There are a lot of moving parts when it comes to ensuring your subscription business stays healthy. And SaaS analytics play a crucial part. Tracking certain analytics will help keep you informed and alerted of your company’s health.
There are a lot of tools out there, but they’re not one-size-fits-all. Find out why SaaS analytics are important, which to track, and which tools are best for your subscription business.
What are SaaS Analytics?
SaaS analytics are analytics specific to the SaaS subscription industry. SaaS analytics uncover things like churn and track metrics like monthly recurring revenue (MRR), lifetime value (LTV), and churn rate.
Why SaaS companies HAVE to focus on their analytics
SaaS is a different animal than other areas like ecommerce, and tracking SaaS analytics will protect your company against lost revenue and churn—things that have a huge impact on your business. If you’re tracking the right KPIs, then you’ll have tangible data points that yield actionable insights, and you’ll be able to adjust your business in real-time to maximize growth.
SaaS analytics tools help you uncover where your worst churn may be hiding—whether it’s intentional or not—and from which customers. While many analytics tools may give you basic insight on churn, SaaS-specific analytics help you dig deeper. Once you know the reason behind your churn, you can stop it at the source.
Segmenting customers is far more valuable than most people think. When you segment customers by industry, MRR, LTV, or even churn rates, you can better understand user behavior and begin to optimize your audience and customer targeting. Customer segmentation will give customers a tailored experience, boosting customer success and overall revenue.
Highlight the most profitable customers
Your most profitable customers will have the highest LTV. Once SaaS analytics tell you which customers have the highest LTV, you can find what makes these specific customers so valuable and why they choose to stick around. Knowledge of that information will help you with other and/or future customers.
You may be running a campaign that sends a bunch of dunning emails to customers who are close to churning. You need to be able to track this in order to see why these campaigns work best and why some may not. You can also track areas of improvement for future campaigns.
The 4 best SaaS analytics tools
The tech space is inundated with tools, so it can be overwhelming trying to decide which is best for your business. So, to help you, we’ll break down the pros/cons of the top four.
ProfitWell Metrics provides a fantastic overview of everything happening in your subscription business, from churn rates to delinquencies. ProfitWell Metrics has been trusted by more than 10,000 successful SaaS subscription companies.
We guarantee 100% accuracy. ProfitWell accounts for more than 1,000 edge cases to ensure your financial metrics are accurate. ProfitWell Metrics is unquestionably reliable. You don’t have to concern yourself with technical difficulties. And Metrics also offers optional paid add-ons to reduce churn and improve pricing. Included with Metrics is Benchmarks, a tool revealing how your metrics stack up against the largest data set in the subscription universe.
Metrics has little out-of-the-box customization to change the methodology in how we calculate metrics.
Google Analytics is customizable to your website. It’s also easy to learn and use. Other reviews describe Google Analytics as a one-stop shop for all of your website’s data. It allows you to see your website’s performance across a range of different time scales while also comparing the performances of different channels, platforms, technologies, demographics, and campaigns.
Some people say Google Analytics is not actionable and not as robust as some other paid platforms. It’s also not entirely independent since it’s Google reporting on Google.
Basic Analytics is free but Analytics 360 is priced on a case-by-case basis.
BareMetrics boasts one-click integration with popular billing systems. It also offers something not many other analytics tools have: cancellation insights. Reviews say it’s easy to use, install, has flexible pricing, and good for goal setting.
Some reviews also say the accuracy is not reliable, especially since the data is collected from very small companies.
14-day free trial. Pricing is based upon your company’s current MRR. If your company rakes in $300,000 per month, your price would be $350 a month.
A cool feature by ChartMogul is the geographical heat map of where revenue and customers are coming from. Users also enjoy additional customization in metrics. Reviews applaud ChartMogul for its data ingestion, analysis, insights, and customizability.
Currency fluctuations are a noted con. ChartMogul succeeds in converting payment currency into operating currency, but doesn’t support using the currency data to show how fluctuations in exchange rates impact changes in metrics overtime.
Depends on plan. Launch is $0 if your MRR is less than $100; Scale is $100/mo for growing subscription businesses; Volume is custom pricing for high-volume businesses.
The 5 SaaS metrics to track
Customer churn is vital to understand the health and stickiness of a business. Your churn rate is the percentage of customers that leave your service over a given period of time divided by the total remaining customers.
Tracking churn rate is important because it’s a direct reflection of the value of the product and feature you’re offering to customers. Your company should constantly optimize its product to reduce churn rate.
Annual recurring revenue (ARR) and MRR are two additional important metrics to track. MRR is the normalized monthly revenue of all the recurring items in a subscription. ARR is MRR multiplied by 12, accounting for the year’s worth of revenue. Tracking monthly and annual recurring revenue metrics allows you to plan for the short and long-term.
LTV is the total dollar amount you’re likely to receive from an individual customer over the life of their account with your product. LTV allows you to account for and accurately predict your business’s revenue and profit over time, rather than just going by upfront metrics like conversion rate. Tracking LTV is crucial because if it’s not higher than your customer acquisition costs (CAC), then you are losing money.
Average revenue per user (ARPU) is simply the average amount of monthly revenue you receive per user. It’s often seen as a vanity metric, but it helps you identify trends in a group of customers booked within the month against different cohorts and segments. Tracking ARPU means you can identify trends and implement changes that can shift the trajectory of your business toward a larger pool of SaaS profits.
One last metric you absolutely need to track is CAC, or, the total cost of sales and marketing campaigns required to acquire a customer. The challenge is spending the right amount to drive new customers without jeopardizing LTV. Successful Software-as-a-Service businesses calculate CAC correctly and use that information to quantify and optimize their marketing funnel.
SaaS analytics help build better subscription businesses
SaaS analytics will help you make sense of your data, so that your business can grow. ProfitWell has helped thousands of subscription businesses track and maximize SaaS analytics.
Take Wootric—a modern experience management software for the customer success champion. Wootric is used by companies in more than 75 countries.
Jessica Pfeifer, Chief Customer Officer and Co-Founder said,
“In the case of running your business, feedback is a gift, you just have to take it in. Yeah, you’ll get some bad feedback. But, you’re also going to get some wonderfully powerful proof points of what you’re doing right.”
Pfeifer said she stumbled across ProfitWell while researching how to make financial reporting more streamlined than using spreadsheets. She said,
“I think for me, ProfitWell was an extremely intuitive way to start looking at my metrics. It was just a nice, magical improvement from my spreadsheet life.”
Pfeifer recommends ProfitWell to subscription companies in the growth stage who don’t have a financial resource on the team. For her multi-tasking startup, Pfeifer said ProfitWell has given her more time to focus on the customer rather than the operational aspects of Wootric.
UrbanSitter is another ProfitWell user that saw results in about 12 weeks. UrbanSitter is a San Francisco-based online and mobile service connecting parents with babysitters and nannies. It’s been operating for about 10 years, used in more than 65 cities in the U.S., and hosts 500,000 care providers.
CEO Lynn Perkins said,
“When we hired ProfitWell we realized we were basing our prices off of very little data. There are not a lot of companies like ours out there, so we were doing a combination of pie in the sky and what we were hearing from user feedback. But none of it was really collected scientifically on the user feedback.”
UrbanSitter previously charged a single price for occasional and recurring customers. After examining metrics like conversions, ARPU, and LTV, UrbanSitter learned there was significant room to increase the recurring price.
ARPU nearly tripled within three weeks. ProfitWell also helped the team at UrbanSitter increase conversions and improve the internal analytical process.
“Seeing the actions that we’ve taken to implement the ProfitWell ideas come to fruition with the results we were hoping, it’s really powerful for the team,” Lynn Perkins, CEO of UrbanSitter.
Your company’s health for the long-term
You don’t track a few SaaS analytics then call it a day. Everything mentioned above needs to be a consistent process, and always top of mind, in order to keep your business’ health up to par.