Measure the ROI of Your Native Integrations

Measuring the ROI of product features, let alone integrations, can be quite complex, which is why many product teams avoid ROI conversations and focus purely on shipping.

However, in order to truly understand the value that integrations are creating for your business and improve your roadmap prioritization efforts, you need to have a somewhat quantitative way of measuring each integration's value, at least directionally.

Luckily, the data you need to measure the ROI of your product's integrations exists - albeit spread across your cross-functional teams' tooling.

The goal of this article is to give you a framework and process for pulling in all that information to derive a quantifiable measure of value for your integration strategy. Let's get into it.

TL;DR: 

• Integrations are enormous growth levers for SaaS companies, with impact on close rates, retention, time to value, and expansion revenue, as well as being a requisite for unlocking valuable tech partnerships

• 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

• The costs to account for include the engineering resources required to scope, build, maintain, and debug end-user issues for the integration (and at times the cost for a license for the application)

• The quantifiable return includes measuring the impact of the integration on retention, the deals that are won due to the integration, and if applicable, the expansion revenue generated from the integration

Why building integrations is always worth it

While the ROI of integrations is clear to all of the leading SaaS companies (many of which have dedicated integrations product managers and engineering teams), earlier to mid stage SaaS companies still struggle with prioritizing them correctly against the rest of their roadmap.

But from working with over 100 B2B SaaS companies, we've seen consistently that integrations can help companies reduce churn, drive expansion revenue, tap into new markets, and improve close rates. Here are a few data points that I'd collected from research and conversations with SaaS leaders:

• According to a study conducted by Profitwell, across 500,000 software users, they found that products had 10–15% higher retention when users had one integration enabled versus none, and 18-22% higher retention when users used four or more integrations.

• Profitwell also saw that customers had a 10-30% higher willingness to pay when they saw the integration they needed

• Rollworks saw that users with 4 or more integrations enabled had a 35% higher retention when compared to those with 1 integration enabled

• Intercom, who measures 'partner activated users', aka integration users, saw that those with 5 or more integrations enabled had nearly 100% retention

• Based on publicly available pricing data, across our 100+ customers, integrations drive an average increase in contract value of over 200%

Let's break down the impact into more granular components to see why these companies saw such a significant impact.

Time to value

During user onboarding, enabling users to see how your product will fit into the rest of their workflow is crucial, and oftentimes, bringing in their existing business data from other tools is a key driver of the 'Aha' moment. When they see their own data in your application, or send data from your application into their other apps, they'll immediately see how easy it is for your product to deliver value.

Without integrations however, they may be stuck with exporting/importing CSVs of data, or worse, manually entering information across their tools, which raises the friction to adoption.

Close rates

Integrations are often a key requirement for buyers when they evaluate and compare tools. In a survey we conducted, 74% of respondents expressed that the integrations are a dealbreaker when they compare SaaS platforms, and 24% said they were nice to haves.

So if you don't have competitive parity when it comes to the key integrations that your buyers need, you'll be at a huge disadvantage. On the flip side, you can also leverage integrations as a key differentiator to win against competitors.

In fact, we recently switched to a different platform for our product tours because Storylane, the platform we use today, had a much deeper HubSpot integration.

Retention

Potentially most importantly, is the impact integrations have on 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. 

Expansion

Additionally, certain core integrations can be a huge upsell lever that can drive expansion revenue from your existing customers. If a customer needs a particular integration that’s only available in a higher pricing tier, they’re more much more likely to upgrade – meaning more expansion revenue for you, or just a higher starting contract value. Read this article on integration pricing strategies to maximize your product's expansion revenue.

Tapping new markets

Integrations will enable you to better position your product for new markets. If you're moving:

- upmarket and want to sell into enterprises: they'll require integrations with other enterprise software (ie. SAP, Netsuite, or Salesforce)

- downmarket to target a higher volume of SMBs: they'll require integrations with other SMB focused tools (ie. Mailchimp, QuickBooks, HubSpot)

- into new verticals/ICPs: they'll require integrations tailored to their vertical/role (ie. integrations with Outreach, Salesloft and Gong for sales, or Klaviyo, Shopify, and Iterable for e-commerce)

Partnership opportunities 

Integrations can create the opportunity to build fruitful tech partnerships with the 3rd party company, which can unlock joint go-to-market opportunities.

If you are integrating with another product, inherently that means that there is an overlap in the customers you serve, and these partnerships can potentially provide you direct access to the partners' customer base.

At a minimum, this could mean that their customers will find your product on their app marketplace, but at its fullest, this could go as far as newsletter promotions, getting referral clients directly for their sales team, and more.

Now that we've covered why integrations have positive implications on your entire business, let's get into why you're actually here - measuring the ROI of your integration(s).

Calculating the ROI of native integrations

Revenue over costs = ROI.

Let's start with evaluating the costs associated with shipping the integration.

Costs

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.

Sales

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.

Conclusion

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 requireed per integration, but also streamline integration analytics and debugging, book a call with us here!