in the service. For example, ebooks downloads should be considered lead conversions, and datasheet and case study downloads should be considered qualified lead conversions.
One last conversion formula that will finish the conversion tracking conversation will be lead to qualified lead conversion. This measures the number of leads that actually turn into qualified leads over time. This is a very important interim step to measure because it provides a measure of the quality of leads being acquired, and the effectiveness of the marketing efforts being undertaken to nurture these leads into qualified leads.
In a typical B2B marketing setup, qualified leads are picked up by the sales team to follow up with. This is the handoff point from marketing to sales.
- Lead Quality:
Well defined SaaS marketing programs start with defining target personas. These personas have certain attributes such as professions, company size, industry focus, etc. While these personas may be well defined, whether marketing efforts are actually reaching these audiences can only be measured by tracking the quality of leads being acquired. Without this measurement in place, it will take several wasted sales calls before quality issues are identified.
While marketing automation tools such as HubSpot provide lead scoring mechanisms to track lead quality, this can also be done by using attributes that are specific to your SaaS company’s needs. Here is an incomplete list of attributes that could be used to track lead quality:
- Country of origin
- Number of forms submitted
- Junk data entered in name and company name fields
- Domain of email address entered
- Cost Per Lead (CPL):
With the long decision-making cycles that are typical in B2B businesses, lead acquisition can often be a multi-channel, multi-week effort. As a result, putting an exact number to the cost of a lead gets into channel attribution challenges. There are a few different ways of attributing leads to channels. Depending on the method selected, the costs can be allocated with the same distribution.
Two other variables that need to be accounted for when calculating CPL are the percentage of legitimate leads and the cost of converting a lead into a qualified lead. As you can see, calculating the cost per lead can become quite a challenge. We recommend starting simple with last channel attribution, and then introducing the complexities of accurate CPL measurements incrementally.
What baseline should be used to compare SaaS Marketing metrics?
While it is important to look at all the metrics defined above, these have little to no meaning when they aren’t compared to baselines. For each of these sets of metrics, there are five slices to use to determine performance. They are:
- Marketing channel
- Visitor Type
- Marketing campaign
- Time period
- Landing page type
By applying the above comparisons, one can get a very detailed cross-section of performance to determine root cause of changes. For example, the CMO level report will display conversion by week. But the analyst level view of the same data will show conversion by week and by marketing channel to determine whether change in conversion can be attributed to actions within a channel.
In summary, tracking performance of SaaS marketing efforts can be accomplished by applying four sets of core metrics and five different lenses or dimensions. Once these metrics are in place, analysts can focus on improving the business rather than worrying about how to measure the impact of their marketing actions. Then they are free to work toward advanced techniques to improve their SaaS marketing efforts such as SaaS marketing verticalization.