The 6 Metrics Every Subscription Business Needs to Track

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The 6 Metrics Every Subscription Business Needs to Track

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

• 3. We’ll cover...1 The metrics we like to track...2 The metrics we NEED to track3 Q&A
• 4. WHY DO METRICSMatter?
• 5. They tell us if we’re succeeding
• 6. Great metrics help us work on the right projects
• 7. THE METRICS WE LIKEToo Much
• 8. Total users
• 9. Pageviews and visitors
• 10. Vanity metrics are a distraction
• 11. We need metrics that track our business
• 12. Metric #1 MONTHLY RECURRING Revenue
• 13. What is monthly recurring revenue (MRR)?
• 14. 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.
• 15. MRR best practices
• 16. Metric #2 USER AND REVENUE Churn
• 17. Churn is the percentage of people that bail
• 18. High churn = pain, low churn = win
• 19. Churn starts low but grows quickly If customer growth is constant, churn will eventually match it. You’ll stop growing.
• 20. 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
• 21. High churn = improve your product
• 22. Once you have control of churn... To keep growing, you’ll need to acquire customers faster every month.
• 23. Churn best practices
• 24. Metric #3 AVERAGE REVENUE PER Customer
• 25. Average revenue per customer
• 26. Up-sells and cross-sells are the key
• 27. Up-selling = get them on a higher plan
• 28. Cross-selling = sell more stuff
• 29. Average revenue best practices
• 30. Metric #4 LIFETIME Value
• 31. There are many different ways to calculate LTV LTV combines current revenue with churn to predict how much you’ll earn in the future.
• 32. Different from average revenue per customer?
• 33. LTV best practices
• 34. Metric #5 COST PER Acquisition
• 35. What’s the cost to acquire a new customer?
• 36. The importance of CPA
• 37. Get CPA for each marketing campaign
• 38. CPA best practices
• 39. Metric #6 THE SIGNUP Funnel
• 40. Track each step to becoming a customer
• 41. Don’t forget to track activation Activation = Someone uses a core part of your product for the first time
• 42. Funnel best practices
• 43. CAN WE TRACK THESE IN Analytics?
• 44. Google Analytics can’t track any of this.
• 45. You need to connect revenue to customers.
• 46. A customer analytics revenue report
• 47. We can also segment by traffic source
• 48. Where do we get customer analytics?
• 49. Two metrics you’ll need to pull by hand (for now)
• 50. KISSmetrics will track these metrics for you

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  • 1. The 6 Metrics Every Subscription Business Needs toTrack Lars Lofgren Marketing Analyst - October 2012 info@kissmetrics.com - Confidential - Do not distribute
  • 2. @larslofgren #KISSwebinar
  • 3. We’ll cover...1 The metrics we like to track...2 The metrics we NEED to track3 Q&A
  • 4. WHY DO METRICSMatter?
  • 5. They tell us if we’re succeeding
  • 6. Great metrics help us work on the right projects
  • 7. THE METRICS WE LIKEToo Much
  • 8. Total users
  • 9. Pageviews and visitors
  • 10. Vanity metrics are a distraction
  • 11. We need metrics that track our business
  • 12. Metric #1 MONTHLY RECURRING Revenue
  • 13. What is monthly recurring revenue (MRR)?
  • 14. 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.
  • 15. 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
  • 16. Metric #2 USER AND REVENUE Churn
  • 17. Churn is the percentage of people that bail
  • 18. High churn = pain, low churn = win
  • 19. Churn starts low but grows quickly If customer growth is constant, churn will eventually match it. You’ll stop growing.
  • 20. 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
  • 21. High churn = improve your product
  • 22. Once you have control of churn... To keep growing, you’ll need to acquire customers faster every month.
  • 23. 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
  • 24. Metric #3 AVERAGE REVENUE PER Customer
  • 25. Average revenue per customer The average amount that you’ve already received from customers.
  • 26. Up-sells and cross-sells are the key
  • 27. Up-selling = get them on a higher plan
  • 28. Cross-selling = sell more stuff
  • 29. 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
  • 30. Metric #4 LIFETIME Value
  • 31. There are many different ways to calculate LTV LTV combines current revenue with churn to predict how much you’ll earn in the future.
  • 32. Different from average revenue per customer?1 Average revenue = what you already have2 LTV = What you’ll get in the future
  • 33. 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
  • 34. Metric #5 COST PER Acquisition
  • 35. What’s the cost to acquire a new customer?
  • 36. The importance of CPA You don’t have a business until you can acquire customers profitably.
  • 37. Get CPA for each marketing campaign The higher your CPA, the longer it takes for you to reach profitability.
  • 38. 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
  • 39. Metric #6 THE SIGNUP Funnel
  • 40. Track each step to becoming a customer
  • 41. Don’t forget to track activation Activation = Someone uses a core part of your product for the first time
  • 42. Funnel best practices 1 Start with your baseline 2 Look for bottle-necks 3 Track activation 4 Track tests through the whole funnel
  • 43. CAN WE TRACK THESE IN Analytics?
  • 44. Google Analytics can’t track any of this.
  • 45. You need to connect revenue to customers. Customer analytics does this for you.
  • 46. A customer analytics revenue report
  • 47. We can also segment by traffic source
  • 48. Where do we get customer analytics?
  • 49. Two metrics you’ll need to pull by hand (for now)1 Monthly Recurring Revenue2 Cost Per Acquisition
  • 50. KISSmetrics will track these metrics for you: 1 Average revenue per customer 2 Churn 3 Lifetime value 4 Your signup funnel
  • 51. Q&A Time! Lars Lofgren llofgren@kissmetrics.com @larslofgren