2013 Totango Annual SaaS Metrics Survey

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Totango's 3rd Annual SaaS Metrics Survey Report: The big take-away from this year’s survey underscores the importance of customer success in the SaaS business model – and why it is imperative for SaaS companies to be relentlessly focused on delivering recurring value to customers.

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2013 Totango Annual SaaS Metrics Survey

  1. 1. 3rd Annual SaaS Metrics Survey 2013
  2. 2. Contents Methodology …………………………………….. 3 Survey Participant Profile ………………….. 5 Executive Summary …………………………… 9 Survey Results & Analysis ………………… 11
  3. 3. Methodology
  4. 4. Totango surveyed 257 executives at SaaS companies about the key performance indicators used to run their businesses. Similar surveys were also conducted in 2011 and 2012, giving Totango unique insights into SaaS trends.
  5. 5. Survey Participant Profile
  6. 6. Job Function Marke?ng   14%   24%   3%   Customer  Success  /  Account  Mgmt   Sales   10%   Products   23%   12%   14%   Title Opera?ons   9%   Customer  Support   C-­‐Level   Other   32%   18%   Director   VP   Manager   Other   18%   23%  
  7. 7. Revenue Distribution 100 89 90 Number of companies 80 70 60 54 48 50 40 33 30 21 20 10 0 <$1M $1-10M $10-50M Annual Revenue $50-100M Note:  Total  does  not  add  up  to  257  companies  (12  respondents  did  not  complete  this  ques?on)   >$100M
  8. 8. Annual Revenue Growth 66 Number of companies 70 55 60 50 40 38 All 257 respondents 30 23 20 17 10 0 0-10% 10-25% 25-50% 49 50 60 Number of companies 58 50 50-75% 75-100% >100% 45 40 30 Excluding companies <$1M in revenue (203 respondents) 27 17 20 15 50-75% 75-100% 10 0 0-10% 10-25% 25-50% >100%
  9. 9. Executive Summary
  10. 10. •  The fastest growing companies in SaaS are the ones that have mastered controlling churn and driving upsell in their customer base. Revenue from existing customers becomes more and more important to SaaS companies as they grow. There is a clear relationship between revenue growth of SaaS companies and managing existing customers. This underscores the importance of customer success and delivering recurring value to customers in the SaaS business model. •  SaaS companies are still heavily focused on tracking metrics around new customer acquisition vs. existing customers. This is changing however, with a growing recognition among SaaS executives on the need and importance of tracking key metrics on existing customers.
  11. 11. Survey Results & Analysis
  12. 12. State of SaaS Metrics: The state of business metrics within SaaS companies is improving, with a marked increase in executive satisfaction compared to earlier years. However, the overriding sentiment indicates that significant work still needs to be done. Satisfaction with SaaS metrics 27% 15% 37% 31% Not satisfied and investing to improve it 34% 32% 35% 25% Not satisfied and learned to live with it 14% Good enough Very pleased 15% 17% 19% 2011 2012 2013
  13. 13. Executive focus on new customers vs. existing customers: SaaS vendors continue to place a heavier focus on acquiring new customers compared to managing revenue from existing customers (renewals and upsell). Level of executive priority and funding for … new customer acquisition 87% … existing customer renewals 10% 3% 58% … upsell/add-on sales 27% 51% High Medium 26% Low 15% 23%
  14. 14. The heavier focus on customer acquisition is also reflected in the metrics SaaS companies track. There is generally higher maturity and prevalence of customer acquisition metrics vs. existing customer metrics. Which metrics do you track Website unique visitors 88% Number of new trial signups or free accounts 69% Conversion rates (free to paying) 65% Customer Acquisition Cost (CAC) 49% Churn 70% Product usage statistics 64% Revenue per user 56% Add-on / expansion sales 53% Customer health 47% Customer Lifetime Value (CLV) Net Promoter Score (NPS) Customer acquisition metrics 41% 27% Existing customer metrics
  15. 15. However, there is clear recognition among SaaS executives on the need and importance of tracking metrics on existing customers. This is reflected in the significant number of executives who plan to begin measuring revenuerelated metrics on existing customers. Which metrics do you plan to track Website unique visitors Number of new trial signups or free accounts Conversion rates (free to paying) 5% Customer acquisition metrics 9% 14% Customer Acquisition Cost (CAC) Churn Product usage statistics Revenue per user Add-on / expansion sales Customer health Customer Lifetime Value (CLV) Net Promoter Score (NPS) 37% 24% 28% 30% Existing customer metrics 33% 42% 49% 46%
  16. 16. Free Trials and Freemium: The majority of SaaS vendors have a free trial or freemium offering as a way to acquire paying customers, though a significant number (33%) still do not. Of the companies that do, 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 18% 0-10% 33% 10-25% 14% 25-50% >50% 8% 27% No free trial/freemium
  17. 17. Churn: The majority of SaaS vendors still measure churn at an aggregate level as a percentage of overall customers and associated revenue lost. Only a few companies look at churn at a more granular level such as product downgrades or reduction in licenses within accounts. How do you measure churn By # customers 73% By revenue 56% By # users/licenses By product downgrade 26% 15% Note:  Total  adds  up  to  more  than  100%  since  each  respondent  could  select  mul?ple  op?ons  
  18. 18. A sizable number of companies have high (>10%) and medium (5-10%) churn indicating that there is significant scope for SaaS vendors to impact growth and revenue by improving customer retention. Annualized revenue churn 15% 0-5% churn 38% 17% 5-10% churn 10-15% churn >15% churn 30%
  19. 19. Upsell and add-on sales: Excluding customers who churn, the increase in revenue from existing customers is <20% for a majority of SaaS vendors. Year-over-year revenue increase from existing customers 16% 4% 2% 7% >80% upsell 60-80% upsell 40-60% upsell 28% 20-40% upsell 0-20% upsell 43% Decline/no increase
  20. 20. Impact of churn and upsell on growth: As a group, the fastest growing companies (>75% YoY revenue growth) have a significantly better record on churn and upsell, underscoring the critical role of managing revenue from existing customers in the SaaS business model. Growth vs. Churn Growth vs. Upsell 100%   90%   29   28   90%   23   80%   70%   17   60%   50%   35   25   40%   30%   20%   10%   45   70%   43   29   28   Respondents   Respondents   80%   100%   60%   25-­‐75%  Growth   Low  Churn   Medium  Churn   >75%  Growth   High  Churn   25   40%   30%   20%   0%   <25%  Growth   69   50%   10%   0%   37   27   20   4   21   9   <25%  Growth   25-­‐75%  Growth   High  Upsell   Medium  Upsell   Note:  Low  churn  =  <5%;  Medium  churn  =  5-­‐10%;  High  churn  =  >10%                        High  upsell  =  >40%;  Medium  upsell  =  2`0-­‐40%;  Low  upsell  =  <20%   >75%  Growth   Low  Upsell  
  21. 21. Customer engagement monitoring for cloud apps   •  •  •  •  Impact conversion rates Reduce churn Drive customer success Increase customer lifetime value LEARN MORE? www.totango.com 1-800-634-1990  

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