As a marketer, it’s always important to stay up-to-date on the latest trends and benchmarks. After all, this is how you’ll be able to set your company apart from the competition. And when it comes to SaaS marketing benchmarks, there are some key metrics you need to know in 2021.
For example, did you know that the average conversion rate for SaaS companies is 4.8%? Or that email open rates have been declining over the past few years? These are just a couple of examples of what’s changed in the world of SaaS marketing – and knowing these changes can help you adjust your own strategies accordingly.
So if you’re ready to learn more about the latest SaaS marketing benchmarks, read on!
SaaS Marketing Benchmarks
There are two distinct types of SaaS models: high touch and low touch.
Low-touch SaaS means selling software to a prospect with little to no in-person contact. Basecamp, Trello, and Unicorn Train are examples of low-touch SaaS.
- The sales model involves offering a free trial of the product, which is promoted through digital marketing.
- Optimizing the in-product experience and adding strong CTAs within the app encourages the prospect to buy a subscription.
A more traditional approach is taken by high-touch SaaS companies like Salesforce, Reachbird, and AppDynamics.
- The sales department makes cold calls to prospective customers or gets them from marketing efforts to schedule meetings and demos.
- The focus is for salespeople to tailor their pitches to enterprises looking to roll out thousands of licenses.
Since each business model has a different sales cycle, their conversion rate differs.
Many SaaS companies use a combination of low-touch and high-touch models. This approach often starts with a low-touch model, which is then followed by a high-touch model to close big contracts and expand their business. Companies such as Dropbox, Periscope, and Tableau have all used this strategy successfully.
B2B SaaS Marketing KPIs
With a proper understanding of your key performance indicators, you can better gauge the success of your marketing campaigns.
Below, we break down our key performance indicators (KPIs) and provide some benchmark data.
We’ve found that there are 7 key performance indicators that really matter to B2B SaaS companies.
If you’re thinking about using any of these KPIs to measure your marketing success, you’ll need some benchmarks to compare against.
A marketing executive likes to see Return on Investment (ROI) as a Key Performance Indicator (KPI) because it tells them how profitable their campaign is.
When calculating your campaign’s ROI, be sure to take into account any external factors that may have affected the outcome. This will give you a more accurate picture of your campaign’s true profitability.
Here are two examples:
You attended a tradeshow and in the following month, sales for identity protection soared. But it would be wrong to assume that the expo itself was responsible for the increase. What if, the day after, there was news that a massive breach had compromised millions of identities? The sudden increase in demand may not have been solely due to the show.
But, if you invest in an SEO strategy based on consistently producing valuable, relevant, and high-quality content to your company website, then you can easily measure and track visitors through the sales cycle. The same can be said for PPC campaigns and other digital marketing campaigns: measuring their returns is easier than for more traditional forms of lead gen or face-to-face marketing efforts.
While Return on Investment (ROI) is an accurate measure of marketing success, it’s only part of the story. You will need to look at other key performance metrics, such as customer acquisition cost, to get a complete picture.
Customer Acquisition Cost (CAC)
To calculate Customer Acquisition Cost (CAC), divide the total cost of marketing by the total number of new customers.
$1 million spent on marketing divided by 1,000 new customers equals $1,000 CAC.
The CAC metric is a key performance indicator that allows you to measure and optimize your marketing spend. By calculating your CAC for each marketing channel, you can make more informed decisions on where to allocate your budget for the best ROI.
Keep in mind that lower CACs usually result in higher ROIs.
While paid search ads, such as Google AdWords, often produce faster, more immediate ROI, organic search engine optimization (SEO) can be more cost-efficient in the long run.
The best way to acquire customers is to combine several marketing channels and to use short-term, high-investment but low-return tactics to bridge that gap between now and when your marketing system starts producing results.
LTV to CAC Ratio
A widely-used metric for marketing, the Lifetime Value-to-Cost-of-Acquisition Ratio (LTV-to-CAC) is the ratio of the net profit you make from a client to the amount you have spent on acquiring that client.
If your Lifetime Value is at least three times your Customer Acquisition Cost, you’re doing pretty well.
However, some executives believe that you should spend big in order to earn bigger.
Other experts suggest if your ratio is 10:1, you might be over-emphasizing your short-term profit over the growth potential of your company. Here is what you should take into consideration when determining your target LTV-to-CAC:
- Not all companies need to grow fast. In such cases, a high LTV-to-CAC ratio is ideal.
- LTV and CAC rise and fall as SaaS businesses evolve.
- Marketing channels affect LTV-to-CAC ratios. Paid ad channels increase the CAC while organic channels are cheap.
SaaS companies that want to maintain a healthy growth rate long-term should target an LTV to CAC ratio of 6:1.
It’s natural for customers to leave, but we want to minimize that as much as possible.
Churn refers to customer turnover. Let’s say you have 1,000 customers and lose 100 during the year. This gives you an annual churn of 10 percent.
A yearly customer turnover of 10% is quite high for a B2B SaaS organization. According to our observations, a 5-7% turnover rate is average.
While it may seem that churning is only relevant to your customer service team, it has an important role to play in your marketing efforts.
Churn can indicate whether the target audience is being reached and if the value proposition is resonating. If churn rates are high, it may be necessary to revisit the campaign strategy.
Your marketing campaign might be successful in attracting a large number of customers, but if they are not the type of customer you are looking for, you will find yourself in a situation where customers come and go instead of staying.
To reduce churn, it is important to understand the psychology of your best customers.
Talk to your existing customers, interview them, and create customer profiles based on their problems. Your development team may have overlooked some secondary use cases.
Understanding your buyer personas is a lot like understanding how to structure your keywords for search engine optimization.
Marketing Qualified Lead (MQL)
It’s one thing to get people to visit your website. But it’s a whole other challenge to get the right people to visit your site – people who are part of your target audience and fit the marketing personas you’ve developed. These are the types of visitors who are most likely to become MQLs.
MQLs are more valuable than other types of visitors because they are more likely to convert into customers.
This KPI is key in understanding the success of your marketing campaigns and can help guide where you allocate your marketing budget. By knowing what percentage of leads are MQLs, you can make more informed decisions on where to focus your marketing efforts.
This metric is closely tied to the marketing sales funnel, which turns website visitors into potential customers. The first stage of the process is for visitors to become qualified leads.
A “lead” is any prospect who has provided you with their email address or phone number. This could include signing up for your newsletter or downloading a whitepaper.
You can follow up with leads in a variety of ways, depending on whether or not they are part of your target audience. If they are part of your target audience, you can pursue them further.
Unique website visitors are key to successful digital marketing. A goal of 10% month-over-month growth is reasonable, with at least 70% of traffic coming from organic marketing channels. By tracking unique visitors, you can see which areas of your site are most popular and make sure that your marketing efforts are driving results.
Once you’ve determined how many visitors your site gets, you can measure where they go after they’ve left. You can also determine how many come back for a second, third, or fourth time.
This metric, which measures how often visitors return to your site, provides insight into how healthy your business is.
You can expect 4-5% of your visitors to return after their first visit.
How to Choose the Right Benchmarks for Your Business
With so many different benchmarks available, it can be tough to decide which ones are right for you and your business. The best approach is to treat it as a project with its own unique set of goals.
Here are some things to consider.
Who is the Decision Maker?
As we have seen, there are many ways to define success for a SaaS business. What is most important is that your metrics and KPIs are aligned with your priorities.
Therefore, it is important for leaders to exercise benchmarking, but it can be beneficial to involve other stakeholders as well.
For instance, if a business is looking to go public or raise a new round of funding, there may be certain metrics that investors expect to see.
In addition to the leadership team, experienced colleagues outside of the organization may be able to provide more granular insights and observations in deciding benchmarks for their specific line of business. This input can be invaluable in ensuring that the benchmarks set are achievable and realistic.
Input vs. Output
One of the first decisions that need to be made is finding the right balance for input and output metrics. Input measures are activities that result in something (like a sales lead), while output is the result itself.
For example, input benchmarks can be predictors of new customer growth, which is the output benchmark.
If you are only looking at your output metrics, you might miss the true root cause of a problem. If you only focus on your input, you might be relying too much on your power of prediction.
Benchmarking is a lot of work, but if you can get your hands on the right data and crunch the numbers, it can be very rewarding.
But getting all the data you need from external sources can be both expensive and difficult.
One of the challenges with benchmarking is that data sources can often be disparate and supplied in different formats. This can also be an issue when benchmarking internally.
SaaS businesses, especially mid-size ones, often have to manage hundreds of different software systems. This can lead to data being spread across multiple silos, which can then make it difficult to find and use the data effectively. It is therefore important to be able to find and extract data quickly and accurately, without duplication.
Benchmarking can be an extremely useful tool for businesses in terms of helping to make informed decisions and setting goals. However, it is important to avoid looking at too many benchmarks as this can create unnecessary confusion and noise.
Benchmarking is most effective when you segment the data. This allows you to discount less relevant points of comparison and outliers that can skew results. However, there is a trade-off between how forensic you need to be to get the information you really need.
Instead of asking “Is this useful?”, ask yourself “Can this be implemented?”.
When benchmarking SaaS markets and businesses, it is important to consider not only the value of the benchmark itself but also how it relates to other benchmarks you have selected. This is because SaaS markets and businesses are a complex maze of connections and interdependencies.
By taking into account the relationships between different benchmarks, you can gain a more comprehensive understanding of the SaaS landscape.
The ideal situation would be to have a set of benchmarks that are interdependent – in other words, a positive movement of one benchmark should result in a positive movement (directly or indirectly) in the rest, and vice-versa.
SaaS businesses should never be static – they should always be adapting to new opportunities and challenges that come their way. By being proactive and constantly looking for ways to improve, you’ll ensure that your business is always moving forward.
It’s important to keep your benchmarks updated on a regular basis – quarterly reviews will ensure that they remain relevant to your business.
As you can see, there are some key SaaS marketing benchmarks that you need to be aware of in 2021. By understanding these trends, you’ll be able to adjust your own strategies and stay ahead of the competition. So don’t wait – start implementing these benchmarks into your marketing plans today!