Ten years ago, you wouldn’t need this article. The SaaS market wasn’t oversaturated yet, and each product could easily find its audience. The times changed, and now, looking for a solution, buyers usually have several choices. They became more selective, demanding, and cautious.
We at Eleken believe that in today’s world, you can’t push people to purchase without the risk they’ll quickly get off the hook. You should carefully guide potential clients through your selling process until they’re ready to pay for your product. Simply put, to become a customer, they have to reach the bottom of your SaaS sales funnel.
This article will help you better understand the customer acquisition process to build your SaaS sales funnel and make the most out of it.
So, let’s start with some basics.
What is sales funnel and why is it important
Imagine you meet a new person. If the first impression is good, naturally, your interest evolves, and you want to know this person better. You become interested in what they say and how they think. In case you find their thoughts make sense and resonate with your values, your trust level is gradually getting higher.
You feel like you both are friends already, so you're getting prone to follow their advice and listen to the opinion. At this stage, you give your new friend the power to influence your decision. Instagram influencers mastered the skill of emotional sales funnels to sell their products. In the SaaS world, the mechanism is very similar - it's all about building relationships with potential customers to turn them into clients.
The SaaS sales funnel (also known as SaaS marketing or conversion funnel) is a multi-staged selling process that starts with building the awareness of your brand in clients' minds and extends beyond the first payment.
Unlike e-commerce businesses that focus on getting new customers through short marketing promotions, the SaaS customer acquisition process requires a more delicate approach. Customers need to be sure - your product is the best solution for the problem they face. While interacting with leads down to the bottom of the sales funnel, your ultimate goal is to raise their trust through engagement, expertise demonstration, and values communication. If building a customer acquisition strategy is on your mind, read our dedicated material.
On the way to purchase, users hit various touchpoints. Thus, how you treat them with your content and advertising may strongly impact the conversion. Understanding your SaaS sales funnel will help you find the gaps and analyze where and why prospects drop out and never convert.
We're now moving closer to the sales funnel stages, but at this point, I want you to understand - customers' journey through the funnel is absolutely under your control.
SaaS sales funnel stages
In the marketing books, you'll come across the acronym AIDA that stands for Awareness, Interest, Desire, and Action. These four stages represent a user's behavior flow based on human psychology. Each step requires a special marketing approach to move a lead to the next funnel level seamlessly. It's crucial to stay relevant and consistent, keeping in mind that the wrong message at the wrong time can be a reason the lead will drop out of the sales funnel.
AIDA concept has many variations, but I find the HubSpot approach the most applicable for the SaaS industry. They define Awareness, Engagement, Exploration, and Conversion as the principal B2B SaaS sales funnel stages. Why I like HubSpot's definition is because it says that raising customers' interest is not enough to get them converted. You should engage your leads and build trust. Also, in the SaaS world, the word "exploration" describes more accurately than "desire" the transition stage, when people finally start showing real interest in your product.
You will get better my idea while learning about all the SaaS sales funnel stages, so let's move on.
Awareness: raise interest, build trust, educate
At this stage, your potential clients are asking questions and looking for information. They may be even not fully realize the problem, so not searching for a specific solution yet.
Your potential clients are becoming aware of your company. More likely, they found one of your blog posts in an organic search or came across a mention of your brand in the media.
To generate more leads, you should put all your efforts into increasing brand awareness. Here are some ways you can do this:
- Promote your content, product, or service through paid adds
- Include PR activities into your marketing strategy to get more exposure
- Enhance your SEO strategy to boost organic traffic
Engagement: become a credible resource
When people come back to your website to consume more content, they're gradually moving to the next funnel stage. The entry point to this SaaS sales pipeline stage is a lead's sign-up for your newsletter or providing an email address to download free material. These actions show the lead is interested in your content, and it's the right timing to get unknown leads into your database and continue educating them on your product-related topics.
The engagement stage may be the longest part of the acquisition process as your potential clients need to determine if they trust you enough. They also want to be sure they need a solution to the problem your product solves.
At this stage, it's crucial to monitor how leads interact with your content. If you see that they opened multiple emails, focus your communication on highlighting the pains your SaaS product relieves. It's time to send more tutorial articles explaining how your tool helps deal with the specific issue or showcase examples when your product usage was beneficial for the customer. Also, you can start directing leads to your product pages to learn more about the solution features. We have some tips on how to build a successful user engagement strategy in the dedicated article.
Exploration: show up your product values
If you managed to hook leads attention and win their trust, this stage should be all about highlighting the benefits of your product and warming the leads up for the purchase. You continue nurturing them with case studies, comparisons, user testimonials, reviews, and success stories. At this point, offering a free trial will give leads a possibility to test-drive your product's full functionality within a limited time period. During the trial, the experience they have will influence their decision whether to become a paid user or not.
The freemium model can also be a part of the exploration stage. Highlighting the limitations of the free plan, you should unobtrusively encourage users to upgrade.
Leads may also proactively reach out to the sales team to ask for a quote or require more information on whether your product is the best match for their needs. In this case, well-trained professional sales reps can seamlessly move the leads to the conversion stage.
Conversion: sell and make customers stay
The paragraph's name conveys the main idea. To sell is important, but to retain is crucial. The SaaS businesses are subscription-based, so it is vital to secure monthly recurring revenue. That's why focusing on customer acquisition only is a short-sighted sales strategy. Retention should always be a part of the discussions related to the company's acquisition strategy.
Here is how you can work on customers retention:
- Send customer satisfaction surveys to get valuable feedback and improve your product or service based on the collected insights
- Offer active users to become beta-testers for your new product for free or promote them as an upsell to give your clients more value from your product
- Create exclusive newsletters for the users with product updates, company news, and insightful industry-related materials
- Activate your users with custom-tailored promo offerings
The magic of customers advocacy
I'd also add one more stage to the SaaS conversion funnel. Do you know what all brands' biggest desire is? To be referred by the customers. Customers' loyalty is a powerful weapon against competitors and a valuable asset for business growth. In today's world of social influencing, those who can get mentioned by satisfied clients have much more advantages. Reviews are new money. Keep this in mind, crafting your sales and marketing strategy.
Simple steps to build your SaaS sales funnel
Ok, I think we're done with the theoretical part. Now let's talk about how to create your first (or maybe not) SaaS sales funnel.
Know your audience
This step, being absolutely obvious, is still ignored by many businesses, and I can understand why. When you make a great product, you tend to think - oh, yes, that's what everybody will appreciate. However, the product for everybody is the product for nobody. You should focus only on people who potentially need your product and can be easily turned from leads to customers.
Whether you put efforts into organic growth or go with paid ads - your goal is to get more exposure. Create useful and engaging content, make it SEO-friendly, and keep posting it across all your platforms. Building brand awareness is not an easy job, yet it is an indispensable part of your business growth.
Create a website
It can be a simple landing page or a nicely-versed website. Ideally, it should clearly articulate your value propositions, main differentiators, product offerings, and price plans. By the way, it is up to you to decide whether you want to show your pricing publicly or not. I know that many B2B companies, mostly enterprise-oriented, prefer not to declare prices on their websites, offering contact sales directly. However, sometimes it can be quite irritating for people who wish to have an idea of your product cost. With this said, I would recommend showing the price for a low-tier plan at least. Transparency and clarity are the right synonyms for every brand name.
Run email campaigns
Regularly, but not too frequently, nurture your leads with high-quality content. One-two emails per week should be enough. But these couple of emails have to be informative and engaging, building a liaison between the leads and your company. To produce valuable content, always try answering the questions - what your potential clients want to learn, what problems they face that your product can help resolve, and what objections they may have you need to overcome to convince them to buy. When you see the leads show interest in your content, send them offers they can't resist.
Work on retention
As I've already mentioned above, retention is vital for every SaaS business to be successful. So, don't forget about your customers as soon as you see the first payment, as this is not the end of your collaboration; this is just the beginning.
The SaaS sales funnel is a dynamic system, which you should watch and analyze, finding the weak points where the leads drop out and never come back.
Track sales funnel effectiveness
Here are the metrics you should check to evaluate your SaaS sales funnel effectiveness.
The SaaS revenue growth rate is one of the most critical business metrics indicating a company's sustainability and profitability.
(Second Month Revenue – First Month Revenue) / First Month Revenue * 100 = % Revenue Growth Rate
The growth rate depends much on the stage the company is at and can significantly change over time. I won't go into the growth rate details here, but you can learn more in the average SaaS revenue growth article elaborating on this topic.
Another metric crucial to track is the churn rate. It shows the percentage of users who left your product over a certain period.
Customer Churn rate = Number of churned users / Total number of users
The average churn rate benchmark varies from 5% to 7% annually. However, this is not the ultimate rule for companies of all sizes—read the SaaS churn rate article to get more useful information.
Customer lifetime value
This metric shows how much money your customers will bring you over time.
To find your LTV, you have to calculate the average revenue per account (ARPA) first.
Then, you can use the formula:
LTV = (ARPA x Gross Margin) / Churn Rate
Customer acquisition cost
CAC measures how much money you spent converting a lead into a customer. This metric is crucial to determine the SaaS business profitability and is calculated by this formula:
Customer Acquisition Cost = Cost of Sales and Marketing /Number of New Customers Acquired
Certainly, the SaaS sales funnel metrics listed above are not the only ones you should use to measure your sales funnel effectiveness. Still, they can help you understand if you have to start working on your marketing funnel optimization.
Optimize your SaaS sales funnel
Firstly, you need to check which stage doesn't work well and where are the "holes" your leads may drop out from.
Let's say you get lots of leads, but they eventually don't purchase your product. It means you fail to properly demonstrate your SaaS differentiators during the engagement and exploration stages.
If they reach free trial but don't convert after trying your product, then probably your onboarding needs improvement.
If your users churn soon after the subscription, you failed to show your product's real value or pay much attention to customer retention.
So, here is what you can do to optimize your SaaS sales funnel:
- Generate qualified leads
- Communicate clearly your values
- Create catchy ads; run more ads to get exposure
- Work on your content relevance and quality
- Improve your landing pages UX and use the A/B testing
To sum up
In today's SaaS world customer acquisition process requires a thoughtful and delicate approach. Building communication with leads, your ultimate goal is to raise their trust through engagement, expertise demonstration, and values communication.
Awareness, Engagement, Exploration, and Conversion are the stages your leads should go through to become your clients. It's under your control to track the sales funnel effectiveness, analyze its weak points, and work on your sales pipeline optimization. Generating more qualified leads, articulating your product values, and improving content quality may help you polish your SaaS sales funnel and convert more leads into customers.
Meanwhile, thinking of your sales funnel strategy, you might be interested to check the stories of the Best SaaS Companies and the Secrets of Their Success.