SaaS Sales Funnel Metrics: What To Track In Each Stage
The sales funnel is a crucial tool for any business to streamline its approach to acquiring customers. After all, it’s a visual representation of your processes for lead generation, qualification, nurturing, and conversion.
Having a sales funnel is important, especially if you’re in the SaaS business. Traditionally, the sales process is a huge part of getting customers for a SaaS company.
Sure, recent trends like product-led growth and community-led growth may have little or no need for a sales team. But if you’re selling a B2B SaaS solution to high-ranking executives and decision-makers, sales is still your ticket to growth.
And if you rely on sales for growth, closely monitoring your sales funnel is a must.
But it’s not enough to identify and follow your sales funnel. There’s a high chance that it won’t be perfect right away. That’s why you need to continuously improve it in order to optimize your sales process to the best it can be.
And the first step to improving your SaaS sales funnel is to measure its performance. That’s why you need to set the right metrics for your funnel.
Why You Need SaaS Sales Funnel Metrics
Tracking the right key performance indicators (KPI) opens you up to a lot of benefits and opportunities. Yes, we’ve already mentioned its ultimate benefit, which is helping improve your overall sales process.
But here are some more reasons why you need SaaS sales funnel metrics:
Optimize Performance For Each Funnel Stage
When you’re tracking sales funnel metrics, you’re not just measuring the performance of your overall sales process. You’re also measuring each stage.
This gives you a more detailed view of how each stage is performing so you can optimize it.
And if you can see how each stage is performing, it can help you identify weaknesses and bottlenecks in your sales process.
Once you know where these are, you can address them and prevent leads and opportunities from falling through the cracks in your sales pipeline.
Set Clear Goals For Your Sales Team
When you have specific metrics to track, it’s easier to set goals for your sales team.
That way, you’re giving them something real to aim for. Not just some vague statement like “Let’s get more sales”, or “Let’s close them faster.”
Giving them a number to aim for will enable them to lock on that target and work towards it. Knowing their metrics will also give them a better idea of their progress as they pursue their objectives.
Even better, you can further motivate them with bonuses and rewards whenever they hit a specific goal.
Having these specific targets and benchmarks can also help you identify underperforming members of your team so you can address the issue.
Make Data-Driven Decisions
Data is key in making sound decisions.
The beauty of tracking SaaS sales funnel metrics is that you can make decisions based on actual data rather than assumptions or gut feelings. This data can help you determine which strategies are working and which ones aren’t.
With this information, you can adjust your tactics and improve your chances of success.
Now that we’ve talked about the importance of tracking SaaS sales funnel metrics, it’s time to talk about which specific metrics you need to track for each stage.
Top-Of-Funnel (TOFU) Metrics
A SaaS sales funnel or marketing funnel can be different for each business. There can be different terminologies or structures.
But generally, the first stages of a SaaS sales funnel include the Awareness and Interest stages.
In these funnel stages, you’re trying to get your potential customers to learn about your product or brand. That’s why content marketing, social media marketing, and paid ads are your primary efforts that serve the top of the funnel.
So you may want to look at the following TOFU metrics:
- Website Visits
- Ad Impressions And Clicks
- Social Media Engagement
TOFU Metric #1: Website Visits
Website visits are one of the most basic TOFU metrics that you can track.
This metric simply measures the number of times your website is visited. The higher the number, the better. More visitors mean more opportunities to convert them into leads or customers.
What’s more, you can further track your unique website visits and recurring visits using Google Analytics. It assigns a unique user ID for each visitor. If it detects the same user ID visiting your site more than once, then it is counted as a recurring visit.
Having a high number of recurring visitors may indicate that your content marketing efforts are going well.
TOFU Metric #2: Ad Impressions And Clicks
Ad impressions refer to the number of times your online ads are seen by users across all digital channels.
This metric is important because it can help you measure the reach of your ads. The more people see your ad, the better. More impressions mean more opportunities to get clicks and conversions.
Clicks, on the other hand, refer to the number of times users clicked on your ad. This metric is important because it can help you measure engagement.
TOFU Metric #3: Social Media Engagement
Social media engagement refers to the number of interactions that happen on your social media posts. These interactions can be likes, comments, shares, and views.
Tracking your social engagement is important because it can help you measure the reach and effectiveness of your social media marketing efforts.
More engagement means your posts and shared content are successfully attracting and maintaining your target audience’s attention.
Middle-Of-Funnel (MOFU) Metrics
The next stages of the funnel include the Consideration and Intent stages.
In the Consideration stage, your viewers are already looking for SaaS solutions to buy. And on the Intent stage, they have specifically expressed their intent to buy your SaaS product.
In these stages, your potential customers transition from being visitors into leads. So the primary effort you can do to nurture these leads is email marketing.
These are the MOFU metrics you should look at:
- Open Rate
- Click-Through Rate
- Qualified Leads
- Lead Velocity Rate
MOFU Metric #1: Open Rate
Open rate is the percentage of email recipients who opened your email.
This metric is important because it can help you measure the effectiveness of your subject lines. If more people are opening your emails, it means your subject lines effectively pique their interest.
MOFU Metric #2: Click-Through Rate
Click-through rate (CTR) is the percentage of recipients who opened your email and clicked a link in it.
This metric is important because it can help you measure the effectiveness of your email content. If more people are clicking on your links, it means your content is interesting and relevant to them.
Now, there are a lot of factors that can affect your CTR. It can be the quality of your content, your calls-to-action (CTAs), design, or timing. To optimize email marketing efforts, SaaS businesses usually perform A/B testing on them.
MOFU Metric #3: Qualified Leads
A qualified lead is a potential customer who has a high chance of buying your product.
You see, not all of the leads you generate will have the intent to buy your product. And even if they do, some won’t even have the authority to do so.
This metric is important because it can help you measure the effectiveness of your lead generation efforts and how well you are attracting the right crowd.
MQLs: These are the leads that have performed specific actions that indicate an interest in your brand or SaaS product. They can be recurring visitors. Or perhaps they’ve downloaded a free e-book that you’re offering on your site.
SQLs: These are the leads that are already interested in your product and have the intent to buy it. The clearest sign of that intent is giving their contact information so that your sales team can reach out to them.
You can further measure your opportunities from SQLs by counting the number of your scheduled demos and meetings.
MOFU Metric #4: Lead Velocity Rate
Lead velocity rate (LVR) measures the growth in the number of qualified leads that you generate every month.
This metric is important because it can help you measure the effectiveness of your lead generation efforts over time.
You can compute your LVR by getting the percentage of your new leads for the current month from the number of your leads last month.
Bottom-Of-Funnel (BOFU) Metrics
The bottom of the funnel includes the Evaluation and Purchase stages.
The Evaluation stage is where your lead decides whether or not your SaaS product is the best fit for their needs.
And the Purchase stage is the stage that every salesperson wants to be in. From the term itself, it’s where your lead buys your SaaS product and turns into a customer.
At these stages, these are the metrics you’ll want to track:
- Conversion Rate
- Sales Cycle
- Monthly Recurring Revenue
- Customer Acquisition Cost
- Average Revenue Per Account
BOFU Metric #1: Conversion Rate
Generally, the conversion rate is the percentage of leads that turn into paying customers. This metric is important because it can help you measure how effective your sales process is.
If you’re not converting as many leads as you want, it means you need to tweak your process.
However, as we are discussing here, the sales funnel has many parts that are affected by different factors. How could you possibly know which ones affect your overall conversion rate?
The answer? You also monitor your conversion rates per funnel stage. By breaking down your conversion rate by stage, you can better see which parts of your sales funnel need improvement.
For example, if your conversion rate is highest in the Evaluation stage, it means that your product is a good fit for most of your leads. However, if your conversion rate is lowest in the Purchase stage, it means that you still have some work to do in convincing leads to buy your product.
BOFU Metric #2: Sales Cycle
The sales cycle is the average time it takes for a lead to go from the first contact to becoming a paying customer. This metric is important because it can help you measure how long it takes for you to close a deal.
If you’re not closing deals as fast as you want, it means you need to speed up your sales process or improve your lead qualification standards. Or both.
You can compute your sales cycle by getting the average number of days it takes for a lead to become a customer.
To do that, you first need to determine the date when a lead becomes a customer. Then, count the number of days from the date when you first contacted them.
Do this for every deal you close and then take the average.
BOFU Metric #3: Monthly Recurring Revenue (MRR)
Monthly recurring revenue (MRR) is the earnings that you can expect to receive every month from your customers.
This metric is important because it’s a predictor of your company’s future growth. After all, if you’re not growing your MRR, then your business will eventually stall.
To compute your MRR, simply multiply the number of paying customers you have by the average monthly price they’re paying.
You can also compute your MRR growth rate which is the percentage increase or decrease of your MRR from last month.
What’s more, you can also track your recurring revenue on an annual scale. That would be your annual recurring revenue (ARR).
BOFU Metric #4: Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) is the amount of money you spend to acquire a single new customer
To compute your CAC, simply divide your total sales and marketing costs by the number of new customers you’ve acquired in a given period.
This metric is important because it can help you measure the efficiency of your marketing and sales efforts. The lower your CAC, the more efficient your efforts are.
But that doesn’t mean you should skimp out on your marketing and sales efforts. Remember that efficiency is the goal.
The best way to reduce your CAC is to focus on generating high-quality leads that are more likely to convert.
BOFU Metric #5: Average Revenue Per Account (ARPA)
The average revenue per account (ARPA) measures the monthly recurring revenue that you’re able to generate from a single customer account.
You can compute your ARPA by dividing your MRR by the number of paying customers that you have.
This metric is important because it can identify which products or subscription tiers drives the most (or least) revenue to your SaaS business.
If your ARPA is growing over time, it may indicate that your upselling efforts are paying off. It may also signify that you’re starting to attract a new market with higher budgets.
Like MRR, you can also compute your ARPA in annual terms instead of monthly. In such a case, you just need to use your ARR instead of MRR in computing for it.
In fact, the annual ARPA is necessary to compute another important SaaS sales metric (which we will talk about later).
Retention Stage Metrics
Unlike in traditional business models, customer relationships in SaaS are crucial long after the Purchase stage. SaaS customers pay a subscription fee, not a one-time fee.
So for a SaaS business, the focus shouldn’t just be on acquiring new customers. It should also be on retaining your existing users.
In fact, prioritizing customer retention is more profitable than getting new customers.
For the Retention stage, you can track the following metrics:
- Churn Rate
- Retention Rate
- Customer Lifetime Value
- CLV:CAC Ratio
Retention Stage Metric #1: Churn Rate
The churn rate is the percentage of customers who cancel their subscriptions in a given period.
To compute your churn rate, simply divide the number of customers who canceled their subscription by the total number of customers you have.
This metric is important because it can help you measure how healthy your customer base is. A high churn rate means that you’re losing more customers than you’re gaining.
And that’s not good news.
You can take steps to reduce your churn rate by improving your customer support or driving efforts that help your customers use your SaaS product to its full potential.
Retention Stage Metric #2: Retention Rate
Naturally, we need to monitor the retention rate during the Retention stage.
This metric is just the opposite of the churn rate. Retention rate is the percentage of customers who stick around or continue using your product after a given period of time.
To compute your retention rate, divide the number of customers who remain active by the total number of customers you had at the start of the period.
This metric is important because it can help you measure how well your product is performing. A high retention rate means that your customers are happy with your product.
You can take steps to improve your retention rate by constantly adding new features or improvements to your product. You should also make sure that your customer support is top-notch so that you can address any issues that may arise.
Retention Stage Metric #3: Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is the amount of money that a user is expected to spend with your company over the course of their relationship with you.
To compute your CLV, you first need to find your average customer lifetime and ARPA.
We already discussed what ARPA is and how you can calculate it. As for the average customer lifetime, it’s simply the average length of time that each of your customers subscribes to your product.
For example, if you have a customer who’s been with you for 2 years, and another customer who’s only been with you for 1 year, then your average customer lifetime is 1.5 years.
Of course, that’s just a scaled-down example. In real life, you have a lot more customers who (hopefully) stick with you for a longer period of time.
Once you have your average customer lifetime and ARPA, you can simply multiply them to get your CLV.
This metric is important because it can help you measure the long-term profitability of your business. The higher your CLV, the more profitable your SaaS business is.
Retention Stage Metric #4: CLV:CAC Ratio
To state the obvious, the CLV:CAC ratio is simply the ratio of your customer lifetime value (CLV) to your customer acquisition costs (CAC).
We already discussed how to calculate CLV and CAC. So once you have these two values, simply divide the CLV by the CAC.
That’s your CLV:CAC ratio.
This metric is important because it can help you measure the financial efficiency of your sales and marketing efforts. If you have a CLV:CAC ratio of 3:1, that means you’re making $3 for every dollar you spend on acquiring new customers.
That’s the standard, by the way. SaaS businesses should have a CLV:CAC ratio of 3:1 or more to be considered healthy.
You can increase your CLV:CAC ratio by focusing on customer retention and upselling. That’s why we’ve been saying that retaining your existing customers is more profitable than getting new ones.
But don’t get me wrong. I’m not telling you to stop getting new users. Customer acquisition is still one of the most important things if you want your SaaS business to grow.
Just don’t do it at the expense of losing your existing customers.
Advocacy Stage Metrics
Now we’re down to the last stage of the SaaS sales funnel. The Advocacy stage is where your customers don’t just use your product. They also actively promote it.
You do this by getting them to talk about your product to their friends and colleagues. You may also run a referral program to motivate your customers to share your SaaS product with others.
This stage is important because it’s the final step in turning a customer into an advocate of your product.
Here are some metrics you can use at this stage:
- Net Promoter Score
- Review Ratings
Advocacy Stage Metric #1: Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric that measures how likely your customers are to recommend your product to their friends and colleagues.
To get your NPS, you start by asking your users the following question: “How likely are you to recommend our product to a friend or colleague?”
Customers then answer on a scale of 0-10, with 0 being “not at all likely” and 10 being “extremely likely.”
Once you have the responses, you group them into three categories: Promoters, Passives, and Detractors.
Promoters (score 9-10): These are your most loyal customers who are willing to tell others about your product.
Passives (score 7-8): These are customers who are satisfied with your product but they’re not raving fans. They may still switch to your competitors if they find better deals.
Detractors (score 0-6): These are customers who are unhappy with your product and they’re likely to tell others about their negative experiences.
To get your NPS, simply subtract the percentage of Detractors from the percentage of Promoters.
This metric is important because it can help you measure the loyalty of your customer base. The higher your NPS, the more likely your customers are to stick with you and even advocate for your product.
Advocacy Stage Metric #2: Review Ratings
This metric is important because it can show you how satisfied your customers are with your product. The higher your review ratings, the happier your customers are.
Although ratings can be subjective, they have a huge impact on potential customers. That’s why it’s important to make sure you leverage your SaaS reviews as much as possible.
Advocacy Stage Metric #3: Referrals
Referrals are customers who refer their friends and colleagues to your product.
This metric is important because it shows you how successful your referral program is. The more referrals you have, the more likely it is that people are talking about your product.
And we all know that word-of-mouth marketing is one of the most powerful forms of marketing there is.
Final Thoughts About SaaS Sales Funnel Metrics
Tracking the right sales metrics will help you assess and improve your overall sales performance.
And knowing what specific metrics to monitor at each stage of the Saas sales funnel will let you zoom in on it. You will know which stages are working well and which ones need improvement.
You will also be able to identify which specific sales efforts contribute to that performance.
At the end of the day, tracking the right sales funnel metrics will help you close more deals and grow your business.
If you want to learn more about growing your SaaS business, feel free to check out our blog here.