The 6 Metrics Every Subscription Business Needs to Track

The 6 Metrics Every Subscription Business Needs toTrack Lars Lofgren Marketing Analyst - October 2012 info@kissmetrics.com - Confidential - Do not distribute

@larslofgren #KISSwebinar

We’ll cover...1 The metrics we like to track...2 The metrics we NEED to track3 Q&A

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 RECURRING Revenue

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.

MRR best practices 1 Can also be tracked quarterly or annually 2 Key driver of profit 3 More important than monthly revenue 4 Use it as your main baseline

Metric #2 USER AND REVENUE Churn

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.

100 new customers per month at 10% churn 800 600 Customers 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar

High churn = improve your product

Once you have control of churn... To keep growing, you’ll need to acquire customers faster every month.

Churn best practices 1 High churn = improve your product 2 Who’s churning? 3 Long term contracts can help 4 Use cohorts to track long term changes

Metric #3 AVERAGE REVENUE PER Customer

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

Average revenue best practices 1 Focus on up-sells and cross-sells 2 Scalable pricing makes this easier 3 Try bundling 4 Growing average revenue can flip churn

Metric #4 LIFETIME Value

There are many different ways to calculate LTV LTV combines current revenue with churn to predict how much you’ll earn in the future.

Different from average revenue per customer?1 Average revenue = what you already have2 LTV = What you’ll get in the future

LTV best practices 1 Churn has a HUGE impact on LTV 2 Find customer segments with the best LTV 3 Start with the simple versions

Metric #5 COST PER Acquisition

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.

CPA best practices 1 Get the CPA for each campaign 2 CPA increases over time for channels 3 Must be a LOT less than LTV 4 Inbound marketing has great long term ROI

Metric #6 THE SIGNUP Funnel

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

Funnel best practices 1 Start with your baseline 2 Look for bottle-necks 3 Track activation 4 Track tests through the whole funnel

CAN WE TRACK THESE IN Analytics?

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?

Two metrics you’ll need to pull by hand (for now)1 Monthly Recurring Revenue2 Cost Per Acquisition

KISSmetrics will track these metrics for you: 1 Average revenue per customer 2 Churn 3 Lifetime value 4 Your signup funnel

Q&A Time! Lars Lofgren llofgren@kissmetrics.com @larslofgren

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The 6 Metrics Every Subscription Business Needs to Track

by KISSmetrics on SlideShare on Nov 02, 2012

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