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10 SaaS Marketing Benchmarks To Look Out For This 2023

SaaS Marketing Benchmarks

 

Sometimes, it’s not enough to merely track the key performance indicators (KPIs) needed for your SaaS business. At some point, you have to know whether or not your current metrics are good enough.

That’s where SaaS marketing benchmarks come in.

As we look forward to 2023, SaaS marketers should have a good idea of what the average SaaS metrics look like and how they can measure up against the industry standard.

In this article, we’ll explore some SaaS marketing benchmarks for 2023 and discuss what they mean for SaaS businesses. With these metrics in mind, you’ll be better equipped to set the right goals for your SaaS business and gauge whether or not you’re hitting them.

Let’s get started.

 

1) Organic Traffic Growth

 

As a SaaS business, your website is one of your main distribution channels and marketing assets.

Unless you’re offering your SaaS product through a digital product marketplace or a similar platform, your website will be where most of your prospects first learn about your SaaS product.

What’s more, content marketing has been one of the most effective SaaS marketing strategies in recent years, making it even more important to track organic traffic growth.

For SaaS marketers, the industry benchmark for month-on-month organic traffic growth is currently at 10%.

 

2) Conversion Rate

 

The conversion rate is one of the most used SaaS metrics both in marketing and sales. Not only can it measure the overall effectiveness of your customer acquisition efforts. It can also measure your performance at every step of the customer journey, from awareness to purchase.

So, there can be different types of conversion rates. Let’s look at a few and discover the industry standard for each of them.

 

Visitor-To-Lead Conversion Rate

 

This type of conversion measures the percentage of website visitors you have who give their contact information, thereby becoming leads.

As of this writing, the industry standard for visitor-to-lead conversion rate is 1.9%.

 

Lead-to-MQL Conversion Rate

 

A marketing qualified lead (MQL) is a lead who has shown a particular level of interest in your SaaS product by deeper interactions with your marketing materials.

They may have downloaded one of your eBooks or signed up for one of your webinars.

Interactions like these indicate that they are more likely to purchase your SaaS product.

The industry benchmark for the percentage of leads that become MQLs is currently at 39%.

 

Lead-To-Close Conversion Rate

 

The lead-to-close conversion rate essentially measures the percentage of leads that become paying customers.

According to Growfusely, the average conversion rate from lead to closing is at 0.05% for an inbound customer acquisition strategy.

 

3) Cost Per Lead

 

One of the most straightforward metrics that measure the effectiveness of your marketing efforts is the number of leads you have generated because of it.

But more than the number of leads you generate, you should also be mindful of the cost you spend to generate them.

Now, your lead generation spend will greatly depend on what strategies you use for it. It can be through organic channels, like content marketing and social media marketing. Or it can be through paid channels like ads and influencer marketing.

So here are cost per lead benchmarks for different types of lead generation channels:

  • Organic channels: $147
  • Paid channels: $280

 

4) Customer Acquisition Cost (CAC)

 

If you measure the amount of money you spend to generate a single lead, you should also measure the amount you spend to turn them into customers.

And that’s where the customer acquisition cost (CAC) comes in.

CAC is a SaaS metric that measures the total cost of acquiring a single paying customer.

To calculate it, you need to add up all your marketing and sales expenses over a certain period of time and divide it by the number of customers acquired during that same period.

 

CAC formula

 

Now, a SaaS company’s spending on marketing and sales can be significantly affected by a few factors, such as its industry, target market, and of course, the marketing channels it uses.

 

CAC Benchmarks By Industry & Target Market

 

Spending on marketing and sales can vary depending on your industry and target market. Closing a deal with a large enterprise will cost you more than getting a smaller customer — say, a small business or an individual consumer.

The same is true with varying industries, where you might find different levels of competition and different customer expectations.

So here are some CAC benchmarks by industry and target market:

 

CAC benchmarks by target market and industry
CAC Benchmarks by industry and target market 2

 

CAC Benchmarks By Marketing Channel Used

 

Another huge factor that affects your CAC is which marketing channels you use.

For example, paid marketing channels such as pay per click (PPC) ads and social media ads will generally have a much higher customer acquisition cost than organic marketing, like content marketing and search engine optimization (SEO).

Here are some CAC benchmarks by marketing channel used:

 

CAC benchmarks by marketing channel
CAC benchmarks by marketing channel 2

 

5) CLV/CAC Ratio

 

More than just measuring how much you are spending to acquire a new customer, you also need to know whether or not you’re actually getting a significant return from your customer acquisition spending.

This is where the customer lifetime value (CLV) to customer acquisition cost (CAC) ratio comes in.

Technically, it measures how much revenue you are earning from each customer compared to how much you are spending to acquire them.

To calculate your CLV/CAC ratio, divide your customer lifetime value by your customer acquisition cost.

For SaaS businesses, the standard CLV/CAC ratio is around 3:1 to 6:1.

A CLV/CAC ratio below 1:1 means that you are spending more than you’re earning from your customers, which is not a good sign.

And even if you get past 1:1 but less than 3:1, it may not give you enough margin to drive significant growth for your SaaS business.

An extremely high CLV/CAC ratio isn’t a healthy sign either.

Sure, you’re getting a lot of ROI from your marketing and sales spend. But getting more than 6:1 might indicate that you’re not investing enough on customer acquisition or that you’re missing out on a huge growth opportunity.

 

6) CAC Payback Period

 

The CAC payback period is another SaaS marketing metric that measures how efficient your SaaS marketing is at generating a return on investment.

It measures the amount of time it takes for you to generate enough revenue from your SaaS product to cover the cost of acquisition.

To compute your CAC payback period, you will need to find your average revenue per user (ARPU). Like its name suggests, your ARPU is the amount of money each customer spends on your SaaS product, on average.

You can calculate your CAC payback period by dividing your CAC by your ARPU. This will give you the number of months it takes to cover your SaaS marketing expenses.

 

Customer acquisition cost payback period formula

 

Ideally, you should aim for a CAC payback period of 5 to 7 months or less. A longer payback period indicates your SaaS marketing isn’t as efficient in generating ROI as it could be.

However, the bar is lower when it comes to SaaS startups, since they are usually heavily investing in grabbing a large share of the market.

That’s why the CAC payback period benchmark for SaaS startups is at a more lenient 15 to 18 months.

 

7) ARR Growth Rate

 

Your SaaS company’s annual recurring revenue (ARR) growth rate is a SaaS marketing benchmark used to measure the success of your SaaS product.

This SaaS metric measures how quickly your SaaS business is growing in terms of revenue, and it can give you an idea of whether or not your SaaS product is getting enough traction.

You can calculate your ARR growth rate by taking your current ARR by your ARR in the previous year.

 

ARR Growth Rate Formula

 

For SaaS businesses, the standard for the ARR growth rate can depend on your company size in terms of annual revenue.

For businesses with less than $1 Million ARR, the benchmark for ARR growth rate is 58%.

But if you’re a larger SaaS company with an ARR of more than $1 Million, your year-on-year growth should be around 45%.

 

8) Churn Rate

 

The churn rate is a SaaS marketing metric used to measure customer retention.

It tells you how many of your customers are abandoning or canceling their subscription every month, and it can give you an idea of the effectiveness of your SaaS product.

But your churn rate could also indicate how well you are doing with your customer retention efforts, such as customer success and customer support.

To calculate your SaaS churn rate, divide the number of customers that canceled in a given period by the total number of customers at the start of said period.

 

Customer Churn Rate Formula

 

Now, there is no single benchmark that applies to all SaaS businesses across the board. There are various factors that may significantly affect your SaaS churn rate, such as your target market and company maturity.

 

Churn Rate Benchmarks By Target Market

 

Whether you have business-to-consumer (B2C) or business-to-business (B2B) SaaS customers has a significant impact on your churn rate.

Consumers tend to have lower commitment levels to their SaaS solutions than businesses do. After all, SaaS products can be essential to a company’s daily operation. While for a consumer it could just be something that’s nice to have but not really essential to daily life.

That’s why you have the following churn rate benchmarks for B2C and B2B SaaS customers:

  • Average churn rate for B2C SaaS: 6.77%
  • Average churn rate for B2B SaaS: 4.91%

 

Churn Rate Benchmarks By Company Maturity

 

The maturity of your SaaS company also has a huge influence on your ability to retain customers.

For SaaS companies that are just starting out, their churn rate is usually higher since they have yet to develop a solid customer base. They also haven’t perfected their SaaS product, tend to have more feature requests, and they usually suffer from poor customer support.

On the other hand, well-established SaaS companies tend to have lower churn rates due to a combination of high customer satisfaction levels, great SaaS features, and robust customer success processes.

What’s more, mature SaaS companies tend to move upmarket from SMB to enterprise, which enables them to close long-term deals with larger customers.

With that being said, here are the churn rate benchmarks by SaaS company maturity:

  • SaaS startups: 10% to 15% in your first year.
  • Small SaaS businesses (less than $10 Million in ARR:) 3% to 5%
  • Larger SaaS businesses ($10 Million or more in ARR): 1% to 4%

 

9) Net Revenue Retention

 

Net revenue retention is a SaaS marketing metric used to measure the amount of recurring revenue you’re retaining from your existing customers.

It considers the following factors in your monthly recurring revenue (MRR):

  • Starting MRR: The recurring revenue you have at the start of the month.
  • Expansion MRR: The additional MRR you generate from upselling and cross-selling.
  • Churn MRR: Your loss in MRR due to customer churn.
  • Contraction MRR: The recurring revenue you lose due to subscription downgrades.

To calculate your net revenue retention rate, simply subtract your churn MRR and contraction MRR from your starting MRR and expansion MRR. Then divide the resulting figure by your starting MRR.

 

Net revenue retention formula

 

Now, much like other metrics, net revenue retention for each SaaS business can be significantly affected by a few factors.

For this SaaS metric in particular, we need to look at how benchmarks are affected by your target market, and company size.

 

Net Revenue Retention Benchmarks By Target Market

 

The SaaS target market you have can have a significant impact on your SaaS net revenue retention rate.

For instance, SaaS businesses that cater to SMBs tend to have a lower net revenue retention rate than those that cater to enterprise customers.

Sure, smaller businesses are easier to acquire as customers. But they have limited budgets and they tend to shift priorities very often. Plus, they’re more easily swayed by SaaS competitors who offer similar solutions.

On the other hand, enterprise customers are usually locked into longer-term contracts with SaaS companies they trust, which generally leads to a high net revenue retention rate.

Here are net revenue retention rate benchmarks for these two different target markets:

  • SMBs: 90%
  • Enterprises: 120%

 

Net Revenue Retention Benchmarks By Company Size

 

As we mentioned above, SaaS companies come in all shapes and sizes. Smaller SaaS companies may not have the same resources or long-term deals that bigger companies have. So they tend to have less manpower and processes for customer success and customer support.

So SaaS net revenue retention rate benchmarks for small SaaS businesses may not be the same as large SaaS companies.

Here are the benchmarks for different SaaS company sizes in terms of ARR:

  • Less than $1 Million ARR: 99%
  • $1 Million to $10 Million ARR: 102%
  • $10 Million to $20 Million ARR: 105%
  • More than $20 Million ARR: 106%

 

10) Net Promoter Score (NPS)

 

Net promoter score (NPS) is another SaaS marketing metric used to measure customer satisfaction.

It starts with a simple survey that asks customers how likely they are to recommend your SaaS product to their friends or colleagues.

Customers can rate their likelihood on a scale of 1 to 10, and the results are then divided into three categories: detractors (1-6), passives (7-8) and promoters (9-10).

To calculate your NPS score, subtract the percent of detractors from the percent of promoters. The result is your NPS score, which gives you an overall picture of customer satisfaction.

 

Net promoter score survey and calculation

 

It can be as low as -100 (all are detractors) or as high as 100 (all are promoters).

For SaaS businesses, the NPS score should at least be above 0.

This means you have more happy customers than disappointed ones. However, you still need to listen to the detractors and passives and address their concerns.

An overall NPS rating of 50 and above is considered excellent. It means you have a significant number of happy customers who might even become brand advocates soon.

What’s more, it is possible to have an NPS score of 80 and above. This is considered a world-class NPS rating and may indicate high levels of customer loyalty and brand advocacy.

 

Final Thoughts About SaaS Marketing Benchmarks

 

The SaaS industry is constantly changing, and SaaS marketing benchmarks are no exception. What was considered acceptable this year may be considered poor performance in five or ten years.

That’s why SaaS businesses need to be aware of the latest SaaS marketing benchmarks and adjust their strategies accordingly. Keeping an eye on industry trends, customer feedback, and SaaS metrics will help SaaS companies stay ahead of the competition

With that being said, SaaS marketing benchmarks are just guidelines.

Every SaaS business is unique, and what works for one company may not necessarily work for another. So use these SaaS marketing benchmarks as a starting point to determine where your company stands in terms of performance today—and then strive to exceed them in the future.

Looking for more guides to help you take your SaaS business to the next level? Check out our blog here.

 

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Ken Moo
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