The Best B2B SaaS Metrics and KPIs to Drive Product Excellence
A Product Manager’s job is simple. Make sure your customers understand your product, use your product, and keep paying for your product.
But to do that, you need to deliver software that your customers need and want to buy. So how do you evaluate the performance of your product onboarding? How do you find out how effective your product is at engaging your users? Or how do you discover where you can improve your product to reduce churn?
That’s where metrics and KPIs come in.
Most SaaS companies collect large swathes of data, but very few know which metrics are critical to collect when it comes to making data-driven decisions.
This article is designed to make it simple for you to:
a) identify the qualities of a good metric
b) put in place a framework to effectively track your metrics and
c) use our ready-made metrics and KPI frameworks to drive excellence in your B2B SaaS product.
The qualities of good B2B SaaS product management metrics and KPIs
In general, there are 4 qualities to look out for in a good metric.
- They should be comparative
Metrics that are comparative make it far easier to benchmark your relative performance compared to peers in your industry. For example, it’s widely publicized that an average B2B SaaS conversion rate is between 5% - 10% so if yours was tracking at say 4%, it would be a good indicator that you should review your conversion journey.
Moreover, comparative can also mean being able to use the same metric against different cohorts of users or different time periods. So continuing our example, you could compare the B2B SaaS (Software-as-a-Service) conversion rate of users acquired by paid ads vs organically, or for week 1 of the financial year vs week 13.
- They should be understandable
Metrics only make a difference if they can drive change. And a Product Manager's ability to drive change within an organization relies on being able to influence people.
Imagine sitting at your desk, logging in to your analytics dashboard and seeing a new metric that takes you 5 minutes to decipher. This would be a great example of a metric you should probably stop worrying about.
Ask yourself this: if it takes you 5 minutes to understand it, how long might it take the CEO or other key influencers in your organization to understand? With metrics, simplicity wins the race.
- They should be in the form of a ratio or rate
If your product has 5,000 users, should you be jumping for joy?
The answer, of course, depends on the context. Some things you’d need to consider include if your user count is growing every month or if it’s declining? And also, how long has it taken the company to reach 5,000 users?
Obviously you’d much rather be a SaaS that has 5,000 users and a 400% MRR growth rate than one with say 5,000 users but a 10% MRR growth rate.
Metrics in the form of ratios and rates have the power to provide perspective and show Product Managers if the changes they’re making are driving the product in the right direction, and if they’re doing so fast enough.
- They should be actionable
If you notice one of your KPI’s going down, could you easily identify some actions you might take to improve it? If so, consider it an actionable metric.
Example:
- Customer Lifetime Value (LTV) has fallen by 30% in the last 12 months
In essence, LTV is a calculation of how much gross revenue each customer on average brings. Therefore if it falls, it’s likely to mean there’s been an increase in churn or a change in pricing.
With this in mind, as a Product Manager, you could take actions such as:
- Talk to customers that recently churned to understand if there’s something in common that’s causing them to leave
- Provide a retention offer when users try to cancel their subscription
- Review any recent changes to your product pricing and plans
A B2B SaaS Product Manager’s framework for managing KPIs and metrics
With so many metrics at your disposal, it can feel overwhelming to login to your analytics dashboard and see a screen of numbers staring back at you.
However, by using the simple exercise you’re about to see below, you can start to categorize your KPIs and order your metrics in a way that makes it easy to understand the performance of your SaaS product.
Understanding results-based KPIs vs influencer metrics
There’s a subtle but important difference between a KPI and a metric.
A metric is any type of measurement that you collect.
However, a KPI (key performance indicator) is a specific type of measurement that relates directly to achieving the organization's core business objectives. An example within B2B SaaS might be MRR ($) or Churn Rate (%).
While KPIs are results-based, metrics can be useful in showing you the journey and progress to improving your overall aim. By understanding this concept, you can create some order out of your dashboard chaos by linking your results-based KPIs to your influencer metrics.
It goes like this…
- You decide what you’re trying to find out
For example: “In general, are customers satisfied with our product?”
- You set your main results-based KPI
For example: NPS (Net Promoter Score)
- You align it with all the influencer metrics you believe could be directly impacting your KPI
For example:
- The average number of support tickets raised per user (% change)
- The average first response time by the support team (% change)
- The number of reported software bugs (% change)
It would be reasonable to assume that if there were more software bugs, a longer response time by support, and more support tickets being raised on average by each user, that your NPS would decrease.
However, the true power of approaching your KPIs and metrics with this framework is you can treat everything like a hypothesis.
Scenario 1: If your main KPI is improving but your influencer metrics aren’t then it either suggests a time-lag in the data or that there’s something you aren’t measuring that’s more important to your customers and is affecting your KPI.
In the example above; if the average number of support tickets per user is rising, bugs are up and support is slower, yet NPS is still improving, perhaps there’s something else at play that has a stronger influence on customers. If so, can you work out what it could be and start measuring it in the future?
Scenario 2: If your hypothesis does seem to be holding true you can start tracking the numbers over time to see how important each influencer metric actually is to your KPI.
Result-based KPI NPS ↑ (+ 20% from 5 to 6)
Influencer metric The average number of support tickets raised per user ↓ (-1%)
Influencer metric The average first response time by the support team ↓ (-10%)
Influencer metric The number of reported software bugs ↓ (-1%)
If results like these correlate over a reasonable period of time, you could start to consider if customers care more about receiving a fast response to support tickets than dealing with a few more software bugs, as the data suggests a disproportionate rise in NPS from a 10% quicker response time.
Additionally, you could investigate even further by segmenting your data. For example, instead of looking at the NPS of all users, you could look at just the NPS of your most valuable accounts and see if everything still holds true.
In the next section, we’ll provide you with ready-made KPI frameworks that B2B SaaS companies can experiment with.
Ready-made metrics & KPIs to drive excellence in B2B SaaS Product Management
To make life easy for you, we’ve created a few ready-made frameworks that can be implemented within most B2B SaaS companies.
Remember these are our suggestions but there’s nothing to stop you using your own metrics and experimenting in your own way – just make sure to choose metrics that are comparative (generally % changes, ratios or rates), understandable and actionable.
- Product Engagement
- Product Satisfaction
The best B2B SaaS KPIs and Metrics for measuring product engagement
The more engaged your customers are with your product, the less likely they are to churn. Therefore product engagement can act as an essential early warning system against churn and ultimately a decrease in MRR.
Measuring product engagement can vary hugely amongst B2B SaaS companies as different software works in different ways.
As a rule of thumb, try to think about the most valuable or essential steps that a user should be taking with your software. For example, there would be no value in using Calendly without connecting your calendar. Or equally, it’s essential for users of ProdCamp to go ahead and create a roadmap!
With that in mind, below is a general framework, but alter it as you see fit.
Result-based KPI Churn Rate (%) ↓
Influencer metric Average number of key actions per user per month (% change) ↑
Influencer metric Average user monthly session duration (% change) ↑
Influencer metric Average number of logins per user per month (% change) ↑
Influencer metric DAU / MAU (%) ↑
Churn Rate (%)
What is it?
Within B2B SaaS, “churn” can be used either in the context of users or revenue – both can be useful.
Customer Churn Rate (%) is the percentage of users that leave within a time period (usually calculated on a monthly or annual basis).
Gross MRR Churn Rate (%) is the percentage of revenue that is lost due to users leaving or downgrading within a given time period (usually calculated on a monthly or annual basis).
Net MRR Churn Rate (%) is the relative percentage of revenue that is lost due to users leaving or downgrading within a given time period.
The difference between Gross MRR Churn Rate (%) and Net MRR Churn Rate (%) is that the Net measurement also includes MRR that has been added during the period too (e.g. through new user signups or user upgrades). As such, there is the potential for Net MRR Churn Rate (%) to be negative.
How do you measure it?
Customer Churn Rate (%) = Total Number of Churned Customers / Total Number of Customers
Gross Monthly MRR Churn Rate (%) = Total MRR Churn over the month ($) / Total MRR at the start of the month ($)
Net Monthly MRR Churn Rate (%) = Total MRR Churn over the month ($) minus Total MRR Added over the month ($) / Total MRR at the start of the month ($)
Churn rate calculations can be relatively complex. As such we’d advise using software to ensure it’s calculated correctly. For Customer Churn Rate (%), you can use product analytics software like Amplitude, but for MRR Churn Rate (%) you’ll need software that also links to your billing or accounting system. If you use Stripe to collect payments, it will do this for you, otherwise, software such as ProfitWell can provide a full suite of revenue retention metrics.
Why is it important to measure?
While most companies focus on adding new logos, the #1 killer of B2B SaaS companies is said to be churn. After all, there’s no point adding more water into a bucket full of holes.
The more your users are actively engaged with your product and seeing the value from it, the less likely they are to leave. That’s why churn rate is intrinsically linked to product engagement, and why product management is so influential in affecting it.
How should you use this KPI?
To give some context, it’s been said that an annual B2B SaaS Churn rate of around 5-7% is acceptable. Remember, much like there is always a natural level of unemployment in an economy, there will always be a level of churn as you can’t retain all your customers forever.
If your annual churn rate (users or revenue) is markedly higher than 5-7%, then it may suggest your product is failing to address all of your users concerns and you may need to do some customer research to understand why.
In the 2020s, the reality of churn is becoming more complex. As the barriers to entry lower, differentiation between products decreases, more SaaS companies emerge and price competition intensifies, churn is trending higher than surveys from the 2010’s would otherwise suggest.
Therefore in terms of product management, the direction of your churn rate can have a lot of importance too. If your churn rate is consistently trending downwards, it’s likely your product is improving within its market and your user success is going up – which means you’re doing something right!
Average number of key actions per user per month
What is it?
This is a valuable but significantly different metric for every SaaS company depending on what you define as a “key action”.
A key action is essentially what a user does within your software that shows they are getting significant value.
For example, for the project management tool Trello a key action could be every time a user adds a card or creates a new board. Or for a market research SaaS like Crunchbase, a key action might be every time a user makes a search.
How do you measure it?
Average number of key actions per user per month = Total number of key actions taken by all users per month / Total number of users
Once you have the raw figures, you should track the % change over time.
If tracking the key action(s) seems quite complex, you could use Amplitude to do it for you. Alternatively Google Analytics remains a viable alternative to use if each key action can be signified with an event or specific page visit.
Why is it important to measure?
For some companies, the average number of key actions per user per month is a better way of seeing how much value a user is getting from your product, compared to simply how much time they’re spending with it.
How should you use this metric?
Within B2B SaaS, it’s often said that the quicker a user reaches an “Aha! moment”, the more likely they are to convert.
By monitoring the key actions being taken by users, you can see if changes you’re making to your product make it quicker for users to find significant value and become stickier to your product over time.
Average user monthly session duration
What is it?
The average amount of time your users spend every month using your software.
Why is it important to measure? There are some exceptions, but most B2B SaaS companies would agree that the more time a customer spends using their software, the more value they’re receiving from it and the more engaged they are with the product.
How do you measure it?
As a formula, you divide the total time that all users spend per month using your software by the total number of users.
Average user monthly session duration = Total monthly session duration of all users (minutes) / Total number of users
If your SaaS is web-based, these figures are generally accessible via Google Analytics.
Once you have the raw figures, you should track the % change over a given time period. If your SaaS billing cycle isn’t monthly, you could adjust the time period to fit.
How should you use this metric?
If you notice an unexplained decrease in your average user monthly session duration, you may expect to see an increase in churn not long after.
As a Product Manager, you can use this time lag to your advantage by taking action in an attempt to stop churn before you expect it such as by talking to customers, analyzing key feature usage and boosting retention offers.
As a side note, if your software revolves around making things quicker or more efficient, you may wish to choose a different results-based KPI for product engagement. For example, an accounting software like Xero might see it as a negative if small business users are spending overly large amounts of time on book-keeping.
Average number of logins per user per month
What is it?
The total amount of times a user logs in to your software over the course of a month, averaged amongst the entire user base.
How do you measure it?
Average number of logins per user per month = Total number of logins across all users per month / Total number of users
You may have internal system logs, or else if your SaaS is web-based, these figures are usually found within support software such as Intercom.
Alternatively, instead of logins, you may wish to track the number of sessions via Google Analytics.
Once you have the raw figures, you should track the % change over time.
Why is it important to measure?
Every time a user logs in, they’re showing intent to use the software. Therefore a B2B SaaS with healthy levels of engagement should see users frequently logging in to their account. While logging in doesn’t necessarily show value, it does show that you’re on your customer’s mind.
How should you use this metric?
If there’s been a significant, sustained and unexpected increase in the average number of logins per user per month, then it could indicate that any changes you’ve recently made to your product have been well received. On the other hand, a significant decrease is normally a prelude to an increase in churn.
DAU / MAU (%)
What is it?
DAU/MAU is the % of daily active users (DAU) as a proportion of monthly active users (MAU). The idea is that by combining them into a ratio, you can measure stickiness.
How do you measure it?
Stickness = Daily Active Users (DAU) / Monthly Active Users (MAU)
The trickiest part is to define what an “active user” means for your software as most companies count it slightly differently. Much like when thinking about product engagement in general, you could align an active user by if they’ve spent a certain amount of time using the software, if they’ve logged in or if they’ve taken specific key actions.
Software like Amplitude should be able to display this for you.
Why is it important to measure?
There is active debate within the B2B SaaS community of the value of using DAU/MAU because it’s less actionable than other metrics, it can be manipulated according to your definition of an “active user” and it doesn’t always correlate with churn. Commentators such as Lincoln Murphy have written that tracking active users is a vanity metric, yet many companies still find it useful to do so.
How should you use this metric?
While you can find benchmarks online of an average B2B SaaS having a 10-20% DAU/MAU, because of the considerable debate behind this metric, it’s considered to be more valuable to track the percentage change in DAU/MAU over time rather than benchmarking the raw figure against other companies.
The best B2B SaaS KPIs and Metrics for measuring product satisfaction
With product-led businesses, customer satisfaction is heavily linked to product satisfaction. If your software is well-designed, easy to use, provides ongoing significant value and operates as expected, customers should generally be satisfied.
With that in mind, below is a general framework for measuring product satisfaction for B2B SaaS companies, but alter it as you see fit.
Result-based KPI Net Promoter Score (NPS) ↑
Influencer metric Customer Effort Score (CES) ↑
Influencer metric Average number of support tickets raised per user per month ↓
Net Promoter Score (NPS)
What is it?
Net Promoter Score is one of the most widely used metrics for understanding customer satisfaction and loyalty.
How do you measure it?
Customers are given an NPS survey with one simple question asking “How likely are you to recommend [company] to a friend or colleague?”.
Then, they are asked to provide a rating between 0-10 to score their answer, with 10 meaning they are most likely to recommend the product and 0 being the least likely to recommend it.
Customer responses are then grouped into one of the following:
Scoring system:
0-6 – Detractors
Customers that are unhappy with your product and are at a high risk of churning.
7-8 – Passives
Customers that are generally happy with your product, but feel it’s missing a few elements to make it perfect.
9-10 – Promoters
Customers that love your product and would happily tell others to join.
The most important part of calculating your NPS is to understand that you don’t just average the score amongst the total user responses. Instead, you should subtract the percentage of detractors from the percentage of promoters to get an NPS score between -100 and 100.
The easiest way to do this if you have raw NPS figures is to use Retently’s NPS Score calculator. Or if you’re looking for a solution to automate the collection and calculation of your NPS score, then read Retently’s NPS software guide to help you decide who to choose.
Why is it important to measure?
Not only is NPS one of the easiest to compare benchmarks amongst industry peers, but it’s a good overall indication of how your customers rate your company and your product.
How should you use this KPI?
As with all the metrics, you can use it to keep your finger on the pulse of how customers feel about the direction of where your product is heading, i.e. are customers becoming more or less impressed over time?
But more so than others metrics, NPS comparisons can be made to rank your overall performance too. According to Delighted, the average NPS score amongst software companies is 41, though there is a wide variation with companies such as Adobe declaring their NPS at 60.
According to Ramin Shokrizadeh, a Senior Product Manager at Zendesk, NPS is also useful to analyse when segmented into different cohorts. “For web based products, I primarily focus on net promoter score (NPS) and its trend over time, broken down by customer segment and persona type”.
Customer Effort Score (CES)
What is it?
Customer Effort Score (CES) is a metric that determines how much effort is required by customers to perform a specific action.
Here are some examples of where this might be applied in the context of B2B SaaS product management:
- How easy was it for you to upgrade your plan?
- How easy was it for you to create your first Trello card? (Trello)
- How easy was it for you to produce your first invoice? (Stripe)
How do you measure it?
Much like with measuring NPS, CES is given as a single question which can be altered depending on the action the customer performed, but is generally in the format of:
“How easy was it for you to……”
The respondent is then asked to grade their response – usually with options ranging from “Very easy” all the way to “very hard”. However unlike NPS, the CES score is then calculated by averaging the responses.
There are many software solutions that can set up CES surveys and measure them for you including Wootric and Retently.
Why is it important to measure?
CES is useful for measuring satisfaction in specific parts of your product, rather than NPS which looks at a customer's overall impression.
This is important because a customer could have a positive experience with one specific feature of your product, yet feel far less positive about another. As such, CES provides an ideal way to identify and address the problem areas of your product, leading to higher overall product satisfaction.
How should you use this metric?
CES surveys are best deployed across all the areas of your product where key actions are taken by customers.
By analyzing the results and comparing the relative scores of different areas of your software you can learn which parts of the product need focussing on the most, and what is having the biggest impact on customers’ overall product satisfaction.
Average number of support tickets raised per user per month
What is it?
The average number of support tickets raised per user can act as a gauge of how effective your product is at delivering the key functionality that your customers are demanding.
Note: If you don’t use support tickets, you could track chat conversations instead.
How do you measure it?
To measure it you should first make sure that your support system supports tagging. Popular solutions like Intercom and ZenDesk can handle this.
While you could measure the overall average number of support tickets raised per user, within the context of product management it may be more useful to only include tickets related to product issues. And with the use of tags this should be simple to do.
Average number of support tickets raised per user per month = Total number of support tickets raised in the past month / Total number of users
The above is the general formula but to look at product-related satisfaction, only include the total number of tagged support tickets in the past month instead.
Once you have the raw figures, you can track the % change over time to gauge how product satisfaction is changing.
One disadvantage of this metric is that it may require you to manually collect the data if your support software doesn’t automatically measure it for you.
Why is it important to measure?
When customers need help or are dissatisfied with your product, it’s the support team that deals with it. Looking at the average number of support tickets per user per month, is a great way to bridge some gaps between customer support and product management (as of course, using ProdCamp is too!).
How should you use this metric?
There’s no official benchmark to follow, but by tracking the % change over time, you can often tell how recent changes to your product are being received by customers, and how easy they find the software to use.
One of the great advantages of measuring this metric is that if you notice fluctuations, it’s easy to understand what’s happening because you can read some of the tagged support tickets to see what customers are talking about.
Conclusion & Recap
In summary:
- The best metrics are comparative, understandable, actionable and in the form of a ratio or rate.
- A metric is any type of measurement that you collect, whereas a KPI (key performance indicator) is a primary metric that specifically relates to core business objectives.
- Behind every KPI you can assign a series of influencer metrics – i.e. Individual metrics that can influence the overall KPI result.
- A great way to simplify how you manage your metrics is to build a framework for managing them. To do this, start by choosing a core area of the product management process such as product onboarding, then align your main result-based KPI with a few influencer metrics.
