If you don’t know how to use analytic tools - they are a headache. If you do, they are a relief pill.
Analytics appliances – a reason for a headache or a pain relief pill?
Sweet dreams are made of high revenue and customers’ satisfaction if you run a SaaS project. But how do you know the exact number of zeros coming to and out of your account? How can you be sure your clients use the software you offer and do not roll their eyes? Well, you recall math lessons from college and track. Why?
Tracking is a way of noticing the negative and positive trends composed of tiny details you don’t see with your bare eyes. When you record each day during the month, you understand that you undersleep and drink too much coffee and this is the reason for your tiredness. When you track your expenses, you may figure out that each week on Monday you spend too much money on sweets because this is the day when you feel stressed out. Knowing the results of your experiment, you can prevent chronic stress and budget holes by throwing away a jar of coffee and scheduling yoga class. It is easier to solve a few problems and implement minor changes and prevent losses.
Likewise, in SaaS, and any other business. When you track the most important metrics, you will identify the negative tendencies if there are any. That is why clients’ reactions are essential. It is the light, helping you to go through the darkness without damaging your legs and the objects around. That’s why companies strive so much to gather reviews. However, people do not always enjoy spending time giving feedback. They don’t like something – they stop using the tool and leave you with no explanation. Here’s why you need analytic tools – to consider all the factors, influencing your customer’s behavior. These tools are a necessary part of all marketing strategies because every sale on the Internet is an experiment. Offline you receive the opinion – sudden smiles and frowns point to the quality. On the Internet, you are half-blind. However, if you get a great command in using analytics tools, you will base your planning and strategies on something more than just senses. Scientifically gathered data will back you. If you don’t know how to use it – it’s a headache. If you do, it’s a relief pill.
What are the symptoms? Top saas metrics and estimation criteria
As soon as you understand that, okay, you do need to track many questions that occur. How? Where? When? What?
HOW? Regularly (weekly/monthly/yearly) and with the help of the tools, we describe in a few abstracts.
WHERE? On the platforms. Many analytics apps are SaaS products themselves. So, the only thing you’ll need is an Internet connection. Zero setups, constant customer support if you don’t know something and the ability to shift to another platform is the project grows.
WHEN? The sooner the better!
WHAT? The main metrics are churn rate, ARR & MRR, LTV, CAC, and COGS.
Now, if you already understand it all – keep reading and refresh your memory. If all these words and contractions confused you – breathe in and breathe out. Remember – every difficult term stands for simple things.
CHURN RATE
Anytime customers stop using your product, they create a churn rate. The more people unsubscribe, the higher the rate. The first thing to remember is that it always happens to every SaaS product. People are different. Some will like your product, some won’t. However, if the number of clients who go away exceeds the number of fresh ones – it’s the time to look for major issues like bugs, poor product quality or customer support and others. Below is the Churn Rate formula.
CR = Churn Rate, C1 = the number of clients at the beginning of the month, C2 = the number of clients at the end of the month.
CR = (C1 – C2) / C1 * 100%
e.g. Jack had 10 clients on the 1st of January. Then the epidemic broke down and it decreased to 5.
Jack’s CR = 10 – 5 / 10 * 100% = 50% – the percentage of clients he lost. 50% is a lot, especially if we talk about 1 000 000 clients instead of 10. An average churn rate which is considered normal is ~6.19%. However, the less – the better.
ARR & MRR
These are the main metrics for SaaS – Annual Recurring Revenue and Monthly Recurring Revenue. It is the average sum of money you always get during a specific period. It is okay if in January you get $100 and on March 50. The average sum is $75. However, this is only rough because calculating ARR and MRR is pretty difficult. Many companies do it incorrectly and cannot deliver the actual state of affairs to your investors, stakeholders and, well, yourself.
The components of MRR and ARR:
monthly expenditure on one client;
a shift to a more or less expensive tariff plan for each client. (Expansion MRR/Lost MRR);
churn rate (Churned MRR).
CAC AND CUSTOMER LTV
Customer Acquisition Cost shows the sum of money you spend to attract each customer to your product and make them subscribe. To find CAC, you need to divide the total cost of sales and marketing by the number of recent clients.
If you spend $1000 and get only 2 new subscriptions per month – the worth of one client is $500 which can be pleasant for clients but not for you.
Customer Lifetime Value is the sum of money you spend on one customer throughout the entire period of using your app. To measure it, you need to show how much revenue you get from the client and divide it by the number of finances you spend on customer service, updates, and personalization.
COSTS OF GOODS SOLD
This shows the expenditure on product creation and maintenance. Here, you need to find out how much money you spend on hosting the development of additional features and their maintenance, data communication, customer support, and training personnel costs. A successful SaaS product will have COGS equal to less than 20%.
Top 5 analytics tools for SaaS
PROFITWELL
About:“We’re SaaS obsessed, are you?”. Yes, this analytics tool is created especially for SaaS. That’s why it contains all the metrics for this particular product we’ve described earlier. Here you can even detect the nature of your average customer. You can differentiate the retrieved data by gender, location, usage and other 107 segments inbuilt in the tool. This is all for free. However, if you don’t want to work on your analytics, ProfitWell offers its paid service. They provide unique solutions for B2B, B2C, Media, and Non-Profit businesses.
Features for SaaS:
Daily growth updates;
Revenue trends;
Growth trends;
Churn and retention trends;
Cash flow breakdown;
Cohorts report;
Customer billing activities.
Pricing:
$0 per month for the unlimited number of users. Access to all basic features.
$X per month for the Churn Rate reduction and income recovery. The price makes up a percentage from the recovered sum.
$1000 per month for ProfitWell to cover all analytics work for you.
Pros and cons:
+ all subscription, financial metrics, and analysis results in one place;
+ accuracy;
+ churn reduction (paid);
+ easy setup;
+ integrates with Zuora, Chargebee, Stripe, Braintree, Slack.
– they support only the English language;
– scaling costs (if you go for a paid plan);
– too many features are hard to filter.
GOOGLE ANALYTICS
About: Free website analytics service by good old uncle Google. It gives you statistical information about how the customers use your website. It is not created for the needs of SaaS. Google Analytics is multi-dimensional.
Features for SaaS:
User and Conversion Modeling;
Audience Reports;
Advertising Reports;
Acquisition Report;
Behavior Reports;
Conversion Reports;
Real-Time Reporting;
User Flow Reporting;
Data Access;
Segmentation;
Visualization and Monitoring.
Pricing:
free;
enterprise 360 – depending on the scale of the business.
Pros and cons:
+ use it on different platforms with an internet connection (computer, smartphone, tablet);
+ Google Analytics Academy;
+ use it with Google Ads account (combine data analysis and marketing);
+ customization choose specific metrics for SaaS;
– intricate (that’s why you’ll need the Academy);
– complicated – many dashboards and settings.
BAREMETRICS
About: A tool maintained by a small team of 11 people. “We’re a small team doing big things. We work hard and play even harder.” The number of customers they have worked with is 800+. Provides dashboards using Braintree, Recurly, and Stripe.
Features for SaaS:
Smart Dashboards for everything from Recurring Revenue to Customer Churn;
About: A web and mobile analytics platform trusted by the world’s leading companies like PayPal, Microsoft, Patreon, Instacart, Cisco and Adidas. 30,000+ Applications, 25 trillion user behavior actions 22 Fortune 100 customers1 trillion data points tracked every month.
Features for SaaS:
Hourly segmentation;
API access;
Custom dashboards;
Dashboard email reporting;
Push notifications;
Revenue analysis;
Segment comparison;
Unlimited user activity feeds;
Behavioral cohorts;
Customizable conversion windows.
Pricing: It has three available plans – Free, Growth and Enterprise. To find out the price for the last two, you need to contact the company.
– long loading time for dashboards with a larger number of different graphs;
– difficult training and adapting;
CHARTMOGUL
About:“We’re here to help you understand and grow your subscription business”. ChartMogul is built by an international team hailing from fifteen different countries and worked with 1000+ customers, having analyzed 100 000 000+ subscriptions. Their clients are Instapage, Meditopia, Frontify, and LiveChat.
Features for SaaS:
Annual Recurring Revenue;
Cash flow;
MRR movements;
Data analysis;
Performance metrics;
API access;
Billing integrations;
Merged customer database;
Custom Charts.
Pricing: depends on your MRR;
e.g. MRR= $50,000, the pricing = $225/month
MRR = $300,000, the pricing = $850/month
FREE for less than $10K in MRR. For subscription businesses with over $10M annual run rate – starting from $2,000/month.
Pros and cons:
+ the comprehensive chart features;
+ easy-to-understand tooltips;
+ intuitive structure and Little training required;
+ 24/7 support;
+ integration with Stripe, Braintree, Google Play, PayPal, and Chargebee;
– does not offer a 100% integration with Stripe;
– no daily digest email;
– sometimes the MRR can be off.
Tips for choosing
1) Decide what features and metrics you need the most. If it’s SaaS then it is better to go for the tools that were initially created for such type of product.
2) Think about the level of support you will need. Are you familiar with the statistics? Will you need to refer to the company to get explanations of some features?
3) Watch demos. Each of the tools we described above has well-constructed demos, explaining what they are working with.
4) Identify your budget and the scale of your business. If it’s a startup, better go for free plans.
5) Watch the case examples.
6) Just try. These companies are also SaaS and there’s nothing to restrain you from changing the platform in time.
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