The KISSmetrics Revenue Report ties your revenue to real people, allowing you to get key metrics like lifetime value and churn.
Most analytics tools tie revenue to sessions, not users. Since sessions have a limited time frame, the only revenue they register is that which transacts during the time period. All the sessions (and their revenue) are independent of each other, meaning key customer metrics cannot be tracked across them.
Since KISSmetrics tracks people, not sessions, each dollar transacted gets tied to a specific person.
The Revenue Report automatically calculates the following key customer metrics for you:
- Total Revenue – The total revenue received for the date range selected.
- Average Daily/Weekly/Monthly Revenue – The total revenue by day, week, or month.
- Lifetime Value – The total amount of money you should expect to receive from your customers. (This metric in Revenue Report provides an estimate of the lifetime value you’ll receive from each customer by dividing average revenue per customer by total churn).
- Average Customers per Day/Week/Month – The average number of active customers during a specified time frame.
- Total Churn – The percentage of customers who cancel during a period of time. When you set up the Revenue Report, you’ll have the flexibility to determine what it should consider a churned customer. We’ll see this in our next section.
The Revenue Report also allows you to segment your revenue data by property. Properties indicate additional characteristics about each person who visits your site. Through this segmentation, you’ll get answers to questions like:
- Which subscription plan is bringing the most revenue?
- Which ad campaign contributed the most to overall revenue?
- Which channels brought the most revenue?
- Where should the marketing team be spending most of its resources?
Throughout the rest of this post, we’ll see how Revenue Report answers these questions and provides the insights you need to grow your business.
Let’s begin by setting up the report.
Set Up the Revenue Report
To set up the Revenue Report, you first need to pick the appropriate property. The property selected needs to be the one that records the amount a customer pays. This property is not automatically tracked in KISSmetrics, so you’ll have to set it up yourself.
When you begin sending your revenue data to KISSmetrics, you’ll set up and name the property that records how much a customer pays. For us, that property is called Subscription billing amount:
Next, we pick our date range. We’ll pick eight full months — January 1, 2014 to August 31, 2014:
Then, we’ll choose our Advanced options:
We first need to choose whether to show revenue in daily, weekly, or monthly buckets. We’ll choose monthly:
We then choose how we want Revenue Report to calculate churn:
Since we are choosing Event only, we’ll have to select an event that will be counted as a churn. In this case, we want a customer cancellation to be considered a churn event:
If we had chosen Period only, we would have had to choose the number of days that would pass without payment before a customer would be considered “churned.” The churn would be triggered if KISSmetrics saw that the customer hadn’t paid during the selected time frame. (We can choose any amount of time up to 2 years.)
SaaS and other subscription companies may want to consider churn an event, since most people need to take an action to cancel. When a customer cancels their account, this event will trigger, and KISSmetrics will record the customer as churned.
E-commerce companies will want to choose a time period. Ideally, this should be whatever they’d like their repurchase rate to be. If you set a time period for churn to trigger, be sure your date range is at least as many days as the repurchase period:
If we had chosen event OR period, whichever comes first, we would have had to choose both an event and a time period:
Before we run the report, let’s take a final look at what we’ve set up:
- We’re calculating revenue from our previously set “Subscription billing amount” property. This property is triggered when the customer is billed and records the amount they paid.
- We’ll be viewing the revenue we’ve received from Jan 1 — Aug 31, 2014.
- We’ll be viewing our revenue across monthly buckets.
- Churn is calculated via an event, not by time period.
- The churn event triggers when a customer cancels. This churn event is not automatically set up in KISSmetrics. You have to set it up yourself.
We click on Run Report and we get our data:
This is the top level view of the Revenue Report. It shows revenue during our selected date range.
We also can view our paying customers:
This shows our total paying customers over time. Each month, we can see how many customers we gained and lost.
We also can view both revenue and paying customers at the same time:
This shows both revenue and paying customers over time. It is useful for revealing how the loss of customers affects revenue. We can see that we lost many customers in April, but it didn’t have a big impact on revenue.
Segment Your Revenue and Get Actionable Insights
This is where Revenue Report really shines.
When you segment your revenue, you uncover all sorts of insights about which sources are driving the most valuable customers.
Beyond that, you also can learn which pricing plan size drives the most revenue. Or, if you’re running an e-commerce store, you can segment by product category to learn which product categories are the most profitable. We’ll run through examples of both.
First, we’ll identify which channels drive your growth.
Learn Where Your Most Valuable Customers Are: Segmentation by Channel
We’ll first start off with segmenting revenue by channel. Channels categorize traffic sources into groups, placing our customers in specific “buckets”. There are a total of seven channels:
Direct — These are people who come from a direct referrer. In many cases, these are people who come to you directly by typing your URL into their browser.
Organic — People who come to your website via a search engine get included in this channel. Also, people who set up a UTM parameter and have the utm_medium as “organic” or “search” will be put in this channel.
Referral — This channel is for those who come to your site via a third party that isn’t a search engine or social site. If they aren’t from those referrers, they’ll be put in this channel.
Email — People who are referred via an email will be put in this channel. They mostly come from a campaign URL with the utm_medium as “email” or “e-mail” will to be put in this channel.
Paid — This channel includes people who come from a paid campaign. They’ll be put in this channel if their referring URL has the gclid parameter or a utm_medium of “cpc,” “cpm,” “display,” “cpv,” “cpa,” “cpp,” or “ppc.”
Social — These are people who come from a social network. We have a list of 276 domains and subdomains for such networks. If any visitor comes from one on our list, they’ll be put in the Social channel. Also, people who come from a campaign URL with the utm_medium as “social,” “social-network,” “social-media,” “sm,” “social network,” or “social media” will be put in this channel.
None — People who don’t fit into any of the above channels will be put into the None channel.
For more details on channels, check out our Channels Definitions page.
We’ll be looking at the “first ever” channel, meaning if a customer first came to us via Google (but from different channels thereafter), we’ll see only Organic. Any referrers after Google are ignored in this list.
To segment our customers by channel, we’ll first need to select Channel as our property. We begin typing the word “channel” into the search box, and then we click on Channel in the drop-down menu:
We get a list of the channels, sorted by lifetime value. In each row, we see the customers who came to us via those channels, and a bunch of other customer metrics:
Next to the Channel column, we see five more columns. Each column gives customer metrics for the customers in each channel. These metrics are similar to the ones you see when viewing revenue. Here are some specifics:
Average Revenue/Person — This is total revenue divided by the number of people.
Paying Customers — The number of people who are still actively paying. These are people who KISSmetrics has recorded revenue from and who have not churned.
Total Churn — The percentage of customer churn in that channel.
Segmenting your revenue by channel helps you make data-informed decisions. To help you make the best decisions from this data, we’ll run through our example revenue report and add some best practice tips along the way:
By far our channel with the highest lifetime value, Email delivers outstanding results. Its strong performance is largely driven by its low churn rate. Despite the fact that it has a smaller customer base, it brings in nearly $400 per customer and over $7,500 in revenue.
Because it’s a good growth channel for us, we’ll focus on getting more people onto our list.
As a reminder, we’re looking at the first ever touchpoint the customer had with us. If they came to our site via a referral link and then signed up for the email list, they’d be put in the Referral bucket and not the Email bucket since that was not the first touchpoint they had with us.
Generally, email is not at the top of a company’s funnel. So, in our case, making Email the first touchpoint means that the company is likely doing a lot of promotion with conferences or partners to get them on the email list before anything else.
Referral is another strong channel for us. Its lifetime value is a little over $13,000, churn is low, and total revenue is solid. Because it’s a great channel, we should continue to focus on getting links from other sites.
Organic brings us the most customers and has the highest revenue, but it doesn’t have the highest lifetime value due to its churn rate. The churn rate isn’t necessarily high, it’s just not as low as our Email and Referral channels. If we can lower the churn, our Organic channel will become even more valuable.
Our second highest revenue channel, Direct has brought us 22 customers. It has the second highest revenue per person, but it has a high churn rate. Since it’s a valuable channel, we’ll continue to work on growth through brand awareness.
One of our poorer performing channels, Social brings us our second lowest revenue stream. The customers from this channel aren’t as valuable as others. If social isn’t taking much time the way it is, we can continue with it. But, we shouldn’t ramp up our efforts or invest any additional time or money into it.
Our Paid channel has a low customer base and a high churn rate. Despite this, it still has brought us $5000 and over $330 per customer. The best course of action is to do two things:
- Check the ROI of what we’re spending per customer and see if it’s worth continuing our efforts.
- If we do decide to continue paid acquisition, we may want to change the messaging. Due to this channel’s high churn rate, our messaging may be giving prospects the wrong idea. Prospects may be buying the product because of our messaging only to find out that it doesn’t match the product. They cancel when they see the product isn’t what they had been sold on.
If we’re running paid campaigns on multiple platforms (AdWords, Facebook Ads, etc.), we should also view the Channel:Origin of our Paid channel. This will tell us specifically which platforms are bringing customers.
Here’s how Channel:Origin looks for the Paid channel:
Selecting Channel:Origin for Paid will show us how each paid platform is performing.
When we view the origin of our paid ads, we see that Facebook is really what’s dragging down the performance. Given this information, we’ll have to wind down our Facebook ads and put more resources into AdWords.
Remember that None is the channel reserved for people who do not fall under any other channel.
What We Learned from Segmenting by Channel: Viewing our acquisition channels taught us which channels are driving growth and which ones are weak. We identified that Email, Referral, Organic, and Direct are the strongest channels, while Paid needs to be reevaluated and Social shouldn’t get any extra attention from us.
Discover Which Pricing Plans Drive the Most Revenue
Many SaaS companies have 3-4 tiered pricing plans. However, without looking at their data, these companies don’t know which plans are driving their growth and which ones are causing the most trouble.
Segmenting revenue by plan will show you the metrics we saw in the last section, except this time revenue will be categorized by plan instead of channel.
This example will feature a high cost, low volume B2B SaaS company. For this type of business, keeping churn low is critical to the health of the business because losing just a few customers can really put a dent in revenue.
Let’s segment the data by Subscription plan level. This property is not automatically tracked in KISSmetrics. You’ll have to set it up manually. Begin typing the words “subscription plan” into the search box, and then click on Subscription plan level in the drop-down menu:
We’re sorting data by the highest lifetime value. We also want to pay special attention to churn and total revenue:
We can see that the medium plan has the highest lifetime value and the second highest revenue per person. Churn rate for customers in this plan is a little high at 5.1%. Total revenue is the second highest out of all the plans. This is a great channel for growth. If we could get churn a little lower, this channel could easily become the one with the highest revenue, and lifetime value would really skyrocket.
Our cheapest plan, small, has a great churn rate and a solid customer base. Its revenue per person is lower (because it’s the cheapest), and this likely won’t change much unless we can acquire more customers in this plan.
The large plan provides a unique opportunity for us. If we can lower the churn rate for these customers, it could quickly become our most valuable channel.
What We Learned from Segmenting by Pricing Plan Size: All the plans have their own strengths and drawbacks. The medium plan has a high lifetime value but churn is a little high. The small plan has a strong customer base and a healthy churn rate, but low total revenue. The large plan brings a lot of revenue but has a high churn rate.
Our focus now should be on reducing our overall churn rate of 5.43%. If we can get churn reduced across the board (especially in our large plan), we’ll be well on our way to higher revenues.
Identify Which Product Categories Drive Your Business
E-commerce companies typically sell hundreds of products that fit within a few categories. They may know which products and categories sell the most, but it’s the metrics that go beyond those numbers that can really provide insights that can guide store growth.
For this example, we’ll segment by the property called Product Line. This is a property not automatically tracked in KISSmetrics. Begin typing the word “product” into the search box, and then click on Product line in the drop-down menu:
And we get our data:
In the case of e-commerce, you’ll want to set churn to a specific period. If a customer doesn’t order from you within a particular time, they should be considered churn, or inactive. In this example, churn is triggered at 100 days. So, the churn percentage indicates the number of customers who ordered from this product line but have not yet reordered any product within 100 days. If a customer comes back after 100 days and reorders, they are no longer considered churned, regardless of what product line they ordered from. Keep in mind that to get this data, we would have to set a date range so Revenue Report can see that a customer reorders after 100 days.
The key metric to look for with this segmentation is the total revenue we’ve received during the selected date range. This metric isn’t necessarily our “best-selling,” which is typically calculated by number of items sold instead of by dollar value.
Viewing it this way, we can see that the In-House Generic Tees is where we really bring home the bacon. It delivers over half a million in revenue, far more than our second most popular line. And, the reason it brings us this much revenue is a large number of people order products in this line. Given this information, we’ll want to ramp up this product line.
What We Learned from Segmenting by Product Category: In-House Generic Tees is our most popular product line. We’ll want to ramp up this product line with a wider selection. Some of the accessory items we sell don’t bring in as much revenue, so we may want to spend less time promoting these and focus more on our top line product categories.
Use the Revenue Report to Help Guide Your Growth
If you want to grow your business, you’ll need to know where to find your must-have customers. The Revenue Report takes the guesswork out of which ad campaigns and channels bring you the most valuable customers. Just get the appropriate properties and events set up, and actionable data will start coming in.
Knowing rather than guessing where customers come from can save you and your business from wasted marketing dollars. Use the Revenue Report as your sidekick to measure your ad campaigns and funnel more money into what works and skip what doesn’t.
To get started using people data, login or sign up for a KISSmetrics account now.