11 Essential SaaS Customer Engagement Metrics To Track This 2023
Ensuring customer engagement with your SaaS product is one of the most important aspects of running a SaaS business.
If your users have high engagement levels, it’s a good sign that they are getting significant value from your SaaS solution. As a result, they will stick with your product in the long run.
Conversely, if they are not engaged, it’s unlikely that they will continue to use your product.
But how do you know whether or not your SaaS customers are engaged?
Four words: SaaS customer engagement metrics.
These are the key performance indicators (KPIs) that SaaS companies can use to measure customer engagement with their product.
Armed with this knowledge, you can take the necessary steps to increase user engagement and improve your SaaS business’s overall performance.
To help you on your SaaS journey, we have put together a guide on SaaS customer engagement metrics and how they can be used to improve SaaS success.
So let’s get started.
1) Customer Retention Rate
One of the main end goals of keeping a high user engagement is customer retention. And you can measure that with the customer retention rate.
The customer retention rate is a SaaS customer engagement metric that measures the percentage of customers who have stayed with your SaaS product over a certain period of time.
For example, if you had 100 customers and 90 of them stayed with the SaaS product within the month, your customer retention rate would be 90%.
A high customer retention rate indicates that users are sticking with your SaaS solution and thus, engaging with it. On the other hand, low retention rates mean that more users are leaving your SaaS product than staying.
2) Customer Churn Rate
The customer churn rate is the SaaS customer engagement metric that measures the percentage of users who have left your SaaS product within a certain period of time.
In other words, it’s the reverse of the customer retention rate.
For instance, if 100 customers are using your SaaS product and 20 of them leave within a year, then your annual customer churn rate would be 80%.
You may also monitor your monthly customer churn rates. This will help you see short-term trends in churn and see if your SaaS product is becoming less popular over time.
A low customer churn rate is something every SaaS business should strive for as it indicates that users are sticking with your SaaS product and engaging with it over time.
On the other hand, high rates of customer churn mean that more and more customers are leaving your SaaS solution than staying.
3) Customer Lifetime Value (CLV)
It measures the total revenue a SaaS business can expect to generate from a single customer over the course of their time with your SaaS product.
There are two different ways to calculate your CLV:
How To Calculate CLV Using Historical Data
If you have historical data about your customers — say, more than five years of customer data — then you probably have enough to establish an average customer lifespan. This is the average number of months or years that a customer will stick with your SaaS product before leaving.
You will also need another SaaS metric called the average revenue per user (ARPU). As you may guess from its name, the ARPU is the average amount of money that each customer generates monthly or annually.
For instance, let’s say you’re generating $1 million in annual recurring revenue (ARR) from a total of 1,000 customers. That means your annual ARPU is $1,000 per customer ($1 million/1000 customers).
To calculate your CLV, you’ll need to multiply the average customer lifespan by the ARPU.
For example, let’s say that your average customer lifespan is 5 years and your annual ARPU is $1,000. That would mean that your CLV is $5,000 ($1,000 x 5 years).
How To Calculate CLV Without Historical Data
A potential problem with the above solution is that it relies on historical data to establish an average customer lifespan.
So how about SaaS startups and other newbie SaaS businesses that don’t have such data?
The good news is that you can estimate the average customer lifespan by dividing 1 by your customer churn rate.
For example, if your SaaS business has an annual customer churn rate of 20%, then that would mean that your average customer lifespan is 5 years (1/0.2 = 5).
And, as before, you’ll need to multiply the average customer lifespan by the ARPU to come up with the CLV. So if your SaaS business had an ARPU of $1,000 and an estimated average customer lifespan of 5 years, then its CLV would be $5,000 ($1,000 x 5 years).
If you want a shortcut for this solution, simply divide your ARPU by your customer churn rate.
Note that the ARPU and customer churn rate you use here must have the same time frame. If you’re calculating your CLV based on a monthly ARPU, then be sure to use the monthly customer churn rate as well.
4) Customer Satisfaction (CSAT) Score
The customer satisfaction (CSAT) score measures how satisfied your SaaS customers are with the services you offer.
Measuring this metric requires two steps:
Create A Customer Satisfaction Survey
First, you need to create and launch a survey for your customers, asking them to rate their satisfaction with your SaaS product on a scale of 1 to 5, with the following equivalents:
1 – Extremely Disappointed
2 – Somewhat Disappointed
3 – Neither Satisfied Nor Disappointed
4 – Somewhat Satisfied
5 – Extremely Satisfied
To maximize your survey and get more specific feedback, you may also add follow-up questions to better understand why your customers have the ratings they have.
Calculate Your CSAT Score
Once you have your survey results, it’s time to calculate your SaaS business’ CSAT score.
Looking at the survey responses, only those who answered 4 or 5 are considered satisfied customers.
So to calculate your CSAT score, add all the number of respondents who answered with a 4 or 5, then divide it by the total number of respondents.
For example, imagine that out of 100 survey responses you received, 70 answered 4 or 5. This would give your SaaS business a CSAT score of 70%.
A high CSAT score is an indication that your SaaS product and services are satisfactory to your customers.
On the other hand, a low CSAT score should alert you that something needs to change — either in terms of customer service or SaaS product features — so as to increase satisfaction levels among your SaaS customers.
And if you have the right follow-up questions on your survey, your CSAT survey responses can also be a good way to identify areas where improvements can be made.
5) Net Promoter Score (NPS)
The net promoter score (NPS) is a SaaS metric used to measure not just customer retention, but customer loyalty and advocacy too.
Measuring this metric needs you to perform three key steps:
Launch An NPS Survey
The first step is to create and launch an NPS survey for your SaaS customers. This survey should be one simple question: “On a scale from 0 to 10, how likely are you to recommend our SaaS product to a friend or colleague?”
You may also include follow-up questions such as why they rated it that way and what you can do to improve their experience.
Group Your Respondents Into Three Categories
Next, you’ll need to group your SaaS customers into three categories:
- Promoters: These are customers who rated your SaaS product 9 or 10 out of 10. They are very happy with your SaaS solution. As a result, they may likely stay with it for a long time and even bring new referrals.
- Passives: These are customers who rated your SaaS product 7 or 8 out of 10. They might be happy, but they aren’t loyal and may switch to another SaaS offer if it’s more attractive in some way.
- Detractors: These are customers who rated your SaaS product 6 or less out of 10. They are likely unhappy with your SaaS solution and can damage its reputation if not addressed quickly.
Calculate Your Overall Net Promoter Score
Finally, you’ll need to calculate your SaaS company’s overall NPS. To do this, subtract the percentage of Detractors from the Percentage of promoters.
You may arrive at a final score as low as -100 (if all your respondents are Detractors) and as high as 100 (if all of them are Promoters).
Your NPS will give you an idea of how happy your SaaS customers are with your service and whether they are likely to recommend it to others.
Now, the thing about these first five metrics we’ve talked about is that they measure the overall atmosphere when it comes to customer retention.
In other words, customer engagement isn’t the only factor that affects these metrics. You also have your customer support, customer success, and other aspects to worry about.
If you want to get a better, more specific grasp on customer engagement, there are other SaaS customer engagement metrics that you can use. Let’s talk about them now.
6) DAU/MAU Ratio
Your daily active users (DAU) and monthly active users (MAU) can give you an overview of how often SaaS customers are using your product.
However, the DAU and MAU on their own don’t really provide that much insight into SaaS customer engagement. In fact, they are sometimes seen as vanity metrics.
That’s why you should use the DAU/MAU ratio to get a deeper understanding of your customers’ engagement with your SaaS product.
As its name suggests, the DAU/MAU ratio is calculated by dividing the number of daily active users by the number of monthly active users.
For example, let’s say that you currently have 1,000 daily active SaaS customers and 3,000 monthly SaaS customers. This gives you a DAU/MAU ratio of around 33%.
This ratio will give you an idea of how often SaaS customers are actually using your product. If the ratio is low (i.e. less than 13%) then it’s a sign that a big chunk of your customer base don’t really have deep engagement with your SaaS solution.
7) Average Session Duration
Another SaaS customer engagement metric you should keep an eye on is the average session duration. This measures how long SaaS customers are using your product when they do sign in.
Ideally, you want SaaS customers to be spending as much time as possible with your SaaS solution. For SaaS businesses, an average session duration of 2 to 4 minutes is considered good.
If the average session duration is low then it’s a sign that SaaS customers may not be finding enough value in your product and could be looking for other SaaS solutions instead.
You can track this metric by measuring how long SaaS customers are logged into your product on any given day or week. The longer their sessions, the more engaged they are with your SaaS product.
8) Feature Usage
Monitoring your customers’ feature usage can give you a better understanding of how your users are interacting with your product.
For example, if SaaS customers rarely use a certain feature then it’s likely that either they don’t understand it or just don’t see the value in it.
This will give you an idea of the features that SaaS customers find most useful and help you identify areas where improvement may be needed.
9) Customer Effort Score
The customer effort score is another customer engagement metric that you can use to measure how user-friendly your SaaS solution is.
The customer effort score is a survey-based metric that measures SaaS customers’ perception of how easy it was for them to accomplish their goals through your SaaS product.
Here’s how you can find your customer effort score:
Create A Survey
Like with CSAT score and NPS, you can start by creating a short survey that SaaS customers can fill out to rate their experience with your SaaS product.
However, unlike the other two survey-based metrics we mentioned, your customer effort score survey responses don’t have to be numbered.
Instead, you can make it more interesting to your customers by using visual elements. You may use emojis and other graphic elements to gauge SaaS customers’ perception of your SaaS product.
Still, this depends on your customer base. If your customers find it easier to respond using numbers, then you can stick with that system.
What’s more, you can also ask follow-up questions so that your customers can provide specific feedback as to which features are easy to use and which are not.
Calculate Your Customer Effort Score
Once your customers have filled out your survey, you can then calculate their customer effort score by taking the average of all the responses.
That’s easy enough if you have a numbered system for SaaS customers to rate their satisfaction with your SaaS product. But what if you’re using visual elements as response options?
If you use emojis, you can assign each one a numerical value and take the average of those numbers.
For example, a smiley face could be worth 5 points. A “meh” face could be worth 2.5 points. And a sad face could correspond to 0.
The result will give you an idea of how easy it is to use your SaaS solution — the higher the score, the more user-friendly it is. And a more user-friendly platform usually leads to more customer engagement.
10) Customer Engagement Score
Customer engagement is a matter of delivering value to your users. And if you’re looking to measure how much value you are providing to them, then the customer engagement score can help with that.
Here’s how you can do it:
Identify Key Customer Engagement Events
The first step is to identify key customer engagement events. These are actions that your customers take within your product that indicate a significant level of engagement.
Now, these events can vary for different types of SaaS products. For customer relationship management (CRM) software, it could be importing a contact list, creating a custom sales pipeline, or even as far as successfully moving a lead through the pipeline.
That’s just three examples. But in real life, you could have more customer engagement events — as many as it takes to accurately measure user engagement.
Assign An Importance Value To Each Customer Engagement Event
Once you have identified SaaS customer engagement events, the next step is to assign an importance value to each one. This will help you understand which SaaS customer engagement events are more important than others and should be given more weight.
Let’s take our previous example with the CRM platform. Each instance of importing a contact list could be worth 1 point. Creating a custom sales pipeline could be worth 10 points, and successfully moving a lead through the pipeline could be worth 20 points.
Multiply Each Event’s Importance Value With Its Frequency Of Occurrence
Throughout a user’s customer journey, they will perform different engagement events at different frequencies.
In our above example, a user might import a contact list every week. But they may only create a custom sales pipeline once every month. And they may only move leads through the pipeline once every few months.
To calculate the engagement score for these events, you simply multiply the importance value of each event (as per our example above) by its frequency of occurrence.
For instance, let’s say that within a quarter, a user has imported 10 contact lists, created 5 custom sales pipelines, and moved 1 lead through the pipeline.
You would have the following individual engagement scores for each event:
Importing Contacts: 1 x 10 = 10
Creating Custom Sales Pipelines: 10 x 5 = 50
Moving Leads Through The Pipeline: 20 x 1 = 20
Add All Engagement Scores
Finally, add up all these individual SaaS customer engagement scores and you will have your SaaS customer engagement score.
In our example, the SaaS customer engagement score would be 80. This number can be compared across different SaaS customers and it will give you a good indication of how engaged they are with your SaaS product.
(Optional) Create A Scale For Your Customer Engagement Score
If you want to set a standard for your customer engagement scores, you can also create a scale and assign values to different SaaS customer engagement scores.
You can also add possible action steps for SaaS customers with SaaS customer engagement scores that fall within a certain threshold.
Here’s an example of what a scale might be:
0 to 30: Low Customer Engagement — Needs urgent attention from the customer success team.
30 to 50: Medium Customer Engagement — Should be encouraged to explore more features.
50 to 80: High Customer Engagement — Needs regular check-ins but no immediate action is required.
80+: Very High Customer Engagement — May be ready for upsell offers and brand advocacy programs.
11) Customer Health Score
Another holistic SaaS customer engagement metric is called the Customer Health Score. This metric doesn’t just look at engagement events, but also interactions with other aspects of your business, such as customer service and product feedback.
Tracking this KPI also involves some steps that are a tad bit similar to the process of monitoring your customer engagement score:
Identify Customer Actions That Impact Their Health Score
Your SaaS customer health score should track all aspects of your SaaS customer engagement. For instance, you can include any action that may indicate anything about their experience with your SaaS product.
For example, you can include actions like logging in to your SaaS platform, interacting with your customer support team, or answering a survey,
Assign An Impact Score To Each Customer Action
Once you have identified SaaS customer actions that affect the health score, assign an importance value to each one.
Unlike customer engagement scores, you may also assign negative values to certain actions that may not necessarily be pleasant to your customers.
For instance, let’s say that a user logs in to your SaaS platform every day — each login could be worth 5 points. A resolved support concern could be worth 10 points, while an unresolved concern could be worth -10 points.
You can even have varying intensities of these scores depending on certain responses.
For example, let’s say a customer answered “4” on an NPS survey. This customer is clearly a Detractor. That response could be worth -20 points on the customer health score. And if it were even lower — say, 0 — it could have a much lower score of -60.
But if this customer is a Promoter, it could be worth positive 30 to 50 points, depending on whether they answered with 9 or a 10.
Calculate Your Overall Customer Health Score
Once you have identified SaaS customer actions and assigned values to them, it’s time to calculate your overall customer health score.
But first, you would need to multiply the SaaS customer action values with their frequencies to get their “weight” in the overall SaaS customer health score.
For example, let’s say our customer logged in 10 times within the month. They had 2 resolved cases and 1 unresolved ticket. And when they answered your NPS survey, they gave it a 4.
Individual health scores for these actions would be as follows:
Log-ins: 5 x 10 = 50
Resolved cases: 10 x 2 = 20
Unresolved ticket: -10 x 1 = -10
NPS survey response: -20
Finally, add all of these individual health scores to get an overall SaaS customer health score.
In our example, your calculation would be as follows:
50 + 20 -10 –20 = 40.
Set A Scale For Your Customer Health Score
The SaaS customer health score is a holistic measure of SaaS customer engagement. But to get the most out of this metric, you should also assign a scale for each SaaS customer health score value.
For example, you may create a scale similar to this one:
Below 0: Red flag — Needs immediate attention.
0 to 40: Some Concerns — Needs focused action.
40 to 60: Sufficient Customer Health — Maintain current touchpoints and user engagement strategy.
60+: Excellent Customer Health — Customer is a loyal user and a possible brand advocate.
Final Thoughts About SaaS Customer Engagement Metrics
SaaS customer engagement metrics are essential for SaaS businesses. They help you understand your customers better, identify areas of improvement in your SaaS product or user experience, and keep track of overall customer health.
These eleven SaaS customer engagement metrics will help you monitor SaaS customer health and keep track of SaaS user engagement.
With these KPIs, you can keep an eye on product engagement trends, analyze the data regularly, and make changes accordingly to ensure SaaS customers have a great experience with your product.
Looking for more guides to help grow your SaaS business? Check out our blog here.