Optimizing Your SaaS Conversion Funnel (+ Example)

David Linder

David Linder

MSc in Marketing from the University of Salford. Facebook Certified Planning Professional Facebook Certified Buying Professional
11 min read

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saas-conversion-funnel-15

The common company used 16 SaaS apps in 2017. That’s a 33 percent increase from the entire year before.

That doesn’t mean your SaaS business will flourish, though. If you would like your little bit of a business that’s worth an estimated 116 billion globally, optimizing your SaaS conversion funnel most turn into a priority.

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saas-conversion-funnel-16

Your conversion funnel describes the steps your potential customers try reach a buying decision. Narrowing the conversion funnel and pushing prospects through faster can lead to higher profits. Do to so, you need to figure out how to nurture your leads and prospects.

Let’s look at one of the most important areas of the SaaS conversion funnel and ways to optimize yours.

Here’s what I’m likely to cover:

Why You should VALUE Your SaaS Conversion Funnel

Customers can hit a variety of touch points on the solution to a purchase. The way you serve content, advertising, along with other brand messages to your market make a difference whether those prospects ever convert.

David Skok, a serial entrepreneur and SaaS expert, says, “Regardless of what size or successful your organization is, you should have a minumum of one place that is clearly a blockage point in your customer acquisition funnel.” In accordance with Skok, failing woefully to discover that blockage can result in stagnant conversions.

Blockages often represent objections your target audience may have about buying your SaaS app. Overcoming those objections at the correct point in the funnel becomes needed for driving conversions.

If you won’t ever get prospects into your funnel to begin with, that’s another blockage.

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saas-conversion-funnel-1

Optimizing your SaaS conversion funnel will help you identify blockages and that means you reach more prospects, convert more leads, and sell more subscriptions.

SaaS Funnel Stages

The SaaS funnel looks largely exactly the same externally. It includes three degrees of prospect nurturing that eventually result in conversions.

First, you need to get a new customer. You then need to engage that customer to help keep her or him happy. Customer retention depends on delivering what your customer expects or anticipates — or even more, when possible.

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saas-conversion-funnel-5

Acquire

The acquisition stage has its funnel.

Writing for HubSpot, content marketer Jeff Cox notes, “SaaS solutions routinely have a reasonably drawn-out sales cycle in comparison to a great many other businesses. Actually, the average amount of the sales cycle for a SaaS company ‘s almost a few months.”

Consequently, you need to concentrate on the customer acquisition funnel first.

Cox uses HubSpot’s classic acquisition funnel.

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saas-conversion-funnel-3

You first need to make your audience alert to your SaaS app. It may be through organic search, social advertising, search advertising, person to person, or any method.

Engagement occurs whenever your convert your prospect right into a lead. She or he might call your sales force, join your email list, or complete an inquiry form on your own site.

Next comes exploration. Your lead knows she or he includes a specific need, but really wants to explore all options. That’s where your specific selling proposition will come in handy. Position yourself as better in unique ways than your competition.

The conversion stage usually employs a catalyst in SaaS marketing. For example, your lead might join a free of charge trial, discover she or he loves the app, and subscribe as a paid subscriber.

Engage

Since plenty of competition exists in the SaaS industry, you can’t rest on your own laurels once a lead becomes a person. Engagement continues through the entire relationship.

You might get in touch with existing customers with a poll or survey to request their feedback, tag them on social media, as well as create a call to ask when you can help with any struggles they’re incurring.

Your customers have to know you care.

Retain

Userlane head of marketing Andy Mura says, “Customers don’t purchase a simple software application. Customers buy success.”

This might apply more to SaaS apps than any market. If your customer doesn’t find success together with your app, they might browse the competition instead.

Consequently, customer retention involves consistently applying your customers’ feedback and making certain their frustrations get heard. Make sure they are feel like area of the family.

SaaS Funnel Metrics: THE MOST CRUCIAL KPIs

Optimizing your SaaS conversion funnel involves several moving parts, a lot of which be determined by metrics. In the event that you don’t have reliable data, you can’t make educational decisions about your marketing efforts.

Following are a number of the key performance indicators (KPIs) that I follow regularly here on Crazy Egg sufficient reason for my other businesses.

Customer acquisition cost (CAC)

Do you understand just how much it costs to get a customer in your SaaS business? In the event that you don’t, you could be in big trouble.

David Skok calls CAC the “startup killer.” What does he mean by that?

He shows that many SaaS startups start out with an imbalance between CAC and customer lifetime value (which I’ll discuss next.

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saas-conversion-funnel-7

If your CAC outweighs the money you generate from each customer, you’ll lose cash — sometimes plenty of it.

The goal would be to make certain you’re generating a lot more profits from customers on the long term than you may spend to create them up to speed to begin with. A confident dynamic between CAC and lifetime value enables you to continue investing in customer acquisition and retention.

You can calculate CAC pretty easily. Divide the money you may spend acquiring customers over confirmed time period by the amount of customers acquired throughout that same timeframe.

If you’ve spent $100,000 in advertising within the last year and you’ve acquired 300 customers, your CAC is $333.

The analysis doesn’t stop there, though. Imagine if your product only costs $20 monthly? That’s $140 each year. Which means you’re losing at the very least $193. That’s harmful to your allowance.

If your product costs $999 monthly, however, you’re operating squarely in the black provided that your other expenses don’t offset your earnings.

Lifetime value

Customer lifetime value (CLV) represents the quantity of money your customer will spend together with your business. In case a customer subscribes to your SaaS app for 15 years, their CLV is incredibly high. However, if that customer drops it following a year, you’re considering a lower CLV.

OmniCalculator provides an excellent tool for calculating your business’s CLV. It’s specifically made for SaaS companies, so that it offers more accuracy when compared to a standard calculation.

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saas-conversion-funnel-12

Once you understand your CLV, you can start optimizing your SaaS conversion funnel. A minimal lifetime value will claim that you have high customer church (which I’ll describe in greater detail later).

The customer isn’t getting something of value that he / she really wants. In some instances, you’re not the SaaS app she or he needs. However, you may want to include more features to your app to help keep customers from bailing.

If you’re struggling to optimize lifetime value, have a look at this video I created on increasing CLV for SaaS companies.

I also share specific ways that Crazy Egg will help you accomplish your targets.

Total conversions

This is among the easiest metrics to track for optimizing your SaaS conversion funnel. You’re calculating the full total conversions throughout a specific reporting period.

Tracking total conversions as time passes will let you know whether you’re losing market share to competitors or becoming obsolete in the tech space. If may also help your marketing and sales teams collaborate on efforts to improve conversions, whether you’re courting leads or generating sales.

Monthly recurring revenue (MRR)

One of the reason why I really like the SaaS model so much is that it results in recurring revenue. Your subscribers pay month after month (or purchase a full time frame beforehand). The model makes calculating revenue and profits easier.

MRR is easily calculated with the addition of up the full total amount of cash your visitors are spending every month. Consider package levels that bring about some customers paying a lot more than others.

Ideally, your MRR increases on a monthly basis. If it doesn’t, optimizing your sales funnel might help bring in clients and retain more existing ones.

Revenue churn

Some metrics are less fun to calculate than others. Here’s one of these.

Revenue churn calculates lost revenue over a particular reporting period. That’s it.

In a slide deck shared by Gainsight, a person service enterprise SaaS company, the impact of revenue churn becomes clearly visible.

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saas-conversion-funnel-11

You measure revenue churn as you wish to know how lost or gained revenue comes even close to the addressable market, your company’s overall growth, along with other metrics.

Customer churn

Here’s another important KPI for optimizing your SaaS conversion funnel. Customer churn represents the rate of which your visitors become non-customers. It’s typically thought as too little communication between your brand and a person for a particular time period.

You may also calculate customer churn in line with the amount of customers who cancel their subscriptions.

SaaS consultant Lincoln Murphy opposes the traditional theory that between 4 and 7 percent customer churn is healthy. Instead, he puts it into perspective: “Having 5% monthly churn means in the event that you started January with 100 customers you’d have 54 customers left by the end of December.”

You probably have significantly more customers than that, nevertheless, you need to consider customer churn in context and find out what this means for the SaaS business.

Optimizing Your SaaS Conversion Funnel

While you’re tracking the metrics I detailed above, you can begin optimizing your SaaS conversion funnel by answering several pointed questions. In the event that you answer “no” to some of them, you’ve found a location where you will need to optimize your funnel.

Are you generating qualified leads?

There’s an impact between a lead and a professional lead. A lead might stick to your email list for a long time without spending a dime. A professional lead is ready and ready to sign up to your SaaS app.

One solution to qualify leads would be to ask questions through the signup process. For example, if you would like your customers to join up for a scheduled call, you can include a field that requests the prospect’s annual marketing budget.

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saas-conversion-funnel-8

If the marketing budget submitted doesn’t align using what you charge for the SaaS app, the chance probably can’t afford it.

Does your lead know very well what you’re offering?

Generating leads takes a crystal-clear offer. On Crazy Egg, for example, we present a straightforward, easy-to-understand offer so nobody gets confused.

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saas-conversion-funnel-2

It isn’t just the offer that’s clear. You’ll spot the two phrases in the bottom that help prospects overcome objections. They get yourself a free 30-day trial plus they can cancel anytime they need.

This is essential since it builds trust and overcomes fears. We also use social proof to let prospects know we’re serving a large number of happy customers.

Are you measuring all of the important funnel metrics?

Take a glance at the set of KPIs I expanded on above. Are you currently tracking every one of them?

If not, you will need a solution to start measuring them so that you can apply the info appropriately. Otherwise, you’re passing up on important information which could not merely help your organization, but save it.

What are your ways of reduce churn?

Reducing customer and revenue churn should rank among your highest priorities. Why? Because when you have high churn rates, you’re living on unstable profits.

Have you brainstormed and implemented methods to reduce churn?

For instance, you may provide a discount to customers who pay annually rather than monthly. You might provide a lifetime price — meaning the client will never need to pay more unless she or he cancels the subscription.

Brainstorm methods to retain your visitors and increase your MMR.

Are you testing and optimizing the web site experience?

Website experience (UX) identifies the standard of the user’s experience while navigating your site. Poor UX could be due to confusing navigation, slow load times, improperly timed CTAs, and much more.

Crazy Egg will help you identify and fix UX issues.

For instance, consider running recordings so that you can look over your site visitors’ shoulders — virtually, that’s. You’ll see where in fact the mouse continues on the page, where in fact the user scrolls, and what elements an individual clicks.

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saas-conversion-funnel-9

Heatmaps and scroll maps are also available in handy.

A heatmap teaches you where in fact the most activity on your own website occurs using colors. You’ll see what elements draw probably the most attention so that you can optimize those areas for the conversion funnel.

A scroll map tells you where most users quit scrolling listed below. Sounds simple, right?

It can yield a great deal of value, though. Once you learn that a lot of people stop scrolling halfway listed below, perhaps you should insert a CTA there. Capture leads who might otherwise simply click away rather than scrolling around find your first CTA.

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saas-conversion-funnel-4

Gathering these reports over a protracted time period will help you to grow and adapt together with your user base. Optimizing your SaaS conversion funnel requires intimate understanding of how your users connect to different pages on your own site which means you learn how to organize your design.

Once you’ve collected your computer data, it is possible to run A/B tests. Find out which versions of every element perform best together with your audience.

A SaaS Conversion Funnel Example

Myk Pono, a specialist in SaaS and conversion funnels, shared a fascinating glimpse right into a detailed SaaS conversion funnel.

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saas-conversion-funnel-6

It compares the customer lifecycle contrary to the sales funnel and demonstrates how they interrelate.

There’s a huge amount of information here, but it’s also simplified to assist you design and optimize your personal SaaS conversion funnel. Pay attention to each green and orange stage and pinpoint what goes on in the middle of your brand as well as your prospect at those points.

It also shows ways to differentiate clients from active customers in your metrics and how upsells and cross-sells will help you are more profitable. For example, if a dynamic customer consistently uses your SaaS app, you may provide a discount on a far more expensive package to improve revenue and build loyalty.

3 Mistakes to Avoid

While you’re optimizing your SaaS conversion funnel, pay attention to these common pitfalls:

    1. Too many steps:

Don’t make your prospect, lead, or customer jump through way too many hoops. In an application, for example, only require information that’s essential. Whenever a customer creates a merchant account, exactly the same rules apply.

    1. Failure to transition in one step to another

Conversion rate optimization requires one to continually increase the buying cycle. Despite the fact that the SaaS buying cycle can last 90 days or longer, it is possible to help optimize your conversion funnel by making the next phase easier and much more logical. Keep your audience engaged.

    1. Not having a recovery plan

What if your present plan doesn’t work? You will need a backup. Moreover, you should know what you’ll do if your organization starts to flounder. How do you want to reverse the negative spiral?

Conclusion

I love the SaaS business model, and several other entrepreneurs have chosen it because of their own businesses. I believe that’s great, but I also know plenty of businesses fail.

That’s why optimizing your SaaS conversion funnel should become your priority.

Don’t your investment KPIs you should track to assemble information about your organization:

  • Customer acquisition cost
  • Lifetime value
  • Total conversions
  • MMR
  • Revenue churn
  • Customer churn

Next, consider some tough questions (and become honest together with your answers).

  • Are you generating enough qualified leads?
  • Do leads know very well what you’re offering?
  • Are you tracking those essential KPIs?
  • How do you want to reduce churn?
  • Have you begun testing and optimizing UX?

You can consider the conversion funnel example I showed you, but understand that everyone’s varies. Look at your personal customers’ buying experiences to determine how to progress.

David Linder

David Linder

MSc in Marketing from the University of Salford. Facebook Certified Planning Professional Facebook Certified Buying Professional

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