The recession is always a day away, it seems.
Persistent uncertainty about the economy's near-future is bound to make the remainder of the year an unnerving time for any business—and none more so than the SaaS companies that often serve increasingly frugal businesses on a subscription basis. Not to mention the exponential increase in competition.
Unfortunately, such caprice is the nature of market predictions and fluctuations, and the confusion is unlikely to settle anytime soon.
How, then, are executives meant to market with foresight and avoid pouring time and resources into low-ROI tactics?
The answer lies in selecting those marketing key performance indicators (KPIs) that assist in navigating uncertainty.
The very concept of KPIs revolves around the conundrum of orienting oneself in a sea of predictions, statistics, and raw data—which is why they have rarely proven more useful than they are today.
There is an infinite number of performance indicators to choose from, so selecting the ones that are vital to understanding the position of one's company can be a steep challenge.
For that reason, I've narrowed them down into three categories that will allow SaaS companies to concentrate on covering their bases and aiming for growth:
- Customer behavior
- Channel management
- Internal infrastructure
Customer Behavior
For SaaS companies, understanding the businesses they serve is the starting point of coordinated marketing.
Metrics that demonstrate clearly how customers—potential or current—respond to existing efforts are the first indication of a marketing department's overall health, and the first to point out areas of urgent concern.
Among the most useful customer KPIs for a SaaS company:
- Net Promoter Score (NPS) , which indirectly measures satisfaction (and more directly loyalty) by asking how likely a customer is to recommend your service
- Customer lifetime value (LTV) , likewise a dependable (if indirect) indicator of customer sentiment, as measured in terms of profitability
- Marketing-qualified lead (MQL) and Product-qualified lead (PQL) numbers, which can demonstrate how effective the company's marketing efforts are at acquiring new customers
Channel Management
The channels through which the marketing department reaches customers are the next link in the chain.
Because every effort and strategy must ultimately be delivered to a target business, the entirety of the marketing machine relies on the successful management of these channels. Therefore, consistently measuring and optimizing the effectiveness of every active channel to determine which are useful—and which are wasteful—are indispensable practices for a SaaS company.
Digital marketing channels generally have built-in KPIs that will be readily available to SaaS companies by default:
- Clickthrough rates on marketing emails and other forms of digital advertisement should always be monitored.
- Special attention should be given to search engine optimization (SEO) metrics that concern a website's domain authority.
- Measuring the successes of nondigital efforts, such as business conferences, tradeshows, print media, and paper-mail marketing, is also important.
- More general marketing-efficiency metrics, such as customer acquisition cost (CAC) and monthly recurring revenue (MRR), can be helpful when measured by individual channel.
Internal Infrastructure
The core of any marketing system is internal. Well-managed channels and receptive businesses have nothing to convey, nor respond to, without a robust internal marketing infrastructure to produce marketing materials.
And if such attention was not warranted before, the ever-accelerating growth of the industry now certainly requires that SaaS companies distinguish themselves with high-quality marketing content. A few simple indicators can demonstrate whether a marketing infrastructure is capable of producing just that.
Funding is perhaps both the most basic of those metrics, and the most overlooked. Examining the ratio of money invested in marketing to the revenue that a SaaS company is aiming to generate may explain some of the department's shortcomings.
Whereas business-to-business sectors generally invest 5-8% of revenue on marketing, software companies invest closer to 22%, on average, according to The CMO Survey findings from 2020 and 2022.
Besides funding, internal KPIs include the rate and cost at which MQLs are converted into Sales-qualified-leads (SQLs); those measures demonstrate the efficiency with which budget is spent.
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Entering a year as uncertain as this one can make executives feel as if they are marketing blindly, while expanding competition makes marketing blindly an ever-more-grave mistake. That is precisely why designating a set of concrete KPIs is not only a necessity, but a major opportunity for SaaS companies to grow in spite of the times. By looking in the right places, detailed in the categories above, these companies can be sure to find their bearings and set their course in any weather.
More Resources on SaaS Marketing
Digging in the Wrong Place: Misunderstanding Where SaaS Growth Comes From (Article 1 of 3)
The Bow-Tie Model: Purpose-Built for SaaS Companies (Article 2 of 3)
Ten Essentials of Software-as-a-Service Solution Marketing
The Future of SaaS Sales Lies in Interactive Demos and Product-Led Growth
