6 indicators for good B-side operations!

If you want to do a good job in B-side operations, you must pay attention to these 6 indicators

With the continued rise in popularity of SaaS products in recent years and the increasing variety of products, the ability to conduct detailed data analysis on customers and businesses has become one of the most important core competitive advantages of an excellent B-side operation. The B-side operation teams at the top of the industry all have a deep data decision-making culture.

The following are the six most critical indicators we have summarized for SaaS products, which are also the six indicators that B-side operations must pay attention to. It can guide your operational decisions at critical moments and lead B-side operations to develop in a better and further direction.

1. Monthly Recurring Revenue (MRR)

Calculation formula: The sum of the average monthly sales of each paying customer

The core difference between SaaS products and traditional products is the subscription-based service: based on demand, customers need to pay for the use of the product on a monthly, quarterly or annual basis. This amount is different from the contract amount. MRR is actually the contract amount amortized to monthly revenue. This allows customers with different payment cycles to be unified into monthly statistics. MRR can show sustained sales growth and reflect customer churn.

Depending on the specific cause, MRR can also be divided into:

• New MRR – The MRR paid by newly added customers
• Expansion MRR – Existing paying customers purchase new features or upgrade to a more expensive product
• Shrinking MRR – Existing paying customers downgrade
• Churn MRR – Customers stop subscribing or paying for services

MRR = New MRR + Expansion MRR - Contraction MRR - Loss MRR

2. Customer Churn Rate

In addition to MRR, another extremely important business metric is customer churn rate, which in this case refers to how often customers cancel their product subscriptions. Customer churn rate and retention rate directly represent the sustainable profitability of a product, and should be the key indicators that each SaaS team needs to pay the most attention to and continuously optimize.

The definition of churn rate varies according to the characteristics of different product businesses. The commonly used churn rate formula is as follows:

Churn rate = (number of customers who cancel during a given time period) / (number of paying customers at the start of the same time period)

Because most domestic customers sign annual contracts and 2B businesses have obvious seasonality, user churn cluster analysis can display both situations for intuitive monitoring.

GrowingIO Retention Chart

In the retention chart above, we can clearly see the future retention rate of customers visiting each function every day. Functions with high retention may be our growth points.

3. Customer Value LTV

SaaS is not a one-time deal. Every customer may leave after using it for a period of time. The customer's value reflects the turnover during the entire customer's active subscription cycle. Customer value can provide a standard for the marketing department to quickly measure the input-output ratio when planning activities and executing sales strategies.

The calculation of customer value can be done using the following more practical calculation method:

LTV = ARPA / Customer Churn Rate (*ARPA Average Monthly Price)

The formula for calculating the average monthly turnover per customer is:

Average monthly customer price = MRR of the month / number of active customers of the month

When a product is just released and the data is not yet complete, you can temporarily use the average customer price instead of LTV. Once you have enough data, you can switch to a more accurate calculation method.

4. Customer reorder rate

The reorder rate, that is, the retention rate of paying customers, can more accurately reflect the degree of customer acceptance of the product than the churn rate when there is insufficient initial data.

Customer reorder rate = Number of customers who have completed reorders / Number of customer contracts that expire in the current period

5. Customer Acquisition Cost (CAC)

Customer acquisition cost is an indicator that everyone is familiar with. Customer acquisition cost needs to include marketing and sales expenses. However, in actual implementation, it is difficult to conduct real-time statistics of marketing and sales expenses. A compromise is to separate marketing and sales expenses, independently calculate the sales lead acquisition cost around a single marketing activity, and then track the lead conversion rate of each activity in the CRM system to calculate a compound customer acquisition cost.

The cost of acquiring a customer is like the customer's value. Continuous tracking can provide a guiding benchmark for the implementation of market and sales plans. The US SaaS industry measures whether a product has a future mainly by whether the customer's value exceeds 3 times the cost of acquiring the customer. However, this figure has not yet been widely verified in China.

6. Customer health indicators

The indicators mentioned above are all post-event indicators, which means they will be reflected only after they occur. Although paying attention to and analyzing these indicators can improve the overall situation in the future, they lack practical execution significance at the level of individual customers. The monitoring of customer health indicators (see the figure below) is real-time. Generally speaking, it is a number obtained by integrating several key events (such as the average number of logins, PV of the help page, the number of times customer service is contacted, and the number of times core functions are used).

Building a model using GrowingIO bubble chart

By conducting a detailed behavioral analysis of customers who have churned over a period of time, we can identify several events whose frequency of occurrence has significantly decreased before churn. We can then continuously monitor the performance of new churned customers on the identified events. If they are consistent, they can be added to the health indicator. It is recommended to track no more than 5 events at the beginning, and compare the indicators of churn and health every once in a while.

The health indicator model cannot be a one-time thing. As the product improves, the health indicator will continue to change, so be prepared to update it at any time.

Conclusion

Although B-end operations and C-end operations are essentially operations, their work content and operation methods are indeed very different. To give the simplest example, the C-end can quickly acquire a large number of users through discounts, promotions, and subsidies, but this is completely unfeasible for the B-end. Simple discount promotions will not only fail to attract enterprise-level users, but may even backfire.

Understand the above six indicators, combine them with our products and industry characteristics, and use data to guide operations in practice.

Author: Simon Zhang

Source: Simon Zhang