If you’ve ever tried to measure the ROI of native integrations, you’ll know it’s near impossible.
From retention rates to sales close rates, from the feedback in customer success calls to running in-app microsurveys, there’s so much data to track and sift through that it can be hard to know where to start.
That's what we aim to help you solve today - we’ve helped hundreds of SaaS companies ship integrations to their customers, and decided it was time to share a framework for measuring the business impact of building those integrations.
- Integrations are a phenomenal growth opportunity for SaaS companies, affecting metrics like retention rate, time to value and expansion revenue, as well as bringing with them numerous partnership opportunities.
- The KPIs you choose for measuring the ROI of native integrations depend to some extent on the business logic behind creating the integration in question.
- To estimate the financial cost of your integration, multiply the number of days required to build and maintain it by the daily cost of running your development team.
- Success metrics that are applicable to almost every integration include the number of installs, the number of tasks executed through the integration, expansion revenue generated and sales close rate.
- You can measure your chosen quantitative metrics by looking at data in your dashboard and CRM.
- If the integration has been a success, expect improvements in most of the behavioral metrics you identified.
- To understand why your metrics have moved in the direction they have, talk to your customer-facing teams and use in-app microsurveys.
- Measuring the ROI of your integrations can quickly become very complex, so you’ll want a reporting infrastructure in place to measure the usage of each integration. Alternatively, you could use a platform that comes with these insights out of the box.
Why integrations are important
You may be wondering why you should spend time on integrations, rather than any of the myriad other things you could do to move your SaaS business forward.
It’s because integrations affect just about every financially significant SaaS metric that you can imagine!
During user onboarding, the more useful integrations you offer your customers, the less time they’re going to waste manually integrating auxiliary pieces of software into your product before they can derive any value from it. Consequently, integrations reduce both Time to Value and Day One churn rate.
Further down the customer lifecycle, integrations also increase retention. That’s because integrating your product into your customer’s tech stack makes them more dependent on your solution, and simultaneously increases the cost of switching to an alternative.
As well as helping you keep more of your customers, integrations will help you make more money from each account. If a customer needs a particular integration that’s only available in a higher pricing tier, they’re likely to upgrade – meaning more expansion revenue for you.
And if they don’t want to pay the full price of the higher-level package, you can always offer them the integration they need as an individual upsell. Chances are, they’ll be more than willing to pay, because they don’t want to pay for a platform like Zapier, be limited to simple data mappings and do all the work of setting up the integration alone.
The more integrations you offer, the more you start to become attractive to enterprise customers, who bring with them massive budgets. Such customers typically use a very large number of tools and place a high value on using software that already integrates with the rest of their tech stack.
If you’re still not convinced that setting up integrations is a good use of time, consider that a successful integration will drive revenue for both you and the third-party software.
For example, integrating with a trusted partner like Slack confers trust upon your SaaS by association, and also makes your brand more visible to businesses that are already using Slack.
Additionally, partnering with other similar-sized companies that target a similar user base can open up co-marketing opportunities that offer you direct access to a highly relevant audience.
To quantify the effect of partnership opportunities on revenue:
- The sales that Freshworks makes from its partners close 50% faster than regular sales.
- RingCentral upsells three times as often with partners than without, for four times as much money.
So tracking the ROI of your integrations could be one of the best things you could do for the financial health of your SaaS business!
Setting KPIs for integrations
Before you start measuring the ROI of your integrations, you’ll first need to figure out which KPIs to track, and then put measures in place to collect the required data.
What’s driving the need for the integration?
To a certain extent, your choice of KPIs will be determined by the reason you built your integration in the first place.
Always identify a clear business objective associated with delivering a potential integration, whether that’s:
- Improving the close rate in sales conversations
- Reducing churn
- Improving customer satisfaction
- Or entering new markets.
Only then will you be able to determine what KPIs to set, so that you can measure progress against your internal objectives.
Or perhaps your integration is a defensive reaction to multiple customers churning – due to a lack of that integration. You can see your customers’ reasons for churning by collecting feedback from users who cancel their subscription via a churn survey.
If this resonates with your situation, then the surest sign of a successful integration will be a reduction in churn from the cohort of users that have requested the integration.
What are the key metrics that indicate success?
You should come up with unique metrics that indicate the success of your integration based on the specific business problem it was designed to solve. That being said, tracking the following metrics should be table stakes for any integration you build.
Installs and uninstalls
If a large number of users have installed your integration, that’s a clear indication of the demand for that integration. Validation of this kind is important because oftentimes, customers will ask for a handful of integrations that they may never use.
However, if a sizable proportion of those users subsequently uninstalled the integration, that might be an indicator that your workflow design, implementation, and overall integration user experience need some work!
Beyond installations, make sure to also track the number of tasks executed that involve your integration. Similar to how you’d track feature usage for your core product, workflow executions are a proxy for value transfer when it comes to integrations – especially given that integrations often deliver value autonomously behind the scenes without any user intervention.
As a side note: if users are deactivating the integration after just a few task integrations, that probably means that there’s a technical bug or issues with your integration's business logic and implementation.
Another good metric to track is the amount of expansion revenue that’s directly attributable to your integration. If you’re just upselling the integration as a standalone upgrade, that’s easy to measure. But if your integration is just one part of an upgrade to a bigger package, you’ll have to delve into the qualitative data to see to what extent the integration alone is driving the upgrade.
Generally, integrations that customer success has received requests for will be much more likely to drive expansion revenue, as they're already using the product in their workflow. This means that they've identified a very clear use case and value prop to the integration. Whereas in sales, many of the integration requests are 'nice-to-haves' but don't translate to any willingness to pay for the integration.
Note that we've specified using expansion revenue instead of expanded accounts, because the size of the account matters here. In other words, if your integration only leads to one customer upgrading, but that company is Google, it might still be a win overall.
Sales close rate
If more of the prospects that your sales team engages are converting into paying customers than before you built your integration, this might be a sign that your integration is working as planned. To be sure that the improved close rate can be to your integration, have a look at your salespeople’s notes. How often do prospects mention your integration as a reason for buying?
Retention/Churn & NPS
As a leading indicator of a customer's churn risk, you will want to look at whether or not the usage of an integration is correlated with improved sentiment/net promoter scores (NPS). That, along with the actual retention rate of customers who end up using the integration of course.
After all, data has shown that customers who use integrations demonstrate an increase in retention of more than 10%, with further increases with additional integrations.
How will you track these metrics?
Once you’ve selected your metrics, it’s important to ensure you have the infrastructure/process in place to track them over time.
Product Analytics for Integrations
While it’s easy enough to measure feature usage via your product analytics software, products like Mixpanel or Heap aren’t built to report on integration activity specifically.
To access deeper integration insights, you’ll need to ask your engineering team to build out automated reporting capabilities and dashboards for each integration based on their activity logs and task history.
The one exception would be if you're using an embedded integration platform like Paragon, which provides the key integration engagement metrics such as installs and connected integrations out of the box.
However, at a minimum, you should have your engineering team send an event to Mixpanel whenever a user has successfully enabled the integration. This will be fundamental in enabling you to segment your user analytics based on which (if any) integration(s) they’ve enabled.
Sales & Expansion
Similarly, you will want to track the impact the integration has had on both your pipeline as well as existing customers from an expansion standpoint.
We dive more into the tracking framework for this in an article here. In summary, ensure that your sales team tracks the integrations prospects have requested or have demonstrated interest in within your CRM.
This way, not only can you analyze the close rate of those customers once you’ve built the integration, you can also look at the average deal sizes / expansions of customers who use the integration.
Finally, to track the impact of the integration on user sentiment, NPS surveys are still the go-to solution. This will be important as you’ll want to be able to measure and compare the satisfaction of your users who activate the integration you build vs. those who do not. If you don’t currently have NPS tracking capabilities in your app, there are many tools out there like Userpilot or Appcues that will easily allow you to serve customers with NPS and microsurveys in-app.
Calculating the ROI of native integrations
Once you’ve figured out which success indicators to track for your integration and have set up the processes/infrastructure to do so, it's time to put the pieces together for approximating the return on your investment from building the integration.
First, you’ll need to work out how much you've invested in building the integration (because engineering time = $$$).
Costs associated with building and maintaining the integration?
The method that most companies employ to measure the financial cost of an integration is by multiplying the number of days required to build the integration by the cost of the engineers working on that integration.
However, if you've built integrations in the past, you'll know that there are many additional factors to account for. In practice, the downstream maintenance costs usually outweigh the effort required to build the initial iteration.
Make sure to account for the effort required to:
- Research the 3rd party API
- Build the initial workflows for v1 of the integration
- Perform proper integration testing (complicated due to multi-app dependencies)
- Build new workflows from user requests after launch
- Make updates to the existing workflows based on feedback
- Help customer success debug support tickets
If launching your integration meant that you incurred costs for marketing it, or training your sales and CS team on how to use it, you can also factor those into your costs around the integration.
Note, however, that not all costs are purely tangible.
In our own experience working with our customers’ engineering teams, building integrations over and over again negatively impacted morale and productivity significantly, given how much they had to comb through esoteric 3rd party documentation, build similar workflows across multiple integrations, and even re-build integrations whenever an API update took place.
Such costs might be harder to quantify, but they’re no less real. So don’t neglect them in your analysis!
Once you’ve accounted for the time and effort that has gone into the integration, it’s time to look at the business impact of the integration, aka the ‘return’.
Measuring business impact
The most important indicator of positive ROI here is of course, attributable revenue.
The simplest thing to start with is looking at the impact on your sales pipeline.
From the exercise above, you should be able to aggregate all the opportunities where the integration has been requested, and analyze not only the total revenue of those deals, but also the close rate/pipeline velocity of those customers.
For example, Mainstem shared that they were able to significantly reduce sales cycles and improve the close rate of enterprise deals as soon as they launched their QuickBooks integrations, as it became a cross-functional requirement for teams to adopt their supply chain software.
In a similar manner, if you have a self-serve product that contains a free trial, compare the conversion rates between the users who activate the integration and those who don't, as integrations play a key role in enabling product-led growth.
Retention & Expansion
This one's a little more tricky, but we've broken it down into several steps.
1. Split your user base between users who use the integration and those that don't.
2. Look at the proportion of users that should/could use the integration - aka the 'TAM' for the integration.
3. Measure the difference in retention rates between the 2 cohorts.
2. Extrapolate the value of the retained customers as a result of the integration.
For example - if 20% of your users are likely to use the integration, and that cohort demonstrates a 10% improvement in retention, you can project out your total revenue and attribute 2% towards the integration.
The same steps can be applied towards expansion, except instead of measuring the difference in retention, you'll want to look at % of users in the cohort that upgraded their plan, and attribute future revenue accordingly.
Engagement & Sentiment
While retention, expansion, and acquisition are the most valuable metrics to track given their direct impact on revenue, it is also important to look at how an integration may impact user engagement and other behavioral indicators.
As such, you should build out cohort reports between users who activate specific integrations vs. those who don’t, and compare their:
- Levels of app activity (daily/weekly/monthly)
- Likelihood to complete specific goals & actions in-app
- NPS scores
While it may be harder to directly attribute revenue from improvements in these metrics, they are no less important to consider when trying to understand the value the integration has created for you and your customers.
Once you've added up the revenue from the sales, retention, and expansion calculations, and take into consideration the integration's impact on the behavioral/sentiment indicators, you will naturally be able to see whether or not the costs for building the integration were justified.
With so many variables to consider, getting a definitive number on the ROI of your integration is essentially impossible. As a result, the complexity involved is why most B2B SaaS companies don’t have any frameworks in place at all. It’s no wonder that most end up with a backlog of integrations - thereby missing out on all the growth those integrations could have kickstarted.
However, this article should have provided everything you need to make informed judgements on the cost/benefit of building any integration, and should help you make better prioritization decisions on your roadmap moving forward.
Whether it's impact on your sales pipeline, free trial to conversion rates, expansion, or retention, make sure you are tracking all the necessary integration related data points in your CRM and product analytics tools.
And don't overlook all the downstream costs of building and maintaining an integration. In fact, that's where Paragon comes in.
If you’d like to see how we can help you not only eliminate at least 70% of the engineering work required per integration, but also streamline integration analytics and debugging, book a call with us here!