2014 SaaS Metrics Report
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The 2014 SaaS Metrics Report by Totango surveyed over 500 SaaS professionals, revealing that companies prioritizing customer retention and upsell experience faster growth, despite ongoing focus on new customer acquisition. While metrics tracking has shifted toward existing customers, dissatisfaction remains high with current metrics systems, and most companies continue to track acquisition metrics over retention metrics. The report emphasizes the need for companies to optimize retention strategies and highlights the significant growth potential from upselling existing customers.
2014 SaaS Metrics Report
- 2. Totango surveyed over 500 SaaS professionals about the key performance indicators used to run their businesses. Similar surveys have been conducted annually since 2011, giving Totango unique insights into SaaS trends.
- 4. 24% 22% 18% 26% 10% JOB TITLE C-LEVEL VP DIRECTOR MANAGER OTHER 20% 27% 15% 6% 9% 10% 13% JOB FUNCTION MARKETING CUSTOMER SUCCESS / ACCOUNT MGMT SALES CUSTOMER SUPPORT PRODUCTS OPERATIONS OTHER
- 5. 49% 24% 13% 14% 1-5 PERSON TEAM 6-20 PERSON TEAM >21 PERSON TEAM NO TEAM CUSTOMER SUCCESS TEAM
- 6. 93 190 112 39 50 0 20 40 60 80 100 120 140 160 180 200 <$1M $1-10M $10-50M $50-100M >$100M NUMBEROFCOMPANIES ANNUAL REVENUE Total does not add up to 502 (18 respondents did not complete this question) REVENUE DISTRIBUTION
- 7. 91 105 108 58 37 103 0 20 40 60 80 100 120 0-10% 10-25% 25-50% 50-75% 75-100% >100% NUMBEROF COMPANIES 66 87 94 42 31 71 0 20 40 60 80 100 0-10% 10-25% 25-50% 50-75% 75-100% >100% NUMBEROF COMPANIES All Respondents (502) Excluding companies <$1M in revenue (391) ANNUAL REVENUE GROWTH
- 9. Increased retention and upsell leads to faster growth Companies that are doing a good job of controlling churn and driving new revenue from existing customers are on the whole growing substantially faster than their peers. Companies still place priority on new customer acquisition Despite a shift in the metrics companies are tracking, priority and funding for customer renewals and upsell has not increased. This suggests that despite best intentions to focus on monetizing existing customers, day-to-day business realities make it difficult for companies to shift priority and funding. SaaS metrics shifting focus toward existing customers This year more companies than ever are looking at metrics on existing customers such as customer lifetime value, revenue per user, product adoption, and customer health.
- 10. SURVEY RESULTS & ANALYSIS
- 11. 15% 17% 19% 20% 25% 14% 35% 30% 34% 32% 31% 35% 27% 37% 15% 15% 2011 2012 2013 2014 Not satisfied and learned to live with it Not satisfied and investing to improve it Good enough Very pleased STATE OF SAAS METRICS: After a marked increase in executive satisfaction with SaaS metrics last year, there was a slight drop-off this year. 50% of respondents are still not satisfied with the state of business metrics in their companies, indicating that much work still needs to be done in this area. SATISFACTION WITH SAAS METRICS
- 12. 54% 56% 86% 28% 31% 9% 18% 13% 5% UPSELL/ADD-ON SALES EXISTING CUSTOMER RENEWALS NEW CUSTOMER ACQUISITION HIGH MEDIUM LOW EXECUTIVE FOCUS ON NEW CUSTOMERS VS. EXISTING CUSTOMERS: SaaS companies continue to place a heavier focus on acquiring new customers compared to managing revenue from existing customers. Despite the broader awareness of this topic, priority and funding for renewals and upsells has effectively remained steady over last year. LEVEL OF EXECUTIVE PRIORITY AND FUNDING FOR…
- 13. 37% 39% 49% 52% 52% 59% 63% 74% 59% 60% 64% 78% Customer rentention cost Net Promoter Score (NPS) Customer health Customer Lifetime Value (CLV) Add-on / expansion sales Revenue per user Product usage statistics Churn Customer acquisition cost Conversion rates (free to paying) Number of new trial signups or free Website unique visitors Customer acquisition metrics Existing customer metrics The stronger focus on customer acquisition continues to be reflected in the metrics SaaS companies track. There is still higher prevalence of customer acquisition metrics vs. existing customer metrics, but the gap is smaller compared to past years. WHICH METRICS DO YOU TRACK?
- 14. The stronger focus on customer acquisition continues to be reflected in the metrics SaaS companies track. There is still higher prevalence of customer acquisition metrics vs. existing customer metrics, but the gap is smaller compared to past years. 49% 42% 41% 39% 34% 31% 27% 19% 31% 18% 13% 12% Customer retention cost Customer health Net Promoter Score (NPS) Customer Lifetime Value (CLV) Add-on / expansion sales Product usage statistics Revenue per user Churn Customer acquisition cost Conversion rates (free to paying) New trial signups or free accounts Website unique visitors Customer acquisition metrics Existing customer metrics WHICH METRICS DO YOU PLAN TO TRACK?
- 15. 0% 10% 20% 30% 40% 50% 60% 70% CUSTOMER RETENTION CUSTOMER ACQUISITION Metrics currently tracked Metrics you plan to track 298 159 185 248 CUSTOMER ACQUISITION AND RETENTION COSTS: Significantly more companies measure and track their customer acquisition cost (298) compared to their customer retention cost (185). However, 49% of those currently not tracking customer retention cost plan to do more work in this area indicating a need to measure and optimize retention. RETENTION COST VS. ACQUISITION COST
- 16. 14% 17% 11% 21% 37% 0-10% 10-25% 26-50% >50% NO FREE TRIAL/ FREEMIUM FREE TRIALS AND FREEMIUM: Over the last 4 years, there has been a drop in the percentage of companies depending on free trials or freemium offerings to acquire new business. Of the companies that have these programs, more than half derive >25% of their new business through trial and freemium conversions. WHAT PERCENTAGE OF NEW BUSINESS COMES FROM FREE TRIALS AND FREEMIUM?
- 17. 17% 27% 59% 66% BY PRODUCT DOWNGRADE BY # USERS/LICENSES BY REVENUE BY # CUSTOMERS Note: Total adds up to more than the respondent pool since each respondent could select multiple options CHURN: The majority of SaaS companies still measure churn by the number of customers lost. The percentage of companies measuring churn by revenue lost has increased over last year. However, only a few companies look at churn at a more granular level by number of licenses reduced or product downgrades. HOW DO YOU MEASURE CHURN?
- 18. 34% 31% 18% 17% 0-5% CHURN 5-10% CHURN 10-15% CHURN >15% CHURN Churn levels are marginally higher than last year. 25% of the companies have high churn (>10%) and 31% have medium churn (5-10%). Only about one-third of companies have low churn (<5%). This indicates that there remains significant potential for SaaS companies to grow revenue by impacting customer retention. ANNUALIZED REVENUE CHURN
- 19. 33% 37% 30% LOW CHURN (<5%) MEDIUM CHURN (5-10%) HIGH CHURN (>10%) 31% 30% 39% 40% 25% 35% HIGH GROWTH MEDIUM GROWTH LOW GROWTH When grouping respondents based on growth, there is a clear indication that the fastest growing companies (>75% YoY revenue growth) have the lowest churn. This underscores the impact that churn has on the overall growth rates of SaaS companies and the importance of retaining existing customers to build a healthy SaaS business. CHURN BY GROWTH OF COMPANIES
- 20. 3% 4% 10% 31%39% 13% >81% upsell 61-80% upsell 41-60% upsell 21-40% upsell 1-20% upsell Decline/no increase UPSELL AND ADD-ON SALES: Selling to existing customers is a big growth opportunity for SaaS companies. Only 17% of companies derive a significant amount of new sales from existing customers. For the vast majority (52%), upsell and add-on sales is not a big source of revenue yet. YEAR-OVER-YEAR REVENUE INCREASE FROM EXISTING CUSTOMERS
- 21. 85% 11% 4% LOW UPSELL (<20%) MEDIUM UPSELL (20-40%) HIGH UPSELL (>40%) 39% 40% 21% 43% 26% 31% LOW GROWTHMEDIUM GROWTHHIGH GROWTH When grouping respondents based on growth, there is a clear indication that the fastest growing companies (>75% YoY revenue growth) do a better job on upsell and add-on sales to existing customers as a source of revenue growth. UPSELL AND ADD-ON SALES BY GROWTH OF COMPANIES
- 22. Customer success and user engagement for cloud apps • Drive conversion rates • Reduce churn • Boost upsell and add-on sales • Increase customer lifetime value LEARN MORE? www.totango.com 1-800-634-1990