10 Growth Metrics You Should Track And Why They Matter
Keeping an eye on such growth metrics, also known as growth analytics, is crucial for business success. By tracking growth metrics, you can uncover potential problem areas, as well as possible avenues for revenue growth, and much more.
In this article, we will discuss the 10 most crucial growth metrics you should be tracking. Let’s look at what they are!
TL;DR
- A growth metric is a measurement of your company’s performance, in terms of growth, over a time period.
- Tracking growth metrics helps uncover areas of improvement, provides deeper insights into retention and churn issues, and enables more informed decision-making and product development.
- Growth metrics are divided into several categories, with each measuring a different aspect of the business and its performance.
- These categories include revenue metrics, engagement metrics, and customer satisfaction metrics.
- Revenue growth metrics include customer acquisition cost (CAC), customer lifetime value (LTV), monthly recurring revenue (MRR), and average revenue per customer (ARPU).
- Customer engagement metrics include product engagement score (PES), feature usage rate, customer retention rate, and trial-to-paid conversion rate.
- Lastly, satisfaction metrics include customer satisfaction score (CSAT) and Net Promoter Score (NPS).
- Want to start tracking growth metrics? Get a Userpilot demo, and you’ll be able to stay up to date with what users are doing inside your app and also act on the data in real-time.
What are growth metrics?
A growth metric is a performance indicator that measures business growth over a given period.
These key metrics aren’t just restricted to any single business area. Instead, they measure different aspects of your company’s performance, from conversion rate to customer churn rate and everything in between.
Why should you track growth metrics?
There are several reasons why you should track growth metrics.
For starters, these metrics provide valuable insights into the long-term success of your business strategies and marketing efforts.
Apart from this, these key performance indicators also provide you with concrete data to base decisions on instead of simply following hunches.
Important growth metrics to track revenue growth
Revenue growth and revenue generation are the most basic metrics that most companies track.
These metrics highlight the future stability of a company and point out any signs of financial distress. Let’s discuss these metrics in further detail and explain how to calculate them.
Customer acquisition cost (CAC)
Customer acquisition is a term that includes all the steps and strategies a company employs to acquire a new customer.
Acquisition typically means having the customer purchase your product or service. So customer acquisition cost (CAC) is the total amount a company spends to acquire a new customer.
Tracking customer acquisition costs helps evaluate sales performance and the effectiveness of your acquisition funnel. It is also useful in calculating the return on investment for each new customer acquired.
How to calculate customer acquisition cost
To calculate CAC, you need to divide the total acquisition cost by the total number of new customers acquired during a given period.
All expenses related to sales and marketing efforts will fall under total acquisition costs. Examples of these expenses include advertising costs, sales team salaries, and such.
Monthly recurring revenue (MRR)
The MRR growth rate is used to calculate the amount of change in monthly revenue from one month to the next.
It’s important to track your MRR growth rate because it can provide insights into the financial stability of your product or service. This financial data can also be used to make better forecasts about future revenues.
A similar concept is the annual recurring revenue (ARR) growth rate, which companies also use for the same purpose, except over a longer time period.
How to calculate monthly recurring revenue
Calculating MRR is simple, you just multiply your average revenue per account by the total number of active users the company has in that month.
Don’t get confused by what average revenue per account is, it is essentially the same as average revenue per user, which is another growth metric we will discuss next.
Average revenue per user (ARPU)
The name for this one is pretty self-explanatory; ARPU is the amount of revenue you can expect to be generated per customer, on average, during a specific time period.
ARPU is amongst the most useful SaaS growth metrics because it helps companies understand their revenue potential and identify high-value customers.
This, in turn, can lead to a better-informed pricing model and sales budget.
How to calculate average revenue per user
You may have noticed that the calculation of MRR above included the use of ARPU.
Simply switching that formula around, we get the calculation for average revenue per user.
To measure ARPU, just divide your MRR for a specific month by the total number of active, paying customers during the same month.
Customer lifetime value (LTV)
Customer lifetime value is a measure of how much profit the company can expect to earn from a customer over the course of their, ideally long-term, relationship with the business.
Calculating LTV will help your company redirect resources in the right direction toward high-value customers, resulting in more revenue over time. By focusing on the right customers, LTV can help fix customer retention issues.
How to calculate the customer lifetime value
You can calculate LTV by figuring out the average purchase value, which is the average sales value of a customer transaction.
Calculating average purchase value is straightforward, you just divide the total revenue by the total number of purchases, and you’re done!
Important growth metrics to track user engagement
For SaaS companies, user engagement typically means how actively engaged a customer is with your product or service.
User engagement plays a key role in influencing your business growth and revenue churn.
The more value users derive from your product, the more engaged they will be. And the more engaged they are, the lower your churn rate will be. Similarly, greater engagement also translates into increased customer loyalty and brand advocacy.
Product engagement score (PES)
Product engagement score (PES) helps you better understand the customer experience by studying how users are engaging with your product.
Calculating this metric helps highlight potential problem areas to fix within your product that might be causing customers to churn.
By fixing these issues and, thereby, adding more value for the user, you can improve your company’s customer retention rate.
How to calculate product engagement score
To calculate the product engagement score, you just take the average of these three important metrics:
- Product adoption rate
- Stickiness rate (looks at product usage rate)
- Growth rate
Feature usage rate
If you introduce a new feature in your product or service, how can you track if it’s performing well or whether users like it or not?
That’s where the feature usage rate comes in. This key metric lets you track the adoption and usage of a specific feature within your product.
Tracking the feature usage rate is helpful because it lets you know which features are useful and which can be removed.
Based on this information, you can make informed decisions about future product development and improvement.
How to calculate feature usage rate
To calculate the feature usage rate, you divide the total number of feature monthly active users (MAU) by the total number of user logins for a specific period.
Customer retention rate
The customer retention rate measures the number of customers that your company manages to keep over a specific period.
Similar to this, the revenue retention rate measures the total revenue from existing customers that the company manages to retain over a specific period.
Knowing your retention rate helps keep track of what customers think about your product. A low retention rate can be a sign of revenue churn, highlighting areas where you might be falling short and what you need to do to meet customer expectations.
How to calculate the retention rate
The net revenue retention rate is calculated by taking total revenue (starting MRR and expansion MRR) and subtracting revenue churn (downgrade MRR and churn MRR) from it.
Divide this figure by the starting MRR, and multiply by 100 to get the retention rate in percentage terms.
Trial to paid conversion rate
The trial-to-paid conversion rate measures the total number of users using trial accounts upgrading and becoming paid customers.
Tracking this conversion rate is helpful because it directly measures the effectiveness of your product and sales efforts.
If your product is good enough, you’ll see more conversions.
However, lower conversions can point towards signs of trouble, either within your product or related to your sales strategy.
How to calculate trial to paid conversion rate
To calculate the trial-to-paid conversion rate, you need two variables.
First, you need the number of trial users that converted to paid users during a specific time period. You divide this by the second variable, which is the total number of free trial users during the same time period.
Important growth metrics to track customer satisfaction
Customer satisfaction metrics revolve around measuring and understanding the customer’s experience with your company’s products, services, or specific features.
However, satisfaction is not limited to these interactions.
It also measures how happy your customer is after interactions with a team member, such as engaging with your tech support team for help.
Satisfaction metrics are a key part of growth analytics because they enable you to understand your customers’ wants and needs via customer feedback and scores. Based on these scores, you can anticipate customer churn and devise plans accordingly to avoid it.
Customer satisfaction score (CSAT)
The customer satisfaction score measures how happy a customer is with your product, a specific feature, or a team interaction.
Tracking the CSAT score at different touchpoints in the user journey helps uncover important issues customers are facing.
Based on the score for each issue, you can rank them in order of significance so you know what problem to focus on first. Such strategic planning helps companies lower their churn rate and grow their customer base.
How to calculate customer satisfaction score
To calculate the CSAT score, first, find the number of customers who interacted with a specific touchpoint and were satisfied with it. Then divide this number of satisfied customers by the total number of customers who interacted with the touchpoint. Multiply with 100 and you will have the CSAT score, expressed as a percentage.
Net Promoter Score (NPS)
The Net Promoter Score is one of the most crucial growth metrics for any company, irrespective of which industry you work in.
This score measures customer loyalty by asking users how likely they are to recommend your product or service to others.
NPS helps you detect detractors who may possibly churn. You can then follow up with these detractors in an attempt to reduce churn and improve the company’s total revenue generated.
How to calculate Net Promoter Score
You just have to subtract the percentage of promoters from the percentage of detractors, and you’ll get the Net Promoter Score – it’s that easy!
Tracking growth analytics: How Userpilot can help
With so many different growth metrics to keep track of, it’s natural to feel confused about how exactly to do that. Userpilot can help by enabling you to track product and feature usage along with other adoption metrics as well.
Moreover, you can gather valuable insights into customer retention with the help of inbuilt retention tables.
Using these cohort tables, you can better understand and analyze user engagement and product stickiness over time.
With Userpilot, you can also easily measure customer loyalty and satisfaction by using available templates for customer surveys and scores, including CSAT, NPS, and CES scores.
Conclusion
If you want to start creating more value for your users and improve your retention rates, then it’s time to implement these growth metrics across your company. By monitoring such metrics, you can make better-informed data-driven decisions to help give your customers exactly what they are looking for.
Just remember that no single growth metric is going to solve all your problems. So it’s good to analyze a few of them across different business areas, such as engagement and revenue, for a more holistic solution.
Want to get started on increasing your company’s growth metrics? Get a Userpilot Demo and see how you can improve business performance and revenue growth.
