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The 6 Metrics Every Subscription Business Needs toTrack Lars Lofgren Marketing Analyst - October 2012   info@kissmetrics.c...
@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 ...
MRR best practices 1   Can also be tracked quarterly or annually 2   Key driver of profit 3   More important than monthly ...
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        ...
100 new customers per month at 10% churn             800             600 Customers             400             200        ...
High churn = improve your product
Once you have control of churn...      To keep growing, you’ll need to      acquire customers faster every                ...
Churn best practices 1   High churn = improve your product 2   Who’s churning? 3   Long term contracts can help 4   Use co...
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 bundli...
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 ...
Different from average revenue per customer?1   Average revenue = what you already have2   LTV = What you’ll get in the fu...
LTV best practices 1   Churn has a HUGE impact on LTV 2   Find customer segments with the best LTV 3   Start with the simp...
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 ...
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 ...
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 signu...
Q&A Time!    Lars Lofgren llofgren@kissmetrics.com        @larslofgren
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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
• 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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Transcript of "The 6 Metrics Every Subscription Business Needs to Track"

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