The SaaS analytics lifecycle

Whether you’re starting or growing a SaaS business there’s a natural progression of analytics tools you will go through. One of the biggest mistakes I see people make is trying to use a tool that their business isn’t ready for.

Using tools beyond your current scope will lead to wasted setup time, analysis paralysis and disappointment when that exciting new tool falls short of expectations.

What you really want is well spent setup time that leads to interesting and actionable results. Here’s my 3 stages of SaaS analytics and the analytics tools that are helpful at each stage.

The 3 stages of SaaS analytics:

  1. Insight
  2. Trends
  3. Optimization

 

The Insight stage

insight stage banner

In this stage you’re goal is to understand your customers: what they want, what they need, and most importantly – what they’ll pay for.

This takes hard work. And it doesn’t scale. You’ll probably end up working 1-on-1 with customers until you and your team can’t handle the workload.

If your customers are super high value you might never leave this stage. There’s nothing wrong with that!

The goal here is to understand your market and learn how to nurture leads into customers.

 

Tools for the Insight stage:

Face-to-face

  • Coffee or beer
  • Lunch dates
  • Skype calls

 

Communication

 

Surveys

 

Screen recordings and heat maps

 

The Trends stage

trends stage banner

As the business grows you might want to start looking at your customer base as a whole rather than just chatting with individuals.

 

Start with these metrics:

Acquisition Rate 

As a percentage of your total user base.

Formula: (new users)/(total active users).

 

Churn Rate 

Again as a percentage of your total user base.

Formula: (churned users)/(total active users).

 

Lifetime value (LTV) 

How much money an average customer will give you before they churn.

Formula: (average revenue per sale)*(average sales per customer).

 

Eventually figure these out too:

Cost per acquisition 

How much does it cost you to get one new customer?

Formula: (monthly marketing & sales spend)/(monthly new paying users).

 

Funnel conversion rates 

From visitor to subscriber, subscriber to free trial user, free trial user to customer, etc.

 

Monthly recurring revenue (MRR)

How much cash is coming in the door next month, and the month after that? Don’t forget to factor in acquisition rate and churn rate!

 

Here’s a good article about key SaaS metrics that apply to this phase.

Once you know the top-level metrics you can start slicing them into segments. But let’s save that adventure for the next stage!

 

Tools for the Trends stage:

Web and customer analytics

 

Custom dashboards

 

Hire someone

 

Spreadsheets

  • Google sheets
  • Excel

 

The Optimization stage

optimization stage banner

This is what analytics look like at scale. It’s time to get your shit together and start making some money!

At this point all your basic metrics are known: lifetime value, customer acquisition cost, churn rate, etc.

Only once you completely understand your metrics should you focus on optimization.

There’s a range of possibilities in this step. I don’t want to wax on too much. Besides, if you’re in this step you’ll want to hire someone to rank and carry out these solutions for you.

 

Tools for the Optimization stage:

A/B testing software

 

Marketing automation

 

Customer segmentation tools

 

Attribution modeling

 

Advertising networks

 

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