Average purchase price
The average purchase price is the average price of a service or product purchased by one customer. The average purchase price is generally verified on a profit and sales basis. However, it is difficult to calculate accurate indicators on a sales basis, so it is not recommended when calculating unit economics in the LTV of a SaaS business.
What is important here australia cell phone number list is to calculate the average customer price based on profit. When calculating the average customer price based on profit, we generally use an indicator called "gross profit." In addition, when calculating the cost of SaaS, we must take into account the costs necessary for operating the service, such as servers, customer support, and customer success.
To calculate an accurate gross profit margin, you need to take these costs into account. The formula below satisfies these conditions.
Average Customer Lifespan
The average customer lifespan is an indicator that shows the average length of contracts between customers who currently have contracts with your company. The longer the average customer lifespan, the more evidence that your products and services are being used by customers, and the more profits your existing customers are bringing you.
Among SaaS companies, there are many that have a short average customer lifespan despite having a large number of customers. These SaaS companies focus on acquiring new customers who can bring in large profits in the short term. However, while such SaaS companies can secure one-off profits, it will be difficult for them to acquire long-term, continuous customers and make continuous profits.
Therefore, calculating the average customer lifespan, which is an indicator of how long customers will continue to use a product or service, can be an effective measure for ensuring the continuity of a SaaS business.
Churn Rate
Churn rate refers to the rate at which customers cancel or leave the company. It is important for SaaS businesses to always pay attention to churn rate and have customers use products and services for as long as possible. Churn rate can be classified into two types.
The first churn rate is the customer churn rate, which is the customer-based cancellation rate. It is an indicator that clearly shows the rate of customer attrition per month, and indicates the number of contracts lost per month.
The second churn rate is the revenue churn rate , which indicates the number of cancellations based on revenue . Revenue churn rate is an indicator that shows the rate of decrease in MRR of customers who signed up in the previous month. By its nature, customer churn rate is an indicator that cannot verify the increase in the average customer price, but revenue churn rate is an indicator that can be used to verify the average customer price, so it can be used effectively.