B2B SaaS Marketing KPIs: Behind the Numbers
KPIs are among the most important metrics available to B2B SaaS marketers. In over a decade working with B2B SaaS marketing clients, we’ve found that there are 7 that truly matter. They are:
- Return on Investment (ROI)
- Customer Acquisition Cost
- Lifetime Value-to-Customer Acquisition Cost Ratio
- Annual Churn
- Lead-to-MQL Conversion Rate
- Visitor-to-Lead Conversion Rate
- Unique Monthly Visitors
If you’re considering using any of these KPIs to evaluate your marketing, you’ll need success benchmarks for each. The table below contains those, based on data from 41 B2B SaaS clients that have worked with our agency.
Benchmarks for B2B SaaS Marketing KPIs
|Campaign ROI||SEO: 748%
|Trade Shows: 85%
LinkedIn Ads: 94%
|Lead-to-MQL Conversion Rate||39%|
|Visitor-to-Lead Conversion Rate||1.9%|
|Unique Monthly Visitors||10% growth month-over-month|
B2B SaaS Marketing KPIs: Numbers and Nuance
Armed with success benchmarks for KPIs, you can measure a marketing campaign’s results; however, it’s important to properly understand the numbers in order to use them more effectively.
Below, we break down the KPIs in more detail and provide more granular benchmarks drawn from our proprietary research.
CMOs tend to like ROI as a KPI because it tells an important part of the story: the total profit or loss compared to the cost of your marketing campaign. However, when calculating your ROI, you must control for factors outside the campaign that may have influenced the outcome. Here are two examples:
- You attend a trade show and in the following month, sales of your identity protection software flourish. It would be tempting to take the increased profit, subtract the cost of the trade show and declare victory! But not so fast: What if the day after the trade show there was news of a huge data breach that exposed millions of people’s information? The trade show itself would not have been solely responsible for the increased demand for your product.
- On the other hand, let’s say you invest in an SEO campaign grounded in regularly publishing thought leadership content to your website. Then, it’s easy to track visitors to your content and follow them through the sales funnel for a much more direct measure of ROI. The same is true for PPC and other digital marketing: tracking their return is much easier than for traditional lead generation or in-person marketing techniques. Note, however, that visitors will often be touched by multiple online campaigns, and your team should create an attribution model to determine which channels should receive credit.
When it comes to KPIs, ROI provides the highest level view, but as the examples demonstrate, you’ll need to examine other metrics to form a complete picture of your marketing performance. The next of these metrics is Customer Acquisition Cost.
Customer Acquisition Cost
Customer Acquisition Cost (CAC) is the total cost of all of your marketing and sales efforts to acquire new customers divided by the total number of new customers, as shown in the formula below:
So that you can get a better sense of what a good CAC is in various SaaS industries, here is our benchmark data for ten markets:
|SaaS Industry||Average CAC||SaaS Industry||Average CAC|
Source: The SaaS LTV to CAC Ratio
The CAC metric is most effective when you can calculate it for each marketing channel you invest in, allowing you to make the most efficient use of your budget. Ideally, you’ll want your CACs to be as low as possible as this leads to the highest ROI.
Often, the channels that produce results the fastest, like PPC, will result in higher long-term CACs than slow and steady methods like SEO. The best customer acquisition strategies will combine multiple channels, using fast-payoff but high CAC campaigns to bridge the gap while setting up their long-term lead generation systems.
Where this is when compared to the long term value of each customer, or in other words, your LTV to CAC Ratio.
LTV to CAC Ratio
A well-known B2B SaaS Marketing KPI, the LTV-to-CAC ratio is based on two numbers: the gross profit you will make from a customer and the money you spent to gain that customer. Conventional wisdom is that if your LTV is three times your CAC (a 3:1 ratio), you’ve done well.
Of course averages are just that: average. Some marketing executives and CEOs believe in spending a lot to earn a lot, prioritizing high growth. Others suggest that if your ratio is too high—say 10:1—you might be overemphasizing your immediate profit margin over the growth for a healthy company long-term. Here’s what you should consider when deciding on your target LTV-to-CAC ratio:
- Not all SaaS companies are in high-growth mode. In this case, a high LTV-to-CAC ratio is desirable.
- LTV and CAC rise and fall as software businesses (and marketing departments) evolve.
- Marketing channels affect LTV-to-CAC ratios. Paid channels raise CAC. Organic channels are cheaper.
Given all those considerations, we believe a ratio of 4:1 is a better target for SaaS companies that aren’t seeking extremely high growth. As with other metrics, though, your ideal LTV:CAC ratio will vary by industry. The below table shares LTV-to-CAC ratio benchmarks for 10 SaaS industries.
|SaaS Industry||LTV Benchmark||CAC Benchmark||LTV:CAC Ratio|
Source: The SaaS LTV to CAC Ratio
Customers come and customers go. It’s the latter we try to limit.
Churn tells you the story of customer turnover. Say you have 1,000 customers and you lose 100 of them over the course of a year. That means your annual churn is 10%. This would be high for a B2B SaaS company; according to our experience, an acceptable churn rate is 5-7%.
While it may seem like churn is a KPI that is only relevant to the customer service or retention team, it has an important role in marketing. It tells you if you’re reaching the right audience with your campaigns, and if you’re communicating the right value proposition. In other words, your marketing campaign might get big numbers of customers in the door, but if they aren’t the kind of customer you’re looking for, you will be caught in a revolving door of customers who come and go instead of sticking around.
To lower your churn, you need to understand the psychology of your best customers. Interview those customers, create personas based on them, and identify the problems that your software solves best—there may be a secondary use case that your dev team hadn’t considered. This is a process that is not unlike understanding your audience for SEO, or for improving your conversion rates.
Lead-to-MQL Conversion Rate
|Stage of Funnel||SEO||PPC||Webinar|
It’s one thing to get people onto your website and it’s another for them to be the people you are looking for. The very definition of an MQL is someone who is part of your target audience or someone who fits the marketing personas who have developed. MQLs are far more valuable than run-of-the-mill visitors.
With an average of 39%—leads who are actually MQLs—you can use this KPI to inform the success of your marketing efforts and help you know where to direct marketing budget.
Visitor-to-Lead Conversion Rate
This KPI is also related to the marketing conversion funnel that turns visitors into customers. Visitors becoming leads is the first stop down the funnel.
A lead is any visitor who has taken that first conversion action and provided some contact information. This includes email newsletter signups, or registering to access a gated white paper.. You then can choose how to follow up and, depending whether they might be a part of your target audience, pursue them.
Unique Monthly Visitors
Total unique website visitors are a key leading indicator for digital marketing. The goal for unique visitors—reasonably attainable—is 10% growth month-over-month, with at least 70% of the traffic coming from your use of organic marketing channels.
Once you know the number of unique visitors, you can also track where they go on your site, as well as how many of them return for a second or third visit. This repeat visitor metrics, will provide an indication of the health of your website and how useful it is for your customers. You should also expect 4-5% of your visitors to return after their first visit.
How To Make the Most of the Numbers
There is a lot of data to consider and KPIs do not always paint the clearest picture. Unless you have extensive in-house experience, it might be time to consider partnering with an agency like ours to help you identify and analyze the B2B SaaS Marketing KPIs that are most important to you.
First Page Sage has more than 12 years of experience working with a variety of B2B SaaS clients, specializing in Thought Leadership SEO and lead generation. If you’d like to know more about our services, schedule a call.