3rd Annual SaaS Metrics Survey

2013

Methodology …………………………………….. 3 Survey Participant Profile ………………….. 5 Executive Summary …………………………… 9 Survey Results & Analysis ………………… 11

Contents

Methodology

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.

Survey Participant Profile

32%  

23%  

18%  

18%  

9%  

Title

C-­‐Level  

Director  

VP  

Manager  

Other  

24%  

23%  

14%  

12%  

10%  

3%  

14%  

Job Function

Marke?ng  

Customer  Success  /  Account  Mgmt  

Sales  

Products  

Opera?ons  

Customer  Support  

Other  

54

89

48

21

33

0

10

20

30

40

50

60

70

80

90

100

<$1M $1-10M $10-50M $50-100M >$100M

Num

ber

of c

ompa

nies

Annual Revenue

Revenue Distribution

Note:  Total  does  not  add  up  to  257  companies  (12  respondents  did  not  complete  this  ques?on)  

38

55 58

23 17

66

0

10

20

30

40

50

60

70

0-10% 10-25% 25-50% 50-75% 75-100% >100%

Num

ber

of c

ompa

nies

27

49 50

17 15

45

0

10

20

30

40

50

60

0-10% 10-25% 25-50% 50-75% 75-100% >100%

Num

ber

of c

ompa

nies

Annual Revenue Growth

All 257 respondents

Excluding companies <$1M in revenue (203 respondents)

Executive Summary

•  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.

Survey Results & Analysis

15% 17% 19%

25% 14%

35%

34%

32%

31%

27% 37%

15%

2011 2012 2013

Not satisfied and learned to live with it

Not satisfied and investing to improve it

Good enough

Very pleased

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

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).

51%

58%

87%

26%

27%

10%

23%

15%

3%

… upsell/add-on sales

… existing customer renewals

… new customer acquisition

High Medium Low

Level of executive priority and funding for

27%

41%

47%

53%

56%

64%

70%

49%

65%

69%

88%

Net Promoter Score (NPS)

Customer Lifetime Value (CLV)

Customer health

Add-on / expansion sales

Revenue per user

Product usage statistics

Churn

Customer Acquisition Cost (CAC)

Conversion rates (free to paying)

Number of new trial signups or free accounts

Website unique visitors

Which metrics do you track

Customer acquisition metrics

Existing customer metrics

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.

46%

49%

42%

33%

30%

28%

24%

37%

14%

9%

5%

Net Promoter Score (NPS)

Customer Lifetime Value (CLV)

Customer health

Add-on / expansion sales

Revenue per user

Product usage statistics

Churn

Customer Acquisition Cost (CAC)

Conversion rates (free to paying)

Number of new trial signups or free accounts

Website unique visitors Customer acquisition metrics

Existing customer metrics

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 revenue-related metrics on existing customers.

Which metrics do you plan to track

18%

14%

8%

27%

33% 0-10%

10-25%

25-50%

>50%

No free trial/freemium

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

15%

26%

56%

73%

By product downgrade

By # users/licenses

By revenue

By # customers

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

Note:  Total  adds  up  to  more  than  100%  since  each  respondent  could  select  mul?ple  op?ons  

38%

30%

17%

15%

0-5% churn

5-10% churn

10-15% churn

>15% churn

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

4% 2% 7%

28%

43%

16% >80% upsell

60-80% upsell

40-60% upsell

20-40% upsell

0-20% upsell

Decline/no increase

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

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

29   28  

43  

35   25  

17  

29   28  23  

0%  

10%  

20%  

30%  

40%  

50%  

60%  

70%  

80%  

90%  

100%  

<25%  Growth   25-­‐75%  Growth   >75%  Growth  

Respon

dents  

Low  Churn   Medium  Churn   High  Churn  

Growth vs. Upsell

4  9  

21  20  

27  

25  

69  

45  37  

0%  

10%  

20%  

30%  

40%  

50%  

60%  

70%  

80%  

90%  

100%  

<25%  Growth   25-­‐75%  Growth   >75%  Growth  

Respon

dents  

High  Upsell   Medium  Upsell   Low  Upsell  

Note:  Low  churn  =  <5%;  Medium  churn  =  5-­‐10%;  High  churn  =  >10%                        High  upsell  =  >40%;  Medium  upsell  =  2`0-­‐40%;  Low  upsell  =  <20%  

Customer engagement monitoring for cloud apps •  Impact conversion rates •  Reduce churn •  Drive customer success •  Increase customer lifetime value

 

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