90+ Key SaaS Terms Everyone Should Know About

Annual Contract Value (ACV)

A average annual value from each contract. It's basically your revenue per contract.

Cloud Sourcing

A combination of cloud computing and outsourcing, which refers to the outsourcing of specific business functions to a provider.

Loyalty Loop

A constant process of providing significant value and a positive customer experience in order to keep customers using the product, embracing new features, growing use, and renewing their subscriptions.

Revenue Recognition

A contract's revenue is recognized only once when it has been generated, regardless of whether it has been paid in advance.

Free Trial

A customer acquisition approach in which prospects are given a partial or complete product for free for a limited period. It usually lasts 14 or 30 days.

Freemium

A customer acquisition method that gives prospects free access to a portion of a software product for an indefinite period. This kind of products do not limit the length of time a prospect may use the program, but it frequently restricts users in some way, such as by limited functionality or the amount of time they are permitted to use it.

Customer Lifetime Value (CLV)

A forecast of the net profit attributable to a customer's complete future relationship. It is the earnings provided by consumers between the time the company hits break-even point with them and the termination of the relationship.

Product Lifecycle

A framework for organizing a company's marketing and sales of a product, from its introduction until when sales peak and fall.

Customer Lifecycle

A framework that outlines a customer's decision-making, purchasing, utilizing, and advocating for a product or service. Acquisition, adoption, retention, and growth are the four crucial stages of this.

Cohorts

A group of customers who signed up at the same time or went through the same onboarding process.

Renewal Rate

A measure of how long a customer stays with you.

Engagement Loop

A method of persuading prospects and customers to re-engage with a product and gain additional value by combining insightful in-product use data with engagement methods.

Churn Rate (or customer churn rate)

A percentage of the number of customers a company loses due to churn. You can calculate it by dividing the number of churned customers by the number of customers at the start of the period you want to calculate the churn rate for.

Initial Value Unit

A single interaction or a series of interactions that help the client go through a critical use case.

Multi-tenancy

A term used to describe multiple companies subscribing to a specific service being placed on a single server.

Annual Run Rate Revenue (ARRR)

ARR plus income that isn't assigned to a recurring subscription. Professional services or implementation costs may be included.

Non-Product Engagements

All of your prospects' encounters with you outside of your product. "Product Engagements" is an excellent place to start.

Cloud Bursting

Allows businesses to use the provider's system when their own IT infrastructure reaches the maximum utilization level. It helps businesses effectively and efficiently deal with 'bursts' or excessive workloads and seasonal usage spikes.

Cloud Spanning

Also known as cloud storming, it refers to the interlinking of different cloud services together, either with the same provider or between different providers.

Customer Experience Era

Also referred to as the third wave of SaaS, where customers evaluate and share their experiences using a product and how they feel about the experience. In this era, providing a good customer experience and customer service became crucial for any SaaS business.

Go-To-Market (GTM) Strategy

An action plan that explains how a company obtains, maintains, and grows customers in a repeatable and scalable manner.

Product-Led Go-To-Market Strategy

An action plan that explains how a firm attracts, maintains, and increases consumers through repeatable and scalable processes that are based on in-product customer behavior, feedback, product usage, and analytics.

Product/Market Fit

An experimenting approach that involves locating clients in a target market that have a problem that your product can solve for a price (or total cost of ownership) that is significantly lower than the value supplied in exchange. This is broader, but the related notion incorporates pain-product and customer-message fit ideas.

Product-Qualified Lead (PQL)

Based on product interest, usage, and behavioral data, it refers to a prospect who signed up and exhibited buying intent.

Professional Services

Beyond product training, assisting clients with best practices and ideas for running their businesses.

Renewal Bookings

Bookings based on already signed contracts.

Revenue Churn

Churn is assessed in terms of the financial value of contracts lost.

Normalized Contracts

Contracts were altered to make them comparable enough to be compared; for example, an average MRR was assigned to a contract paid annually to compare it to a contract paid monthly.

Omnichannel Approach

Customers are engaged in contextual engagements that look and feel the same across channels and devices.

DaaS

Desktop as a Service allows users to operate desktop OSs, which are hosted within virtual machines. Users can easily access an OS instance using their own computers, but things aren't perfectly standardized in this business, and many providers offer their own form of this.

Net MRR Churn (a.k.a. Net Revenue Churn)

For the same period, the percentage change in MRR is based on churning and expansion MRR. It's determined by subtracting expanded MRR from churning MRR and dividing the result by the period's MRR. The proportion of MRR lost from current customers in a given period is known as this term.

MRR Expansion Rate (a.k.a. Net Revenue Retention Rate)

For the time for which MRR expansion is computed, the percentage of MRR acquired owing to upsells and cross-sells to current customers. It's determined by multiplying the expansion MRR by the beginning MRR.

Customer Retention Rate

From the beginning to the conclusion of the term, how many clients are retained, excluding new consumers.

Prospect (user) onboarding

How a prospect progresses from initial signup to initial value and finally to PQL status. It is intended to assist users in quickly becoming acquainted with the product and realizing its first value.

Geography in cloud computing

If the servers are located far away from where most users are trying to access the app, they'll undoubtedly face latency issues, i.e., it'll be sluggish. Data sovereignty is another issue to consider as users also have to keep in mind where their data is being stored and processed. For example, EU-based businesses might be worried about US law enforcement agencies accessing their data stored in the servers operated by US companies. Since cloud computing regulations vary significantly from country to country, it makes sense to carefully consider the provider's country of origin and the physical location of its servers. In addition to SaaS, other subsets of cloud computing include IaaS (Infrastructure as a Service), PaaS (Platform as a Service), BPaaS (Business Process as a Service), Cloud Management and Security Services, and Cloud Advertising.

Moment of Truth (MOT)

In marketing, the point at which a consumer or user engages with a brand, product, or service to develop or modify an impression of that brand, product, or service.

Product Engagements

Inside your product, prospects experience all of the encounters. See "Non-product engagements."

MRR Churn Rate (a.k.a. Gross Revenue Churn)

Is computed as a percentage of MRR lost from current customers at the beginning of the quarter. Since it excludes upsell and cross-sell, it is always positive (a positive churn rate indicates that the firm is losing money).

Moment of Joy

It happens when a prospect recognizes the worth of a product. It is similar to the Moment of Truth but more popular in the gaming industry. When a user performs a desired activity, a successful product-led conversion ties moments of joy with recognition and rewards.

Churn

It happens when the customers don't renew their monthly subscription to a service or cancel.

Break-even

It happens when the revenue generated by the customer is equal to all the money the company spent to acquire that customer.

Personalized Customer Experience

It is a continuous process of creating and delivering personalized messages and experiences that result in meaningful consumer interactions.

Signup-to-Customer Rate

It is the percentage of new clients who become paying customers after signing up. The number of clients is divided by the number of signups to arrive at this figure. It reveals how well your organization converts signups into consumers on average.

Lifetime value

It is used for revenue forecasting; lifetime value is the average revenue a provider can expect from a subscriber until he/she cancels or leaves the service.

Dunning

It means "To make persistent demands for the payment of a debt," according to the technical definition in Investopedia. In the context of SaaS, it often refers to emails sent to users after their payment has run out.

Cloudware

It's another name for cloud software or apps that run over the internet.

Customer Retention Cost

Its costs include the renewals team, professional services team, customer marketing, and other expenses.

Bring Your Own Cloud (BYOC)

Like Bring Your Own Device (employees use their own devices), it refers to using 3rd party cloud apps for specific purposes instead of solely relying on a company's IT resources. For example, employees use Google Drive or Dropbox for sharing files and MailChimp for email marketing

Committed Monthly Recurring Revenue

MRR forecasting for the future, considering expected account growth and churn.

Contracted Monthly Recurring Revenue

MRR that is guaranteed by contract.

Days from Signup to PQL

Measures how long it takes a prospect to become a PQL.

Days from Signup to Customer

Measures the average number of days for a PQL to become a customer.

Days from PQL to Customer

Measures the average number of days it takes a PQL to become a customer.

App Integration

Refers to the connection between different systems/software/platforms, allowing users to connect their existing data with multiple systems. For example, if you already have a contact list of thousands of people, it makes no sense to create a new list for all the software you use. It allows you to use the existing contact list with different software such as email marketing and leads management systems.

Revenue Backlog

Revenue that has not yet been recognized but will be realized during the course of the contract.

Cloud Computing

SaaS (Software as a Service) is a part of this, which means computing over the internet. It has been around since the early 2000s. It uses remote servers to store, process, and manage data and allows service providers to offer computing services such as storage, applications, and raw processing on the internet. So instead of buying servers and developing their own IT infrastructure, users can subscribe/purchase the said services from providers and pay on a monthly/quarterly/annual etc. basis. Nowadays, many companies prefer this and offer their apps as a service on the internet instead of one-time installable products. There are some advantages as well as disadvantages. Just like SaaS, it allows the providers to have less control over processes and costs more in the long run. It is popular among users because users pay for the SaaS services they want to use, and they decide the time when they use services, so they don't have to deal with complex processes themselves. It has evolved for years and now includes a variety of services. Storage, raw processing, networking, natural language processing, AI, office apps, CRMs, computer-aided design, and many more services are included in it. For example, some of the most popular consumer-level examples include Spotify, Google Apps, Office 365, and Netflix.

Customer Journey

Starts from the second a customer interacts with a product and covers all the all touchpoints the said customer has with a company, brand, and product. It doesn't end with the purchase; it also covers the customer's acts related to the company and product, such as recommending it to others or repurchasing.

Customer Engagement Touchpoint (or Customer Engagement Interaction)

That one moment when a prospect or customer comes in contact with your brand, company, employees, product, or message through various channels and devices. For example: When someone sees an ad for your app on Facebook.

Cloud Portability

The ability to move data and apps from a locally-hosted environment to the cloud or between different cloud services providers. This kind of apps mean the users are not locked up with any particular provider and can easily move their data.

Average Selling Price (ASP)

The amount of revenue per customer provides.

Customer Acquisition Cost (CAC)

The average amount spent by a company to acquire one customer. It covers all customer acquisition costs, including sales and marketing expenses and salaries of the employees. To calculate it, Divide the customer acquisition costs by the number of customers acquired in the same period.

Average Revenue Per User (ARPU)

The average monthly revenue recognized per user.

Days to Break-Even

The average number of days it takes a client to produce enough money to pay the CAC is measured by this. In other words, it demonstrates how rapidly a company's CAC recovers.

Value Gap

The discrepancy between what a client expects from a product and what they receive or perceive as value.

Average Customer Life (ACL)

The duration of the relationship between a customer and the company. Basically, the average number of days (or months) between the second a prospect becomes a customer and when the customer stops purchasing a service (or churns. Check churn to learn what it means.)

Virtual Private Cloud (VPC) and Virtual Private Networks (VPN)

The first term refers to the 'isolated chunks' of cloud users can securely access over the internet. The second one allow creating a secure network tunnel using which users can send/receive information securely.

Digital Transformation

The impact of digital technology on all facets of human civilization.

Product Champion

The individual who is most engaged with your product and has a clear idea of who will be utilizing it in their company, as well as what duties each user will play.

Burn Rate

The monthly pace at which a firm burns its cash (typically venture money) before turning a profit.

Service Level Agreement (SLA)

The most important (and often ignored) agreement that specifies what to expect from the provider and its responsibilities. No matter how boring the it sounds, everyone should read and understand it before signing up for anything. It includes things like service availability and uptime (usually something like 99.99%), mean time to respond and repair, the escalation path, penalties and exclusions, and contract termination terms.

Runway

The number of months of runway refers to how much cash the firm has to operate at its present burn rate.

Customer Experience Strategy

The process of managing customer experiences in the customer lifecycle to improve the experience of the customers. Companies can have different customer experience strategies for the short and long term; however, overall, it's an ongoing process.

PQL-To-Customer Rate

The proportion of PQLs who become customers. The number of clients is divided by the number of PQLs to arrive at this figure. It indicates how well your business converts PQLs into customers.

Signup-to-PQL Rate

The proportion of prospects who meet the profile and in-product interaction requirements to qualify as product qualified leads (PQLs). The number of PQLs is divided by the number of signups to arrive at this figure. This rate tells you how well your organization interacts with prospects in the early phases of building a relationship. Note that in some circumstances, examining this term in terms of individual and account signups makes sense.

Visitor-to-Signup Rate

The proportion of visitors who come to your site and then sign up. The number of product signups is divided by the number of visitors to a signup page to arrive at this figure. It indicates how well your business persuades people to sign up for free trials or a freemium.

Contextual Engagement

The result of combining the right customer, the right messages, at the right time, and in the right way. It basically means providing the customer base with the right thing at the right time while understanding their expectations and anticipating the potential outcomes.

Deferred Revenue

The terms "revenue" and "cash" are not interchangeable. Cash can be collected in advance, but it is not considered income until it is generated.

Velocity Metrics

The time it takes for an organization to reach specific milestones. This contains the average number of days it takes a prospect to convert from signup to a PQL, as well as the average number of months it takes a business to break even (when CLV>CAC).

Latency

The time it takes for data packets to cross the data connection between the sender and the receiver—the lower the latency, the better, i.e., less time taken during data transmission. As a general rule of thumb, the nearer the physical location of the server, the lower the latency would be and vice versa.

Bookings

The total contract worth, which is especially useful for providers offering lead generating apps and provides a fair idea of how the service is working for its clients. Its number helps determine the number of customers signing up during a specified period of time.

Customer Experience (CX)

The whole experience a customer has while using a product and their perception of the brand, company, or product. It also covers all the interactions the customer has with the brand and product.

Valued (Golden) Features

These aid businesses in determining which product capabilities provide consumer value and thereby close the Value Gap. The concept also gives a way to determine which consumers benefit from product features and which customers are disengaged at critical phases of their lives.

Migration Costs

These are the costs related to moving data from existing applications/systems to the cloud. They depend on the scale of the projects, while some businesses might have to completely re-optimize their data for cloud apps, which could result in abnormally high migration costs.

Value-Based Pricing

This entails determining which characteristics of product clients appreciate the most.

In-Product Call to Action (CTA)

This indicates the purchase intents of prospects and aids in the conversion of prospects to PQLs or conversion events.

Zero Data (Empty State)

This is what a prospect sees during the first signup process when no data is accessible in the product. Guide the prospect through a path that populates, uploads, or integrates data into a product to solve this.

Customer Behavior Index (CBI)

This metric measures the engagement rate of your prospects and customers by analyzing their in-app activity and usage.

Customer Satisfaction Metrics

This shows how engaged your consumers are, how much value they get out of your offering, and whether or not they will recommend your solution to their friends. It represents how a customer views your organization, brand, and product in terms of value and experience. Net Promoter Score (NPS), Customer Behavior Index (CBI), and Customer Lifetime Value are a few examples of metrics in this area (CLV).

Hybrid Cloud

This technology makes more sense for most businesses since some of their data is in the public cloud while some projects are in the private cloud. It can also involve multiple vendors and various cloud usage levels, which helps plan and recover from a disaster and avoid buying expensive hardware.

Customer Onboarding

Training, account and team member setup, and integration support are all part of the process of getting a newly subscribed client (or account) up and running with your product. The objective is to get the consumer to understand the entire value of your product, retaining customers while also developing business inside the account or generating recommendations from satisfied customers.

Private Cloud

Tucked safely away behind the enterprise firewall, a cloud like this provides large businesses with more control over their data and processes than 'normal' cloud computing. These are primarily used for PaaS and IaaS projects, providing developers with access to the computing power they need to deal with projects that require a lot of computing power. However, only a few companies can afford to match the scale and security of large platforms such as AWS, Google, and Microsoft.

Unified Customer Profile Data

Your organization's system of record all customer profile, corporate, and behavioral data is stored in.