Data is the oil of SaaS. Everyone wants access to it, but if left unrefined, it has little value. However, with the proper tools, data allows you to extract business-changing insights. Subscription data helps SaaS companies determine how customers respond to their current product and pricing—for good and for ill.
But how do you collect and extract value from all this data? What exactly can you learn from your customer movements and churn rates? In this article, we’ll dive into the most potent metrics your company should pay attention to and help you understand how to leverage them for actionable outcomes and business growth.
The conversion rate of your users to paid subscriptions or annual contracts is an essential metric for forecasting the growth of your SaaS. Studying your closed/won or closed/lost deals (if you’re in a sales-led model), or the conversion rate of free trials gives SaaS leaders insight into the viability of their product.
One popular method you can use to test your conversion rates is with a freemium sales model. A freemium subscription model is commonly deployed in product-led growth companies to acquire new customers and generate demand. Based on the actions of freemium users, SaaS organizations can analyze their conversion rates and pinpoint deficiencies in their products or processes.
For example, if users are not converting because they’re receiving enough value from a free plan/subscription, you may need to insert a paywall earlier in the customer journey. You can also limit the features available in a free plan to encourage users to convert sooner.
However, If customers are not converting because they are not receiving enough value, rally up your product team and ask the following questions:
At what point in the freemium plan are users dropping off?
What are the features that freemium users value most?
What are the most commonly cited reasons for freemium user churn?
SaaS companies can use these insights to change their product and test conversion rates accordingly.
Customer and User Feedback
Customer feedback is the best source of qualitative data that SaaS companies have easy access to. You can gather customer feedback through the following channels and methods:
Social media forums
1:1 calls via your Customer Success team
Gauging Customer Feeback
Do customers understand your product’s value?
A SaaS company’s value proposition is its guiding principle—it’s a declaration of how your product or service helps buyers solve real-world business problems. If your product isn’t showing the same value outlined in your value proposition, customers will start to walk away. So how do you determine what your customer think about your product?
Here are several methods to gauge the satisfaction of your users:
Test your strategic narrative:
Using tools like Wynter, B2B companies can test their messaging and receive actionable feedback from target buyers. SaaS companies should also consider testing messaging with their current customer base to ensure that their strategic narrative aligns with customer expectations.
Consult with your Customer Success team:
Ask your CS team what current users value most about your product/service. How would they describe your product to their colleagues? What made customers adopt your solution over a competitor?
Talk to Sales:
Your sales team can provide information about what convinces buyers to sign up early on in the customer journey. Record and keep track of what encourages buyers to choose your solution—whether it be your pricing and packaging, specific features, available integrations, etc.
Are you reaching out to trial customers too much, too little?
Studying the effectiveness of in-app communications and sales outreach helps SaaS companies nail their messaging. To test this data, track interactions and response rates to in-app messages and outbound communications from your sales and marketing teams. Based on your customers’ response rates, you can test several iterations of your messaging and determine when (and how) to communicate with potential buyers.
Analyzing your subscription data starts with tracking the right SaaS metrics. Here are a few customer movement metrics SaaS companies should measure:
Average Revenue Per User
Studying the ARPU of different customer segments helps SaaS companies identify which customers yield the highest ROI. You can ask your CS team to run a cohort analysis of your separate user segments and determine who your least profitable customers are.
Your upsell rate is the percentage of customers within a given cohort who purchased additional software or services. While many SaaS companies focus on the acquisition of new customers, the state of your upsell rates could reveal opportunities to monetize your existing customer base for additional revenue.
Usage Growth Over Time
There’s a reason Facebook employs an algorithm dedicated to keeping eyeballs on the screen. A steadily increasing usage growth rate amongst current customers means they’re likely to opt-in to premium features and tell their peers about the software.
By tracking usage growth amongst current customers, your company can determine what keeps them interested and engaged in your SaaS.
Identify customer renewal rates across the different products, pricing plans, and customer segments of your SaaS. Steadily increasing and consistent renewal metrics keep SaaS organizations in business and accurately reflect the current health of a subscription-based business.
Scrubbing the data often leaves SaaS companies face-to-face with the harsh reality of churn. As painful as it might be, analyzing the reasons behind customer churn can give SaaS organizations quick insights into why their renewal rates are dropping.
Let’s look at the different types of churn that exist in SaaS businesses. MMR churn is the loss of existing revenue every month due to customers leaving or downgrading their services. Understanding this metric is vital when forecasting business growth; it’s also an excellent reference for product teams to determine the stickiness of the platform.
Start with the gross MMR churn for a realistic representation of a business’s health. This metric shows how much revenue is lost to churn in a set time.
Net Revenue Retention
Next, let’s check out NRR. This metric shows the net revenue lost or gained in a defined period.
The Bottom Line
Learning from subscription data is essential for SaaS companies because it helps business owners understand what customers want and need from a SaaS platform. It’s essential to keep tabs on subscription data, whether you’re tracking conversion percentages in a freemium model or learning what makes customers sign up and stick around.
If you’re looking for a better way to track essential metrics like NRR, Gross Churn, ARPU, and other important SaaS metrics—you need the proper tools. On the Maxio platform, B2B SaaS business owners have access to in-depth customer data analysis, simple subscription management, and effortless payment and accounting solutions. Request a demo and see why Maxio is the #1 billing and subscription platform for SaaS companies.