Measuring growth is fundamental to your business. As a founder, your first priority is scale. However, you won’t know how to scale properly unless you’re keeping adequate track of growth metrics. Once you identify your main pain points and a few ways to solve them, your revenue will skyrocket.
The SaaS industry has grown by over 5x in the last 7 years. Without a doubt, there is plenty of growth for you to capture. You only need to pick the right growth metrics to focus on.
At June, we will list 20 different growth metrics for you to keep track of. Read on to determine the best ones for your business.
What Are Growth Metrics?
Growth metrics are a way to measure growth. They are ways to track the performance of your business in important areas. Some, like revenue, are quite broad. However, you can also drill down on factors like customer acquisition cost, which will help you understand how efficient your marketing efforts are.
Once you begin tracking growth metrics, you’ll have a much clearer picture of where your business is headed. You’ll know which features to double down on and which factors are causing your company distress. You can use an analytics platform like June to automatically track and derive insights from our visual reporting templates. Here’s how Waldo, which offers automated testing for mobile apps, uses June to measure the impact of various product updates on their sales:
The Cost of Ignoring Growth Metrics
It’s a bit cliché at this point, but it bears repeating, 9 out of 10 startups fail. You’ll need to find some way to get an advantage. By tracking a few growth metrics, you’ll keep your finger on the pulse, always finding new growth opportunities.
Not all growth metrics tell you exactly how you’re growing. Some will tell you the things that are preventing you from growing. Addressing those issues is critical to your future growth.
Sometimes, you have a festering problem like customer churn that is holding you back from serious revenue growth. Instead of throwing money into the proverbial fire with a futile marketing strategy, you could just try retaining your customers instead and increasing their overall value.
A Comprehensive List of 20 Growth Metrics and Why You Should Use Them
We’ve compiled a list of 20 data analytics metrics that could help facilitate your growth. You don’t need to examine all of them every day, but you should at least be aware of them and keep them in your arsenal. In fact, we highly suggest that you focus on tracking a handful of key metrics and making sure that those numbers are improving.
Some growth metrics can be broken down into different metrics depending on your perspective.
Revenue is, quite literally, the end-all and be-all of growth metrics. If you aren’t growing your revenue, then you aren’t growing your business. Most actions you take have the ultimate goal of growing revenue. Minimizing costs doesn’t provide anywhere near the ROI of investing in revenue and customer growth.
That said, there are a few perspectives you can take to revenue growth. You’ll often see revenue segmented in the following ways:
- Average Revenue Per User (ARPU)
- Monthly Recurring Revenue (MRR)
- Annual Recurring Revenue (ARR)
Average Revenue Per User (ARPU)
If you offer multiple SaaS products and multiple different plans, then you must track your ARPU. The formula is as follows:
ARPU = Total Revenue / Total Users
When you segment your users into various cohorts, you should calculate the ARPU for each one. That will help you determine which groups of customers are the most profitable. Furthermore, it will guide your future marketing and customer retention efforts. Focus your energy on profitable customers.
Monthly and Annual Recurring Revenue
These two metrics are often presented as though they were different, but they’re pretty much the same thing. The way you use MRR and ARR depends on the context. Usually, you use MRR if your company offers monthly subscriptions. However, ARR is used when you want to take a more long-term view of things. Let’s talk about monthly recurring revenue.
MRR = All Subscription Revenue in a Given Month
If you have 20 subscribers each of whom pays $200 for their subscription in August, then you have an MRR of $4,000. Pretty simple, right?
If your subscriptions are monthly and continue for all 12 months of the year, then you can feel free to multiply that MRR figure by 12. However, if your subscriptions are yearly, then we can’t say that your revenue over a particular month could be sustained over a year.
Retention is exceptionally important to your business. You should track user retention simply because it’s good to know if your customers are returning to your product. Here is the retention formula:
Period Retention = Total users still active / Total users since sign-up.
If you have 10 customers sign up and only 7 remain a month later, then your retention after 1 month is 70%.
When your customer retention chart looks like the graph below, you’re in big trouble. 0% retention means that eventually, all your customers will fail to see the value of your product and unsubscribe. There are ways to increase retention with a product that has clear benefits. However, in the 0% scenario, it appears that nobody sees the benefit of your products after a couple of months.
Multis is an all-in-one application to help web3 organizations manage their crypto-finances. Using June’s retention tools, they managed to figure out which behaviors led to successful customer retention and which ones caused them to churn. After identifying these behaviors, they sent suggestions to users who exhibited a high churn risk to get them back on track.
Engagement is a very general concept. There are several ways that your users could engage with your product. Data analytics metrics will help you listen for user events and therefore help you track user engagement. Since your customers engage with your product’s features, let’s go over a couple of examples related to that.
Feature Use Rate
When you first release a feature, you want to see how many of your current customers are already using it. This is the best way to receive direct feedback on your work. If they don’t like the feature, you could ask for advice on how to improve it. Perhaps you need to promote it a bit more. But if all else fails, you’ll need to scrap the feature.
Feature retention is an excellent type of retention to analyze. You should start by deciding how often your product should be used. If you think that customers should use your product twice a week, then you should probably look at weekly retention for each feature. Afterward, you only need to find out the percentage of users who use each feature every week from when they subscribed to your platform.
Just like you learn a lot about your new features from their use rate, you can also learn a lot from retention. Users will simply stop using features that they don’t find useful. Perhaps they’re too tricky to understand. Once again, you’ll need to learn from your customers to decide whether to keep the feature around or improve it.
The churn rate is a bit like the opposite of retention, it tells you how many customers you’re losing every month. Or, it could tell you how much revenue you’ve lost too. Identifying a churn rate and then reducing it will help you keep your customer acquisition costs low. You’ll become more efficient as a result.
The churn rate is usually expressed in terms of your customers as follows:
Churn Rate = Total Customers That Left / Total Customers at the Beginning of the Month
Imagine, at the beginning of May, you had 5,000 customers. During that month, 600 customers left. As a result, you have a churn rate of 12%.
Businesses with multiple different plans will appreciate knowing whether the customers that are leaving are even worth pursuing. Calculate monthly revenue churn like this:
Revenue Churn = Subscription Value of the Customers That Left / Monthly Revenue
Let’s say that the same 5,000 customers in the previous example brought in revenue of $500,000. But you have multiple products on offer and the 600 customers that left only brought in $40,000 per month. That makes your revenue churn 8%, the problem wasn’t as big as it seems. Pick your battles wisely.
You’ll often want to measure revenue churn by separating customers into different cohorts. This will tell you which groups of people lose you the most money.
Conversion isn’t centered around the use of your app. Yet it’s still one of the most important growth marketing metrics all the same. Your best bet is to use a link tracking tool to better understand your customer journeys. Follow them from the discovery of your service all the way up to their conversion to becoming a paying customer.
Payment isn’t the only conversion goal you can set, you might also look at something like where your conversions drop. For example, Mathisse at Soda.io used a conversion funnel to compare different sections of his onboarding flow to see where most users dropped off. Learn more about Mathisse's story.
This metric tells you how easy it is for customers to get up and running. Or at least, how eager they are to start with your product. Most SaaS products take a while for customers to onboard, so you’ll want to track multiple events in the activation process.
Sometimes, you’ll notice bottlenecks at a certain point which could eventually lead to customer churn. Get your clients on board faster.
Customer Acquisition Cost (CAC)
Customer acquisition costs can kill a lot of growing startups. Here is how to calculate CAC:
CAC = Cost of Sales and Marketing / New Customers Acquired
Minimizing your CAC is all-important. The best way to do it is by reducing churn. By taking advantage of the customers you already have and maximizing the value you get from them, you’ll do better in the long run. Throwing money into marketing strategies to facilitate customer growth and make up for churn is not sustainable.
Customer Lifetime Value (LTV)
Like revenue, customer LTV is a bit of a lagging indicator. Much of your efforts will go into boosting this metric.
LTV = Average value of a sale * The number of transactions * Retention time period
By minimizing customer churn and CAC, you increase your customers’ loyalty. After all, they’ll be staying for longer, and renewing their subscription in the process. Having a high LTV indicates company stability, which will make you highly attractive in the eyes of investors.
If you can successfully upsell your customers, this indicates that they believe in your product. Knowing which cohorts to upsell to will also improve your growth. Once again, you won’t have to dig into marketing tools so much in this scenario because you’re just upselling customers that you already have. Look for opportunities among them.
To plan for the future, you want to track things like daily and monthly active users over time. This will help you forecast how many resources you’ll need to successfully run your product and accommodate customer growth. It will also give insights into customer behavior and usage cycles.
Of course, some of your users will be far more prominent than others. June gives you a listing of the top power groups. Knowing the identity of these power users will allow you to identify your ideal customer. You should also get to know these power users well so that you can find out why they like your product. You can look at their feature usage, but you might also want to interview them directly.
To make sure you're improving check whether your power users (say users that use the product more than 3 days per week) are increasing over time.
Net Promoter Score
If you run any company, you should always be running customer surveys. These will help you quantify anecdotal feedback from your customers. Give them an incentive so that they can’t resist answering your questions.
One of the questions you should ask your customers is: “How likely are you to recommend this product to a friend or family member?” Let them rate this on a scale of 1 to 10. This will help you gauge how effective word of mouth will be in promoting your product.
Customer Satisfaction Score
This is a bit touchy-feely, but gauging customer satisfaction could give you important insights when tracking user events doesn’t. Are your customers clicking through your app happily, or is every action a burden on them?
Track your percentage of positive responses to the question “Are you satisfied with our product?” to understand customer satisfaction.
Virality isn’t about going viral in the internet sense, only about how often your customers refer your business to others:
Virality = Total Customer Referrals * Conversion Rate / Total Customers
Of course, you can only find this out if you have a robust customer referral system. The more customers like your product, the more they will share it with others. A happy customer will cover marketing for you.
How To Use Data Analytics Metrics with June
Now that you have an idea of what growth metrics you should look at, browse through some of June’s templates to find the right tracking methods for you. We include all sorts of metrics to help you track retention, feature use, power users, and much more. Best of all, you can explore these templates for free for up to 1,000 users, so go try them now.