the 6 metrics every subscription business needs to track
TRANSCRIPT
The 6 Metrics Every Subscription Business Needs to Track
Lars LofgrenMarketing Analyst - October 2012 [email protected] - Confidential - Do not distribute
@larslofgren #KISSwebinar
We’ll cover...
The metrics we like to track...1
The metrics we NEED to track2
Q&A3
WHY DO METRICSMatter?
They tell us if we’re succeeding
Great metrics help us work on the right projects
THE METRICS WE LIKEToo Much
Total users
Pageviews and visitors
Vanity metrics are a distraction
We need metrics that track our business
Metric #1
MONTHLY RECURRINGRevenue
What is monthly recurring revenue (MRR)?
SaaS depends heavily on recurring revenue
All your costs are up front. And it takes a long time to turn a profit on a
customer.
Can also be tracked quarterly or annually1
Key driver of profit2
More important than monthly revenue3
Use it as your main baseline4
MRR best practices
Metric #2
USER AND REVENUEChurn
Churn is the percentage of people that bail
High churn = pain, low churn = win
Churn starts low but grows quickly
If customer growth is constant, churn will eventually match it. You’ll stop
growing.
0
200
400
600
800
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar
Cust
omer
s
100 new customers per month at 10% churn
High churn = improve your product
Once you have control of churn...
To keep growing, you’ll need to acquire customers faster every
month.
High churn = improve your product1
Who’s churning?2
Long term contracts can help3
Use cohorts to track long term changes4
Churn best practices
Metric #3
AVERAGE REVENUE PERCustomer
Average revenue per customer
The average amount that you’ve already received from customers.
Up-sells and cross-sells are the key
Up-selling = get them on a higher plan
Cross-selling = sell more stuff
Focus on up-sells and cross-sells1
Scalable pricing makes this easier2
Try bundling3
Growing average revenue can flip churn
4
Average revenue best practices
Metric #4
LIFETIMEValue
There are many different ways to calculate LTV
LTV combines current revenue with churn to predict how much you’ll earn
in the future.
Average revenue = what you already have1
LTV = What you’ll get in the future2
Different from average revenue per customer?
Churn has a HUGE impact on LTV1
Find customer segments with the best LTV2
Start with the simple versions3
LTV best practices
Metric #5
COST PERAcquisition
What’s the cost to acquire a new customer?
The importance of CPA
You don’t have a business until you can acquire customers profitably.
Get CPA for each marketing campaign
The higher your CPA, the longer it takes for you to reach profitability.
Get the CPA for each campaign1
CPA increases over time for channels2
Must be a LOT less than LTV3
Inbound marketing has great long term ROI
4
CPA best practices
Metric #6
THE SIGNUPFunnel
Track each step to becoming a customer
Don’t forget to track activation
Activation = Someone uses a core part of your product for the first time
Start with your baseline1
Look for bottle-necks2
Track activation3
Track tests through the whole funnel4
Funnel best practices
CAN WE TRACK THESE INAnalytics?
Google Analytics can’t track any of this.
You need to connect revenue to customers.
Customer analytics does this for you.
A customer analytics revenue report
We can also segment by traffic source
Where do we get customer analytics?
Monthly Recurring Revenue1
Cost Per Acquisition2
Two metrics you’ll need to pull by hand (for now)
Average revenue per customer1
Churn2
Lifetime value3
Your signup funnel4
KISSmetrics will track these metrics for you:
