B2B Marketing Benchmarks: One Way to Know Levels of Success

Benchmarking is one of the essential steps to measuring B2B marketing success. However, data sometimes feels overwhelming. With so many metrics, where do you focus?

A good SaaS marketing agency considers many factors when sifting through a long list of metrics. These include your goals, audience, digital touchpoints, and the SaaS sales funnel model.

This article explains seven of these metrics. It also discusses the following:

• How benchmarking differs from KPIs and metrics.
• Why even seasoned B2B marketers find it difficult.
• The value of partnering with a specialty marketing agency for data analytics.

This blog post empowers you to purposefully use data. This way, you avoid the common SaaS silent killers and effectively scale. Read below if you are ready to learn more. Let’s go!

Want to know how we help SaaS businesses stand out from the crowd? Watch this video to learn how DAP makes it happen!

What Are Benchmarks?

Benchmarks are standards or points of reference from industry averages, historical data, or both. Many often confuse them with key performance indicators (KPIs) and metrics, but they have different meanings.

Metrics evaluate the performance of specific business activities. These include website visits, trial signups, or completed sales demos. KPIs, on the other hand, analyze business performance according to your goals. They always include metrics.

Benchmarking is a process that compares KPIs and metrics over time, with the following benefits:

• Provides context to evaluate your metrics and KPIs. Is your performance good or bad?
• Identifies strengths, weaknesses, and opportunities compared to benchmarks. Do you have marketing aspects to improve? How do you fare when compared to your competitors or the industry standards?
• Anchors goal setting for improvement targets. Do you meet your objectives? Your goals might be unrealistic and need refinement.
• Quantifies progress. Information is easier to understand and act on by everyone, especially in marketing and sales.

Simply put, good benchmarks take the guesswork out of B2B marketing. They provide clarity to speed up sound decision-making. 

The Challenges of SaaS Marketing Benchmarking

Although vital to knowing marketing success, benchmarking is also challenging. For one, the process is different than when you measure ecommerce metrics. 

For products, benchmarks usually focus on traditional metrics. These include sales revenue, market share, distribution reach, brand awareness, and lead generation. It emphasizes less customer lifetime value (CLV) or churns. This is because purchases are often one-time, not recurring subscriptions.

SaaS benchmarks are more complex and specialized. For example, your business requires significant financial investment but must control spending. To do this, you should optimize acquisition costs while maximizing the existing CLV through renewals and upsells. 

Additionally, the subscription-based model demands detailed monitoring of usage and adoption. It also keeps track of account expansion and retention over time. Physical products do not require this depth of ongoing customer analytics.

Other SaaS benchmarking challenges include the following: 

• Identifying credible sources for comparative data.
• Ensuring appropriate “apples to apples” comparison.
• Customizing the KPIs to consider unique business circumstances.
• Applying consistent methodology as metrics and business evolve.

Because of these reasons, companies like yours benefit more from hiring a SaaS marketing agency specializing in your niche. It uses experience and expertise to sort through vast amounts of data. It then applies creativity, science, and innovation, such as AI SaaS, to generate actionable insights even in real time. 

In summary, benchmarks are guidelines, not hard rules. Each company’s business model and market are unique. The value comes from understanding how you stack up and tailoring strategies based on your needs.

Seven Vital SaaS Metrics to Benchmark

A SaaS marketing agency considers over 15 metrics and KPIs to effectively benchmark a client. The likes of unique visitors, lead stages, and response times are more useful as general performance metrics. The ones below focus on customer acquisition, retention, and satisfaction. These are the core drivers of success.

     1. Churn Rate

SaaS relies heavily on recurring customers. This makes churn rate a priority metric for your business. 

The churn rate is the percentage of customers who cancel or fail to renew at any given period. In short, it measures turnover. Its value lies in its ability to reveal retention challenges. It also estimates revenue risk because losing customers means lost sales. 

The churn rate formula is simple:  

Churn rate = Customers lost / total customers

To illustrate the churn rate’s value as a SaaS metric, let us say your business has 1,000 customers paying $10 monthly. 

Seventy-five canceled their subscriptions in January, so the monthly churn rate is 7.5%. This percentage suggests you lost 7.5% of your customer base during that month and $750 in recurring revenue going forward.

An acceptable SaaS churn rate is around 5%, so 7.5% is concerning. As a business, you dig deeper to know the answer. You discover that newer customers under six months have 10% churn. Longer-staying subscribers have a 3% churn. 

One possible explanation is an onboarding issue. New subscribers need to see more product value. Now, you can redirect marketing focus to expanding onboarding training and ramping up customer success for newer accounts.

     2. Customer Acquisition Cost (CAC)

The customer acquisition cost (CAC) illustrates the investment required to turn prospects into customers. Consider it the price tag of growth.

To get your number, divide the total marketing and sales spend by the number of new customers. Suppose you spent $100,000 last month on marketing and sales. The efforts generated 400 new customers. 

Using this formula: CAC = $100,000 / 400 customers = $250.

It cost $250 to acquire each new customer last month.

Now, you track CAC according to preferred intervals. Initially, it is month to month. As your business grows, opt for quarterly or yearly. 

Based on the data, are new campaigns generating customers for less? If not, what are the problems? If a customer brings in $2,000 in revenue over their lifetime, what is the maximum justifiable CAC?

Optimizing CAC accelerates growth. It informs your priorities and decision-making, especially when resources are tight.

Remember, though, that CAC is only effective when it is accurate. It requires carefully evaluating which expenses account for marketing and sales spending. 

     3. Customer Lifetime Value (CLV)

Imagine you could predict how much revenue a customer will generate for your business over their lifetime. How much value would you place on each new subscriber?

This is the purpose of customer lifetime value (CLV). It is based on the idea that customers are assets, not transactions. 

The metric then shifts the frame from individual purchases to the complete relationship. In the process, you transform one-time sales into multi-year streams of revenue. 

This mindset shift also unlocks new potential in marketing. Suddenly, higher CACs make sense for a high lifetime-value customer. It is easier to justify entire programs that retain these valuable relationships for longer.

How do you calculate CLV? It looks into two factors:

• Average purchase value. How much does the typical customer purchase or transact? For SaaS, this might be the average monthly subscription fee. 
• Average lifetime. How long does the typical customer remain active before churning or becoming inactive? This part requires analyzing historical retention and churn rates.

Apply these two numbers to the formula below: 

Lifetime value = Average value per purchase x average lifetime

For example, a cloud storage company charges $20 per month for its standard plan. On average, customers use it for 36 months before churning. Using the formula, the CLV is $720.

The business then takes the following steps based on this data:

• Evaluate marketing spending. It now knows that any CAC below $720 would be profitable in the long run.
• Increase pricing. The business can increase pricing for such a plan if the CLV is accurate. A $25/month price bump would boost the CLV to $900.
• Improve retention. With a 36-month average lifetime, the company has a good long-term relationship with customers. It relies on that to extend the months further with an attractive loyalty program.
• Upsell or expand accounts. The business can generate additional revenue from upgrades or add-ons if retention strategies are effective. This can increase the average purchase value.
• Forecast revenues. The company uses CLV to predict future customers’ revenue potential for planning purposes. For example, if it adds 100 customers this month for the same CLV, the projected lifetime revenue is $72,000.
• Link CLV to customer segments. The business calculates CLV for various market segments (e.g., buyers of different plans) and then optimizes marketing and product strategies to align with customer behavior and needs. 

The key is turning the CLV analysis into action across marketing, product, pricing, and retention initiatives to maximize customer value.

     4. Months-to-Recover CAC

Marketing spending brings subscribers, but how long until that investment pays off? This metric answers that question by dividing total CAC by customer revenue.

For example, a customer pays $50 per month for an app. The CAC to attract this person is $300. Using the formula mentioned above, recouping such an expense takes at least six months.

For SaaS companies, months-to-recover CAC indicates the efficiency of investing in growth. Shorter periods mean you have enough recurring revenue streams to cover acquisition costs quickly. 

Most top SaaS businesses target maintaining this metric within 12 months or less. They also improve it using the following best practices:

• Breaking down CAC by channel to isolate the most efficient sources of customers.
• Factoring geography and other variables into CAC allocation models.
• Regularly updating the CAC payback period as subscription pricing and marketing costs change.

Months-to-recover CAC transforms a general metric such as CAC into a concrete goal. You can now move the payback period closer to the subscription term. This drives smarter investments to fuel growth.

     5. CAC-to-LTV Ratio

Many startups generate revenue and get funded, but why do they still fail? One possible reason is unsustainability. In particular, their revenue does not support or justify their acquisition costs. They need more cash flow to manage the burn rate. 

How do you avoid the same fate? A SaaS marketing agency calculates your CAC-to-LTV ratio. This determines whether your retention and marketing strategies result in long-term profitability. 

To get the ratio, divide the CAC by your LTV. For simplicity’s sake, let us say that your business has an LTV of $1,200 and a CAC of $150 per customer. The ratio then is 6.66 or 7.

SaaS companies aim for a ratio of 3 and above. Anything lower means that the business is losing money despite generating income. Consider optimizing marketing efforts to enhance lifetime value or find ways to spend less on advertising. 

     6. Burn Rate and Burn Multiple

Like other businesses, SaaS companies spend first on marketing and other business functions before generating revenue. How long does it take before they run out of capital? This is where the burn rate becomes valuable. 

Generally, the burn rate determines the speed at which you spend cash reserves or financial capital before realizing income. Because of this, some call it negative cash flow.

A SaaS marketing agency calculates two burn rates: gross and net. It depends on when you start realizing income. Initially, it measures the gross burn rate, considering only your business expenses. 

Suppose you are a new startup with a $1.5 million cash reserve. You spend $150,000 on all business activities, from marketing to administration. It means that you have only ten months before you run out. 

By then, you must have revenue to sustain yourself. If that is feasible, consider infusing more money into the business. You might apply for a loan, reduce spending, or get more investor funding. 

Once you realize revenue, the agency shifts to the net burn rate. This is how much you lose per month, despite your income. You get it by using the formula below:

Net burn rate = (expenses - revenue) / number of months 

Suppose it is month 5, and you have a total revenue of $70,000. However, the total expenses are already $300,000. The net burn rate is $46,000, which is also the amount you lose monthly. 

Despite the frightening number, the net burn rate effectively gives you more ideas about your spending and marketing outcomes. If it decreases over time, it means your marketing strategies are working.

Burn Multiple

Burn multiple refers to how much money you must burn to become viable. The valuable data tells you the following:

• Capacity to pay creditors.
• Attractiveness to investors. 
• Ability to cover expenses before you reach profitability.

Use this formula to get the number: cash burned / net annual recurring revenue (ARR).

To get the ARR, use this formula: ARR = (annual subscription revenue + recurring revenue from upgrades and add-ons) - lost sales from downgrades and cancellations.

Essentially, the higher the burn multiple, the less profitable the business appears. This is because you need to use more capital to grow. Consider these steps to help you manage it. 

The ideal burn multiple depends on your growth stage. Usually, it is higher when you are in the early phases due to no income and limited funding. It should decrease as your business matures. For instance, if you are in Series C funding, it should be less than 1.

Overall, aim for 1.5 and below. Anything higher usually scares off investors and warrants an investigation from you. 

     7. Natural Rate of Growth (NRG)

As its name suggests, this metric identifies the percentage of growth that the business can attribute to organic revenue. Simply put, you generate income without any marketing or sales intervention. A good example is a referral signup not linked to affiliate marketing. 

NRG is a wonderful tool to evaluate your product’s fit-to-market viability. It also provides a clearer picture of your growth potential, especially if you pair it with burn multiples. Most importantly, it opens creative opportunities to decrease acquisition costs while staying profitable. 

To calculate NRG, you must know the following:

• Annual growth rate, which is your year-over-year
• Percentage of organic signups
• ARR

To get the annual growth rate, subtract the ending and beginning values and divide it by the latter. Say your March 2022 revenue was $400,000. For this year, it is $2 million. The annual growth rate is 4%.

We already provided the formula for the ARR. Now, to know your natural rate of growth, multiply it all. For instance, 0.04 is the annual growth rate, 0.90 is the percentage of organic signups, and 0.90 is your ARR from products. The NRG is 0.0324, or 3.24% (multiplied by 100).

The ideal NRG depends on your ARR. If you generate less than $10 million, aim for at least 150%. These tips help you pull the numbers up:

• Improve product-market fit. Make sure your product effectively addresses core customer needs. Listen to feedback to refine positioning and messaging.
• Focus on retention. Minimize churn by enhancing the customer experience through onboarding, support, and community building. High retention increases organic growth.
• Streamline viral loops. Make it easy for customers to share content, invite team members, or integrate your product with tools they already use. Remove friction from propagating growth.
• Optimize conversion funnels. Remove bottlenecks in your signup flows, free trials, and sales processes.
• Improve search visibility. Enhance SEO strategies that provide free traffic.
• Focus on product-led growth. Make your product the driver of adoption through generous free tiers, built-in sharing, and aha moments that hook users.

The key is earning growth by delighting customers rather than paying for acquisitions. Measure NRG over time to diagnose what works.

Summing Up

In the complex world of B2B marketing, benchmarks distill activities down to a manageable scorecard. They clarify the metrics that matter most.

However, precise benchmarks are only half the formula. The real goal is to take action on the insights. If your team needs help with using data, consider bringing in specialists. 

Digital Authority Partners (DAP) is an award-winning SaaS marketing agency ready to help you. We identify the right benchmarks and execute strategies to reach them. 

Numbers do not lie. Contact us, and let us work together to improve yours.