SaaS Glossary: 81 Terms You Should Know

Feeling overwhelmed by all the tech jargon in the SaaS industry? This comprehensive glossary cuts through the confusion by defining over 50 key SaaS terms in simple language.

Whether you’re a new SaaS entrepreneur looking to understand industry terminology or a prospective customer researching options, this glossary has you covered.

Keep it bookmarked as a quick reference to brush up before meetings and presentations.

A

• ACV (Annual Contract Value): The average annual revenue a customer contract is worth to the business.
• ACL (Access Control List): A list of permissions attached to an object specifying which users or system processes can access that object and what operations they can perform.
• ARPA (Average Revenue Per Account): The average revenue generated per account, typically calculated monthly or annually.
• ARR (Annual Recurring Revenue): The yearly revenue generated from subscription-based products or services.  Use this ARR calculator to keep track of your performance.
• ARPU (Average Revenue Per User): The average revenue received from an individual user, customer, or subscriber. 
• ASP (Average Selling Price): The average price at which a product or service is sold across different markets or channels. 

B

• Bounce Rate: The percentage of visitors to a particular website who navigate away from the site after viewing only one page. For SaaS companies, analyzing bounce rates can help in optimizing their web platforms for better user engagement.
• Break-even: The point at which total costs and total revenues are equal, meaning the business is neither making nor losing money.
• Burn Rate: The rate at which a company is spending its capital before achieving profitability.

C

• CAC (Customer Acquisition Cost): The total cost of acquiring a new customer, including all marketing and sales expenses. Using a CAC calculator can help you make informed decisions on acquisition strategies.
• Churn Rate: The annual percentage rate at which customers stop subscribing to a service. For SaaS businesses, reducing churn is critical for growth and stability. A churn rate calculator can reveal valuable insights into customer satisfaction and retention strategies.
• Cloud Computing: The delivery of computing services—including servers, storage, databases, networking, software, analytics, and intelligence—over the Internet (“the cloud”). SaaS is a significant component of cloud computing. Cloud-based app development enables businesses to provide reliable, fast service to their customers.
• CMGR (Compound Monthly Growth Rate): The month-over-month growth rate over a specified period, showing the pace at which a company is expanding.
• COGS (Cost of Goods Sold): The direct costs attributable to the production of the goods sold by a company.
• Concentration Risk: The risk associated with any single exposure or group of exposures with the potential to produce large enough losses to threaten a company’s health.
• Cohorts: Groups of users segmented by specific characteristics or behaviors for analysis over a period.
• CRR (Customer Retention Rate): The percentage of customers a company retains over a given period.
• CSAT (Customer Satisfaction Score): A measure of how a company’s products and services meet or surpass customer expectations.
• CTC (Cost Per Click): The cost an advertiser pays each time a user clicks on an online advertisement. Use our CPC calculator to estimate ad costs and maximize your marketing spend.
• CTR (Click-Through Rate): The ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. For quick CTR calculation, use our tool. 
• Customization: The ability to alter a SaaS application to fit specific needs. SaaS products often offer various levels of customization to cater to different business requirements.
• Customer Behavior Index: A composite metric that measures the value of a customer based on their behaviors.
• Customer Lifecycle: The progression of steps a customer goes through when considering, purchasing, using, and maintaining loyalty to a product or service.
• Customer Onboarding: The process of getting new customers to understand and use a product or service to make them ongoing users.
• CX (Customer Experience): The product of an interaction between an organization and a customer over the duration of their relationship.

D

• DAU/MAU/WAU (Daily/Monthly/Weekly Active Users): Metrics that measure the engagement of a digital service’s user base by counting the number of active users over daily, weekly, and monthly periods.
• Deferred Value: The value of a product or service that is not realized until a later date, often used in accounting to spread the cost of an asset over its useful life.
• Downgrade: The process of moving to a lower-tier SaaS subscription plan with fewer features or limitations. SaaS customers might downgrade their plans to adjust to their current needs or budget constraints.

E

• Elasticity: The ability to scale computing resources up or down easily. SaaS platforms leverage cloud elasticity to provide scalable services to their users, adjusting resources based on demand.
• Engagement Loop: A feedback loop that engages users by providing value and encouraging continued interaction with a product or service.
• Engagement Rate: A metric measuring the level of engagement that a piece of created content receives from an audience. For SaaS companies, engagement rates can help assess the effectiveness of marketing strategies and product features.

F

• Freemium: A business model in which a SaaS product is offered free of charge, but money is charged for additional features, services, or virtual goods. It’s a common strategy to attract new users to a platform.

G

• Go-To-Market (GTM) Strategy: The plan of an organization, utilizing their inside and outside resources to deliver their unique value proposition to customers and achieve competitive advantage.
• Growth Hacking: A process of rapid experimentation across marketing channels and product development to identify the most effective, efficient ways to grow a business. SaaS companies often use growth hacking techniques to quickly increase their user base and market share. Our email marketing for startups tips are here to help you communicate effectively with your audience. 

H

• Hybrid Cloud: A cloud computing environment that uses a mix of on-premises, private cloud, and third-party, public cloud services with orchestration between the two platforms. SaaS applications may leverage hybrid clouds to balance flexibility and security needs.
• Horizontal SaaS: Software that caters to the needs of a wide range of industries rather than focusing on a specific niche. Examples include productivity, email, and communication tools. Looking to boost your sales funnel? Try these 7 easy and effective email template strategies to generate more leads. 

I

• Integration: The process of linking together different computing systems and software applications physically or functionally to act as a coordinated whole. SaaS products often integrate with other services via APIs to extend their capabilities.
• Infrastructure as a Service (IaaS): A form of cloud computing that provides virtualized computing resources over the Internet. SaaS applications may be built on top of IaaS platforms to leverage scalable computing resources.

K

• Knowledge Base: An online repository of information about a product, service, or topic. SaaS companies typically maintain a knowledge base to help users find answers to questions and learn how to use their products effectively.

L

• Latency: The delay before a data transfer begins following an instruction for its transfer. In SaaS, low latency is crucial for providing a responsive and seamless user experience.
• Lead generation: The initiation of consumer interest or inquiry into a business’s products or services.
• Licensing: The granting of permission to use intellectual property rights, such as software, trademarks, or patented technology. SaaS models typically move away from traditional licensing to a subscription-based model, where users pay for access to the software over time.
• LTV/CLV (Lifetime Value/Customer Lifetime Value): The total worth of a customer’s business over the whole period of their relationship.

M

• MCR (Monthly Churn Rate): The rate at which customers cancel their subscriptions in a given month.
• Migration: The process of moving data, applications, or other business elements from one environment to another. In SaaS, this often involves moving data from on-premises or other cloud services to a SaaS platform.
• MQL (Marketing Qualified Lead): A lead judged more likely to become a customer compared to other leads based on lead intelligence.
• MoM Growth Rate: The month-over-month growth rate shows how a company’s performance metrics increase or decrease.
• MRR (Monthly Recurring Revenue): Monthly revenue generated from subscription-based products or services.
• MRR Projection: An estimate of future Monthly Recurring Revenue based on current data and trends.
• Multi-Tenancy: A software architecture principle where a single instance of the software application serves multiple customers (tenants). 

N

• Network Latency: The time it takes for data to travel across a network from one point to another. In SaaS environments, minimizing network latency is crucial to ensure fast response times for users.
• NPS (Net Promoter Score): A metric for assessing customer loyalty for a company’s brand, products, or services.

O

• Onboarding: The process of introducing new users to a SaaS product, guiding them through the setup, and teaching them the basic functionalities to ensure a smooth start and enhance user adoption.
• Outage: A period of time when a system, service, or application is unavailable or not functioning. SaaS providers strive to minimize outages to ensure uninterrupted service for their users.

P

• Platform as a Service (PaaS): A cloud computing model that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an app. 
• Public Cloud: Cloud computing services are offered by third-party providers over the public Internet, making them available to anyone who wants to use or purchase them. Many SaaS applications are hosted on public clouds.
• Private Cloud: A cloud computing model where the infrastructure is dedicated to a single organization, offering greater control and privacy. Some enterprise-level SaaS solutions may be offered via a private cloud.
• Product-Market Fit: A company’s product satisfies strong market demand. Product-market fit is crucial for SaaS companies to ensure long-term success and growth.
• Product roadmap: A plan that matches short-term and long-term business goals with specific technology solutions to help meet those goals.
• PQL (Product Qualified Lead): A lead that has experienced the value of the product through a trial or a limited version and is more likely to become a paying customer.

Q

• Quota: A limit set on the usage of a particular resource within a SaaS application, such as storage space, number of users, or number of transactions. 

R

• Recurring Revenue: A stable and predictable income generated by customers who subscribe to a SaaS product, typically on a monthly or annual basis. It’s a key metric for the financial health of SaaS companies.
• Retention Rate: The percentage of customers who continue to subscribe to a SaaS product over a given period. High retention rates indicate customer satisfaction and product value.
• Release Management: The process of managing, planning, scheduling, and controlling a software build through different stages and environments, including testing and deploying software releases in SaaS applications.
• Role-Based Access Control (RBAC): A method of regulating access to computer or network resources based on the roles of individual users within an organization. 

S

• Scalability: The ability of a SaaS application to handle growing amounts of work or its potential to be enlarged to accommodate that growth. Scalability is vital for SaaS solutions to ensure they can support an increasing number of users and data volumes.
• Signup to Customer Rate: The percentage of users who sign up for a service and eventually convert into paying customers.
• Single Sign-On (SSO): An authentication process that allows a user to access multiple applications with one set of login credentials. SSO enhances user convenience and security within SaaS ecosystems.
• Service Level Agreement (SLA): A contract between a service provider and a customer that specifies, usually in measurable terms, what services the provider will furnish. SLAs are crucial in SaaS to define performance and availability expectations.
• SLA (Service Level Agreement): A contract between a service provider and a customer that specifies, usually in measurable terms, what services the provider will furnish.
• Subscription Model: A business model where customers pay a recurring price at regular intervals to access a product or service. It’s the predominant revenue model for SaaS businesses, offering predictable income and customer retention metrics.
• SQL (Sales Qualified Lead): A prospective customer that has been researched and vetted – first by an organization’s marketing department and then by its sales team – and is deemed ready for the next stage in the sales process.

T

• TAM (Total Addressable Market): The total market demand for a product or service.
• TCV (Total Contract Value): The total value of a contract over its life, excluding any renewal options.
• Tenant: In a multi-tenant SaaS architecture, a tenant is a group of users who share common access with specific privileges to the software instance. The SaaS model allows multiple tenants to share the same application while ensuring data isolation.
• Time to Value (TTV): The amount of time it takes for a customer to realize significant value from a SaaS product after initial adoption. Minimizing TTV is critical for customer satisfaction and retention.

U

• Uptime: The amount of time a SaaS application is available and operational. High uptime rates are crucial for SaaS providers to meet SLA commitments and maintain customer trust.
• Upselling: A sales technique where a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale.
• Usage Metrics: Data that provides insights into how customers interact with a SaaS application, including active users, feature usage, session length, and more. Usage metrics are vital for understanding customer behavior and improving the product.

V

• Vertical SaaS: A type of SaaS designed to cater to the needs of a specific industry or sector, such as healthcare, finance, or real estate. Vertical SaaS solutions offer specialized features and functionalities tailored to their target markets.

Y

• Year-Over-Year (YoY) Growth: A method of evaluating two or more measured events to compare the results at one time period with those from another time period, typically from one year to the next. 

Many businesses find it helpful to understand the ASP model vs SaaS model differences when migrating to new systems.