If you’ve ever stepped into the world of SaaS, you’ve probably come across acronyms and jargon that seem like a foreign language. From ARR to PLG to multi-tenancy, the terms pile up quickly—and if you don’t understand them, you risk making the wrong decisions about growth, pricing, or even product development.
That’s why we created this SaaS glossary: a one-stop resource where you’ll find clear definitions, examples, and explanations for the terms that matter most. Whether you’re a founder, marketer, investor, or simply SaaS-curious, this guide will help you cut through the noise and focus on what really drives success.
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What Is SaaS and Why Do You Need a Glossary?
SaaS (Software as a Service) is a software delivery model where applications are hosted in the cloud and accessed via the internet. Instead of buying software once and installing it on local machines, businesses and individuals subscribe to SaaS tools—think Slack, Zoom, or HubSpot.
As the SaaS industry has grown, so has its unique vocabulary. Metrics, pricing models, user engagement frameworks, and security requirements all come with specialized terminology. A glossary not only helps you stay informed but also ensures you can communicate effectively with teams, clients, and stakeholders.
SaaS Glossary A–Z
To make things easier, we’ve grouped the most important SaaS terms into categories.
Core SaaS & Business Metrics
- ARR (Annual Recurring Revenue): The total predictable subscription revenue a SaaS company expects annually. Example: If 100 customers pay $1,000/year, ARR = $100,000.
- MRR (Monthly Recurring Revenue): Recurring revenue on a monthly basis. Ideal for tracking short-term performance.
- ACV (Annual Contract Value): Average revenue per customer contract, normalized for one year.
- ARPU (Average Revenue per User): The average monthly revenue per user account.
- CAC (Customer Acquisition Cost): The cost of acquiring a customer (ads, sales, marketing spend ÷ number of new customers).
- CLV or LTV (Customer Lifetime Value): The projected revenue from a customer during their entire relationship with your company.
- Churn Rate: The percentage of customers who cancel or fail to renew in a given time.
- Retention Rate: The opposite of churn—the percentage of customers who stay active over a period.
User Engagement & Growth Terms
- DAU/WAU/MAU: Daily, Weekly, and Monthly Active Users. Measures product stickiness.
- Onboarding: The process of helping new users become successful with your product.
- Activation: When a user first experiences the core value of your product (e.g., sending a first message on Slack).
- Product-Led Growth (PLG): A growth strategy where the product itself drives adoption and revenue (Dropbox, Zoom).
- Sales-Led Growth (SLG): A strategy where sales teams drive adoption (common in enterprise SaaS).
- Freemium: Offering a basic version for free to attract users, then upselling advanced features.
- Viral Loops: Growth mechanism where users bring in new users, often via referrals.
Pricing & Monetization Models
- Subscription Pricing: Fixed recurring fees (monthly or yearly).
- Usage-Based Pricing: Customers pay based on usage (e.g., API calls, storage space).
- Tiered Pricing: Different price levels based on features or usage.
- Value-Based Pricing: Price is based on perceived value to the customer.
- Price Anchoring: Setting a higher “reference” price to make the intended plan look more attractive.
- Dynamic Pricing: Prices adjust based on demand, usage, or market trends.
Product Development & Technical Terms
- MVP (Minimum Viable Product): The simplest version of a product that solves a problem and gathers feedback.
- API (Application Programming Interface): A way for software systems to communicate with each other.
- SDK (Software Development Kit): Tools that developers use to build integrations or apps.
- Webhook: Automated messages sent between apps when events happen (e.g., new payment triggers an email).
- Sandbox: A test environment to experiment without affecting live data.
- CI/CD (Continuous Integration / Continuous Deployment): Development practices for frequent, automated releases.
- Microservices: Breaking down software into smaller, independent services that work together.
- Multi-Tenancy: A single SaaS platform serving multiple customers (tenants) while keeping data isolated.
Security & Compliance
- SSO (Single Sign-On): One login for multiple applications.
- MFA (Multi-Factor Authentication): Security layer requiring multiple verification methods.
- RBAC (Role-Based Access Control): User permissions based on roles.
- GDPR (General Data Protection Regulation): EU privacy law regulating how companies handle user data.
- SOC 2: A compliance standard for managing customer data securely.
- Vendor Lock-In: When switching providers becomes difficult due to high costs or complexity.
- Shadow IT: Unauthorized software or tools used inside an organization without IT approval.
Operations & Infrastructure
- Scalability: The ability of a system to handle increased demand.
- Uptime: The percentage of time a SaaS product is available. Often part of SLAs.
- SLA (Service Level Agreement): A formal commitment to service standards like uptime or support.
- Cloud Migration: Moving applications or data from on-premise to the cloud.
- Monitoring: Continuous tracking of system health, performance, and usage.
- Embedded Analytics: Integrating reporting and insights directly into a SaaS product.
SaaS Jargon Made Simple
Instead of drowning in acronyms, here’s a plain-English approach:
- Webhook: Think of it like a text message from one app to another when something happens.
- Churn: Customers leaving.
- CAC: How much it costs to get one paying customer.
- ARR: The total amount of money your subscriptions make in a year.
Real-World Examples of Key Terms
- A startup with 200 paying customers at $50/month has an MRR of $10,000.
- If its CAC is $200 and average LTV is $2,000, the business is in a strong growth position.
- Switching from a flat subscription to tiered pricing can increase revenue by capturing different customer segments.
Download the SaaS Glossary Cheat Sheet
Want a quick-reference guide? Download our free SaaS Glossary PDF and keep the essential terms at your fingertips.
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FAQ: Common Questions About SaaS Terms
Q1: What’s the difference between ARR and MRR?
- ARR is the annualized version of recurring revenue, while MRR tracks it monthly.
Q2: How do you calculate CAC and CLV?
- CAC = Total sales/marketing costs ÷ new customers acquired.
- CLV = Average revenue per customer × average lifespan.
Q3: Freemium or Free Trial—what’s better?
- Freemium works well for high-volume, low-cost SaaS. Free trials often work better for premium B2B products.
Q4: How is PLG different from SLG?
- PLG focuses on self-serve adoption, SLG relies on sales teams. Many companies blend both.
Final Thoughts – Keep Learning SaaS
SaaS is one of the fastest-moving industries in the world, and new terms emerge almost every year. By mastering the language of SaaS, you’ll not only understand the space better but also make smarter strategic decisions.
Bookmark this glossary, share it with your team, and check back for updates—we’ll continue to add new terms as the industry evolves.
