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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In today's competitive SaaS landscape, understanding your company's performance across different markets isn't just helpful—it's essential for strategic growth. While many executives focus on overall revenue or customer acquisition costs, revenue per market provides crucial insights into where your product is thriving and where it might need additional support or reconsideration.
What is Revenue per Market?
Revenue per market is a financial metric that measures the total revenue generated from a specific market segment. These segments can be defined geographically (by country, region, or city), demographically (by industry, company size, or customer type), or by any other meaningful categorization relevant to your business model.
This metric goes beyond broad revenue figures to provide granular insights into how your product or service performs within specific customer segments. It answers critical questions like: Which industries bring in the most revenue? Are enterprise clients more profitable than SMBs? Is your product gaining traction in international markets?
Why Revenue per Market Matters for SaaS Companies
Informed Resource Allocation
According to a study by McKinsey, companies that reallocate resources based on market performance achieve 30% higher total returns to shareholders than those that don't. Revenue per market provides the data needed to make these critical allocation decisions.
"Resource allocation is the single most important management activity," notes Sanjay Sarma, SVP of Strategic Analysis at Salesforce. "Understanding which markets deliver the highest returns allows you to double down on winners and reconsider underperformers."
Product Development Direction
Different markets often have different needs. When you understand which markets are driving revenue, you can tailor product development to serve those markets better. This targeted approach is far more effective than trying to be everything to everyone.
Marketing Efficiency and ROI
Marketing budgets are finite. Revenue per market helps you understand where each marketing dollar will likely yield the highest return, allowing for more efficient spending and better targeting.
According to data from ProfitWell, SaaS companies that align their marketing spend with market revenue potential see 22% higher customer lifetime value than those using broader targeting strategies.
Expansion Opportunities
Identifying high-performing markets can reveal opportunities for expansion into similar segments. If you're seeing strong revenue from healthcare organizations in New York, you might find similar success with healthcare organizations in Boston or Philadelphia.
How to Measure Revenue per Market
1. Define Your Market Segments
Before measuring anything, clearly define what "markets" mean for your business. Common segmentation approaches include:
- Geographic: Countries, regions, states/provinces, cities
- Industry: Healthcare, finance, education, technology, etc.
- Company size: Enterprise, mid-market, SMB, solopreneurs
- Use case: Different ways customers utilize your product
- Customer type: B2B, B2C, B2B2C, government, non-profit
"The key is to define segments that are large enough to be meaningful but specific enough to provide actionable insights," explains April Dunford, positioning consultant and author of "Obviously Awesome."
2. Gather the Right Data
To calculate revenue per market, you'll need:
- Total revenue within each defined market segment
- Number of customers in each segment
- Time period for measurement (monthly, quarterly, annually)
Ensure your CRM and billing systems accurately capture market segment information for each customer.
3. Calculate Basic Revenue per Market
The basic formula is straightforward:
Revenue per Market = Total Revenue from Market / Time PeriodFor example, if your SaaS company generated $250,000 from healthcare clients in Q2, your quarterly revenue for the healthcare market is $250,000.
4. Calculate Revenue per Customer by Market
To gain deeper insights, calculate the average revenue per customer within each market:
Revenue per Customer by Market = Total Revenue from Market / Number of Customers in MarketThis helps identify which markets not only generate substantial revenue but also have higher-value customers.
5. Track Trends Over Time
Revenue per market becomes most valuable when tracked consistently over time. Set up dashboards to monitor:
- Quarter-over-quarter growth rates by market
- Year-over-year comparisons
- Market share changes within each segment
According to research from Bain & Company, companies that regularly track segment-level metrics grow 15% faster than those focusing only on overall company performance.
Acting on Revenue per Market Insights
Reallocate Sales and Marketing Resources
If your enterprise segment generates 60% of your revenue but only receives 30% of your marketing budget, consider adjusting that allocation. Similarly, if you're spending heavily on a market that shows limited revenue potential, it may be time to recalibrate.
Refine Pricing Strategies
Different markets often have different price sensitivities. Your revenue per market data might reveal opportunities to implement market-specific pricing or packaging.
Inform Product Roadmap
Use revenue per market data to prioritize feature development. If your highest-revenue markets are asking for specific capabilities, those requests should receive serious consideration in your product roadmap.
Jason Lemkin, SaaS expert and founder of SaaStr, notes: "Listen to your customers, but really listen to the customers who pay you the most."
Identify Expansion Opportunities
Markets with rapidly growing revenue may indicate areas ripe for increased investment, additional hiring, or geographic expansion.
Common Pitfalls to Avoid
Ignoring Low-Revenue Markets with High Potential
Some markets may show lower revenue today but have substantial growth potential. Consider growth rates alongside absolute revenue figures to identify emerging opportunities.
Over-Segmentation
While granular data is valuable, segments that are too narrowly defined can lead to statistical noise rather than actionable insights. Ensure each segment has a sufficient sample size.
Neglecting Customer Acquisition Cost by Market
Revenue alone doesn't tell the full story. Incorporate customer acquisition costs (CAC) by market to understand true profitability across segments.
Conclusion
Revenue per market is more than a vanity metric—it's a strategic tool that enables SaaS executives to make informed decisions about resource allocation, product development, and market expansion. By understanding which markets drive your business forward, you can focus your efforts where they'll have the greatest impact.
In today's data-driven business environment, companies that harness the power of revenue per market analysis gain a significant competitive advantage. They identify opportunities faster, allocate resources more efficiently, and ultimately deliver better returns for shareholders.
As you implement revenue per market tracking in your organization, remember that the goal isn't just to collect data, but to transform that data into actionable insights that drive strategic decision-making and accelerate growth.