2016 SaaS Metrics Report

11,147 views

Published on

Every year we take the opportunity to run a comprehensive survey of professionals at SaaS companies ranging from early startups to established businesses with over $100M in revenue. Our aim is to better understand the key performance indicators used by SaaS companies to run their business.

For the 2016 SaaS Metrics survey report, we have added several questions based on the comments and responses over the years. New topics covered this year include company spending on customer retention and the definition/measurement of customer health.

Published in: Technology

2016 SaaS Metrics Report

  1. 1. SaaS Metrics Report February 2016
  2. 2. About The Research The SaaS Metrics Report is based on an annually conducted survey started in 2011. This year’s report looked at responses from over 300 SaaS professionals. About Totango Totango is the leader in customer success management for SaaS businesses. Totango helps companies improve customer health, boost revenue, and manage their customer success operations.
  3. 3. Executive Summary Summary of the top findings from the latest SaaS Metrics Survey. Customer retention cost, customer health, and customer lifetime value are the new frontier in SaaS metrics The SaaS industry continues to be a challenged by high churn rates Spending on customer retention is growing SaaS companies continue to invest in tracking more metrics on their existing customers. The top new metrics companies plan to track in 2016 are customer retention cost, customer health, and customer lifetime value. More than two-thirds of the surveyed SaaS companies experienced annual churn rates of 5% or higher. Additionally, almost the same number saw an increase or no change in churn since the previous year. More than half of the companies surveyed increased their spending on customer retention last year. Spending on staffing increased at a faster clip compared to spending on technology or programs, suggesting that companies are still more focused on building out their teams vs. putting in place the infrastructure to scale customer retention operations. Upsell and expansion sales are a missed opportunity for SaaS vendors For the large majority of SaaS companies surveyed (81%), only 20% or less of new revenue came from existing customers in the form of upsell and expansion sales. SaaS company growth rates are strongly influenced by customer retention and upsell For the third year in a row, the survey indicates that the fastest growing SaaS companies have a significantly better record on churn and upsell, underscoring the critical role of managing revenue from existing customers in the SaaS business model.
  4. 4. Participant Profile
  5. 5. Job Function Job Title Marketing Customer Success/Account Mgmt Sales Customer Support Products Operations Other C-Level VP Director Manager Other Participant Profile 11% 46% 11% 4% 8% 10% 10% 20% 12% 28% 32% 10%
  6. 6. Participant Profile Customer Success Team Size 1-5 Person 6-20 Person 20+ Person No Team 44% 30% 18% 8% Revenue Distribution 0 20 40 60 80 100 120 <$1 M $1-10 M $10-50 M $50-100 M >$100 M 55 108 70 19 46 Annual Revenue NumberofCompanies 12 respondents did not complete this question
  7. 7. Annual Revenue Growth Participant Profile NumberofCompanies 0 20 40 60 80 0 20 40 60 80 NumberofCompanies 0-10% 10-25% 25-50% 50-75% 75-100% >100% 0-10% 10-25% 25-50% 50-75% 75-100% >100% 58 80 70 29 21 52 44 69 65 25 19 33 All Respondents (310) Annual Revenue Growth Excluding Companies < $1 Million Revenue (255 respondents)
  8. 8. Survey Results & Analysis
  9. 9. The State of SaaS Metrics For the third year in a row, 50% or more respondents indicated that they are satisfied with the state of their business metrics. That said, after a sizable jump in 2013, satisfaction has not improved significantly, with only a slight upward trend for executives who are “very pleased” with their company’s metrics. Satisfaction with SaaS Metrics Not satisfied and learned to live with it Not satisfied and investing to improve it Good enough Very pleased 27% 2011 2012 2013 2014 2015 34% 25% 15% 37% 32% 14% 17% 15% 31% 35% 19% 15% 35% 30% 20% 11% 33% 31% 25%
  10. 10. Level of Executive Priority and Funding High priority Medium priority Low priority Focus on New Versus Existing Customers Customer acquisition continues to be a higher priority for SaaS companies compared to managing revenue from existing customers. The emphasis on renewals has increased marginally over the last two years, though upsells and add-on sales have not received increased priority and funding. New Customer Acquisition Existing Customer Renewals Upsell/Add-on Sales 89% 9% 59% 46% 27% 41% 13% 14% 2%
  11. 11. 46% 49% 50% 54% 58% Which Metrics Do You Track? Website unique visitors The Metrics Companies Track The percentage of respondents tracking customer acquisition metrics has not changed substantially over time. By contrast, tracking of metrics on existing customers, especially churn, add-on/expansion sales, and Net Promoter Score, has seen an upward trend over the last few years. # of new trial or free signups Conversion rates (free to paying) Customer acquisition cost Churn Product usage statistics Add-on/expansion sales Revenue per user Net Promoter Score (NPS) Customer Lifetime Value (CLV) Customer health Customer retention cost 84% 66% 56% 56% 80% 63% 84% 35% Customer acquisition metrics Metrics on existing customers 54% 46%
  12. 12. 37% 45% 46% 55% 22% 37% The Metrics Companies Plan To Track Survey results show that respondents are mostly planning to add metrics on existing customers to their internal processes. Annual trends suggest that metrics such as customer retention cost, customer health, and customer lifetime value are the next big metrics respondents plan to track. Which Metrics Do You Plan To Track? Customer acquisition cost Conversion rates (free to paying) # of new trial or free signups Website unique visitors Customer retention cost Customer health Customer Lifetime Value (CLV) Net Promoter Score (NPS) Add-on/expansion sales Product usage statistics Revenue per user Churn 17% 32% 30% 34% 10% Customer acquisition metrics Metrics on existing customers 13%
  13. 13. Customer Acquisition and Retention Costs A significantly higher number of companies measure and track customer acquisition costs compared to customer retention costs. However, 55% of respondents plan on tracking customer retention cost in the future, making it the #1 new metric most companies plan to measure. Retention Cost vs. Acquisition Cost Customer Acquisition Cost Customer Retention Cost 56% 37% 55% Currently track Plan to track 35%
  14. 14. Annual Spend on Customer Retention More than half the companies surveyed increased their spending on customer retention last year. Spending on staffing increased at a faster clip compared to spending on systems and technology or retention programs (e.g. customer community, nurture campaigns, etc.). This suggests that companies are still more focused on building out their teams vs. putting in place the infrastructure to scale customer retention. How Did Your Spend on Customer Retention Change This Year? Increased spend No change in spend Decreased spend 24%69% 7% 39%58% 40%52% 8% 2% People & staffing Systems & technology Retention programs
  15. 15. 22%58% 20% 31%46% 23% 39%33% 28% 39%26% 35% 23%21% 56% 39%30% 31% 33%35% 32% 25%47% 28% 30%47% 23% Tracking Customer Health For the respondents who measure customer health, the top drivers of health are product usage and engagement, CRM metrics, and service utilization (e.g. licenses used vs purchased). The frequency with which companies recalculate customer health varies widely, with the majority doing so on a weekly or monthly basis. What Is Included In Your Definition Of Customer Health? Usage and engagement CRM metrics (support tickets) Service utilization Customer satisfaction/NPS Executive sponsor relationship CSM risk assessment Business impact/ROI Use of support/training material Other metrics Included Not included, but will be in the future Do Not Include How Often Do You Recalculate Customer Health? Daily (As it happens) Weekly Monthly Quarterly Annually 21% 29% 16% 29% 5%
  16. 16. New Business From Free Trials or Freemium The number of companies depending on free trials and freemium to acquire new business continues a steady 5-year decline. Of the companies that have these programs, less than half derive more than 25% of new business through free trial and freemium. What Percentage of New Business Comes From Free Trials and Freemium? 17% 16% 38% 18% 11% 0-10% 10-25% 26-50% >50% No Freemium/Free Trial
  17. 17. How does your company measure churn? Most SaaS companies continue to measure churn by the number of customers lost, followed closely by churn based on revenue. Even as new technologies make it easier to analyze churn, less than one quarter of respondents calculate churn at a more granular level based on product downgrades or number of users/licenses lost. How Do You Measure Churn? By # of Customers By Revenue By # Users/Licenses By Product Downgrade 69% 62% 22% 16%
  18. 18. Churn Rates Only 32% of respondents experienced an annual churn rate of 5% or less, while almost one-fifth had churn exceeding 15%. Survey responses suggest mixed results in controlling churn. While slightly over one-third report a decrease in churn over last year, 30% of respondents saw an increase in churn and the balance 34% saw no significant change. Annualized Revenue Churn Rate 0-5% churn 5-10% churn 10-15% churn >15% churn 32% 32% 17% 19% 36% 34% 30% Increased No change Decreased Has your churn rate increased or decreased in the last year?
  19. 19. Churn by Company Growth Retaining customers is a vital component of high-growth SaaS businesses. This is supported by survey results showing that the fastest growing companies (>75% YoY revenue increase) also had the lowest churn rates. Low Churn (<5%) Medium Churn (5-10%) High Churn (>10%) High Growth Medium Growth Low Growth 39% 27% 34% 30% 40% 30% 29% 29% 42% High Growth = >75% YoY rev increase Medium Growth = 25-75% YoY rev increase Low Growth = <25% YoY rev increase
  20. 20. Revenue Boost From Existing Customers Boosting revenue from existing customers remains a growth opportunity for most companies. For the large majority of respondents (81%), 20% or less of new revenue came from existing customers. This is also highlighted by survey results showing that only 14% of respondents saw a significant jump in the contract value of existing customers. Year-Over-Year Revenue Increase From Existing Customers >81% upsell 61-80% upsell 41-60% upsell 21-40% upsell 1-20% upsell No increase Decline 9% 26% 44% 13% 3% 2% 3% 5-10% 10-15% 15-20% >20% 0-5% % of New Revenue From Upsells/Add-on Sales (vs Revenue From New Customers) 23% 30%19% 19% 9%
  21. 21. Upsells and Add-on Sales by Company Growth Upsells and add-on sales are a key growth driver for SaaS companies. This is supported by survey results showing that the fastest growing companies (>75% YoY revenue increase) also had higher upsells and add-on sales. Low Upsell (<20%) Medium Upsell (20-40%) High Upsell (>40%) High Growth Medium Growth Low Growth 48% 17% 35% 42% 38% 20% 76% 3% 21% High Growth = >75% YoY rev increase Medium Growth = 25-75% YoY rev increase Low Growth = <25% YoY rev increase
  22. 22. Join hundreds of businesses driving customer success with Totango. Learn more: www.totango.com 1-800-634-1990 @Totango

×