The SaaS business world can’t seem to agree on who first said, “You can't manage what you can't measure.” Peter Drucker? W. Edwards Deming? Regardless of who said it first, it’s been repeated by managers and data gurus for years.
Regardless of the original author, the message behind the quote is as important as it’s ever been. Without data, we can’t really measure the success or failure of anything. And this is particularly true when it comes to a well-managed referral partner program.
It’s been estimated that only about 30 per cent of B2B businesses have a formal referral program. Many businesses in that other 70 per cent have informal programs, and they reward referred business in some way. However, for your referral program to be formal and profitable, it needs to be measurable. That means you need to know and track the right key performance indicators (KPIs).
With that in mind, today we will explore the importance of enterprise SaaS KPIs in a referral partnership program and outline the best ones to focus on.
Why enterprise SaaS companies need strong KPIs
SaaS businesses of any size or maturity level can benefit from a strong referral program. However, enterprise-level SaaS companies can really leverage their reputation and tap into their fleet of satisfied paying customers as potential referrers.
At the same time, most enterprise-level SaaS solutions come with a notoriously long sales cycle. A referral program can reduce those numbers by baking more trust into the sales process and potentially improving your conversion rates by 71 per cent.
However, like all projects and campaigns, you need strong data to measure your success and identify your areas of improvement.
See more: How to win more customers through referrals.
The must-track enterprise SaaS KPIs for partnerships
When looking at your referral program, you will want to pay particular attention to your:
Customer lifetime value (CLV):
Good news! The CLV of a referred customer can be 16 per cent higher than a non-referred customer. However, you will still need to keep an eye on this metric. If it’s lower than your standard CLV, this could point to high-level issues with your program and a need to focus on areas like partner enablement.
Customer acquisition cost (CAC):
With a higher CLV, shorter sales cycles and lower marketing costs required for customers that are referred, your CAC should be lower than customers coming from other channels. However, you still need to monitor this number over time to make sure you’re always trending in the right direction.
Monthly recurring revenue (MRR) and annual recurring revenue (ARR)
Compare your referral program’s MMR and ARR to your other revenue streams. How does it compare? Is it increasing or decreasing, month over month and year over year? Is it contributing to your overall total revenue growth metrics?
Ideally, boosting these average revenue numbers should take less investment and effort than your other revenue streams.
Customer churn rate
It’s been estimated that referred customers are 18 per cent less likely to churn. If you are seeing a significant number of referred customers opting not to renew their contracts, it may be time to rethink how you’re talking to your referrers and affiliates about your ideal customer profile (ICP).
Net revenue retention (NRR)
This metric is one of the most important keys to sustainable business growth and the go-to health indicator for all SaaS companies.
Ideally, your referral program should help your customer retention in two ways. First of all, your already-happy customers that you’re using in your referral program should be further incentivized to renew their contracts because of discounts or other perks. At the same time, your new referred customers should have arrived at a lower CAC and should be less likely to churn.
Net promoter score (NPS)
This is one of the most important enterprise SaaS KPIs for measuring customer satisfaction and customer success. Your NPS among referred customers should be higher, as these customers chose you based on the advice of someone who put their reputation on the line to recommend you. That trust means a lot in B2B sales today.
Related: Critical points of trust within your ecosystem.
The role of sales and marketing metrics in enterprise partnerships
The SaaS metrics that drive your traditional sales and marketing efforts definitely need to be a part of your referral program and tracked separately.
For example, your marketing qualified leads (MQLs) and sales qualified leads (SQLs) are crucial. As we’ve explored in another article discussing marketing metrics, you can track your MQLs in PartnerStack by setting up lead qualification criteria within the platform. This helps you ensure that your referrers are sending you the right customers, which helps you recognize the top referrers and coach the ones whose leads don’t align.
At the same time, your sales team can track your revenue attribution by linking PartnerStack with your CRM tool (i.e. HubSpot or Salesforce) to identify the best-converting channels and highest-earning referrers.
Aligning KPIs with business performance and sales strategies for SaaS companies
It’s important to remember that tracking important SaaS KPIs can also help your partners. They need this data to be the best possible advocates for your brand. If a partner is sending you predominantly unqualified leads, this should be addressed and recognized. At the same time, if a partner is sending you a lower amount of leads, but they all convert, you will want to help them find more leads.
A well-designed and well-optimized referral program can be essential to any enterprise-level company’s growth strategy. But it won’t work perfectly out of the box. Changes will need to be made as you progress, which is why your sales team needs to make data-driven decisions based on your KPIs.
When things are up and running properly, you should be filling your sales pipeline with uniquely qualified leads because your referrer will have already done much of the vetting and qualifying for you. That means that these leads should be more likely to convert, with lower marketing costs to acquire them.
From there, these customers are statistically more likely to stick around and have a higher lifetime value than the average customer. But the onus is still on you to keep them. Customer satisfaction, customer engagement, customer retention and raving fans are essential to any SaaS company’s ongoing business model.
Remember, you need to continuously monitor your referral program and your customer success by using the KPIs we’ve talked about today to ensure that both your referrers and your referred customers are happy for years to come.
