Marketing and selling SaaS products can be extremely challenging. In order to overcome those challenges successfully, companies need a well-structured sales funnel at hand. The sales funnel is considered to be one of the most important concepts that can bring your business to the next level. Therefore, SaaS companies just cannot ignore the necessity to clearly define and manage it. They are using quite a lot of marketing channels to increase their brand awareness where each channel is an essential part of the funnel. SaaS sales funnel, in its turn, can be spread across the marketing channels.
What is the sales funnel and why is it important?
The sales funnel represents each step a person has to take to become your customer.
It mainly consists of four stages: awareness, interest, decision, and action. These stages are represented in a well-known marketing acronym AIDA:
At this stage, people come across your product or service for the first time. They may find you not only in ads or social media, but even learn about you from word of mouth. Whether a prospect moves further or not depends on your sales and marketing ability.
This stage implies evaluation of your product or service by your potential customers. They might think about their current problems and how your offering can help to solve them. No doubt, they will also compare you with your competitors in order to make the right decision.
If prospects have already gathered enough information about your business and are ready to learn more about your pricing and packaging options, feel free to move them to the next step of making a decision. Therefore, you should be armed with sales pages, webinars, user testimonials, reviews, and success stories to help your prospects turn into your customers.
At this stage, you can see the results of the work done. Whether the prospect makes a purchase or not depends on the efforts you put into the campaign and, of course, a pinch of luck.
So, your sales funnel is a path that prospects take to buy your product or service. But what if you have created a sales funnel, and nothing happens?
The answer is simple: you shouldn’t stop on that because your sales funnel needs to be understood and constantly optimized. When you understand your funnel, you can find the holes in it – the places where your potential customers quit and don’t convert.
A flowing sales funnel is crucial for any business, and SaaS providers are not an exception.
What is a SaaS funnel?
It is common knowledge that the SaaS model differs from other business models as the revenue of such companies is generated over an extended period of time. With regard to the fact that acquiring customers has a cost, the importance of a troubleproof sales funnel for SaaS companies becomes obvious.
In one of our recent articles, we have already given the definition of SaaS. It is a kind of software delivery model where users get apps via the Internet and on a paid subscription basis.
SaaS marketing differs from the traditional one because of the peculiarities of the products to be promoted:
- They exist online. Therefore, the marketing strategy for them should be almost entirely digital.
- They have unlimited number of subscriptions for selling. Therefore, a free trial may be a good option for promoting a SaaS product.
- The sales process is very fast. Everyone can buy a SaaS product just in a few clicks.
The SaaS sales funnel is a multi-stage selling process from building the awareness of your company in prospects’ minds and your further actions taken after the first payment.
In the previous part, it is mentioned that everything begins with awareness of your product or service, and this eventually turns into the prospect’s decision to accept your offering or not. And likewise happens in the SaaS world.
SaaS sales funnel stages
As it was mentioned above, a sales funnel mainly consists of four stages: awareness, interest, decision, and action. These stages are represented in a well-known marketing acronym AIDA.
AIDA has many variations as each software company sells products of different complexity, features, pricing, etc.
However, most SaaS businesses prefer an approach that comprises the following stages:
At this stage, people might not know the problems their companies face and are not looking for any solution. They are just asking questions and looking for information that may be closely related to what your product does.
Now you should roll up your sleeves and harness all the marketing means to make your company noticed by the relevant audience. You can use SEO, social media, and paid search strategies to bring leads to your website.
At this stage, you shouldn’t miss the opportunity to turn your prospects’ awareness of your brand into an intent to purchase.
While at the previous stage you focus on the low-intent keywords in your SEO and PPC strategies, here you should go for higher-intent keywords. This is due to the fact that now you’re going to target people who clearly showed their desire to buy a solution to their existing problem.
Now your prospects already know the solutions to their problems and are considering the providers who can offer the best option for them. Here your main goal will be to turn consideration into a purchase. For SaaS companies, a good practice is to include guides on how to get most of the trial period or share with leads some comparison of their software to their competitors’. If you go for paid ads, you can also add call-to-action keywords that imply an immediate purchase.
It’s also worth mentioning that you should make up your CRO strategy in a smart way as it can cost you a lot of wasted money and time if you don’t make sure that your tests and optimizations bring income. In order to learn more about effective ways to increase SaaS conversion rate, follow this link to one of our articles.
At this stage, a prospect has already decided whether he or she will buy your product or not. If the decision was made in your favor, then congrats! You have acquired a customer.
It’s high time we thought about ways to convert our customers into loyal clientele. You should do everything possible to retain their interest in your product and ask yourself what they will gain from loyalty to your brand.
Above all, put your customer service at the heart of your relationships with clientele. In fact, it doesn’t mean that you should give them a perfect product, but you should always be there for them when they have problems or questions to ask you. For example, you can add a FAQ section to your website or use chatbots.
Secondly, make your customers feel valued and reward them for staying with you. These can be extra discounts, free consultations, and many more!
You can also try upselling and cross-selling campaigns to convince your customers that they can get even more value with your brand and receive more income.
How to encourage my customers to refer me to their friends? That is the question you should ask yourself at the stage of advocacy in your sales funnel. Now is a great chance to turn loyal customers into your brand advocates. At this stage, it makes sense to actively build a profile of positive reviews, gathers customers’ success stories related to your product, and create referral programs.
How to build your SaaS sales funnel
As it was explained, stages of the sales funnel are the steps people take to become your customers. Then we need to find out what steps SaaS providers should take to build a sales funnel for their business.
Define your target audience
First of all, and, perhaps, the most obvious one is to find out who your audience is. Unfortunately, it is sometimes ignored by companies, and we can even assume why. People tend to think that when they create an incredible product, everyone will want and buy it. No, that’s not going to happen. On the contrary, a product for everybody is a product for nobody.
Improve brand awareness
The next step in defining your funnel is to get more exposure. Increasing your brand awareness is not an easy job. But if you spread your marketing efforts in the right direction, it will pay for itself very soon. You can go for paid ads or organic growth – everything depends on your goals, budget, and time you’re ready to invest in this. In order to move deeper into this topic and see which strategy is more suitable for your business, we recommend you to read our recent article about the differences between PPC and SEO.
Create a compelling website or landing page with a clear CTA
Thirdly, you should make sure that your company has a website or a landing page. It should help prospects clearly understand your value propositions, product offerings, price, and what makes your product unique. If you don’t want to reveal your entire pricing structure, including at least the amount of your cheapest plan.
Engage with your prospects
After that, you can run email campaigns (but not so frequently – 1-2 emails per week). Try to use your emails as a link between your leads and your company, just share with them some interesting and engaging information. To achieve this goal, ask yourself: what your leads are looking for, what problems they have and how your product can help to solve them, and what doubts might prevent them from choosing you as a SaaS provider. As soon as you see that people show interest in your emails, send them your tempting offer.
Retain your customers
Finally, you should make up your retention strategy. Don’t let the first payment blind you and make you forget about your customers. When you acquire them, you haven’t finished your work yet. The main idea here is that it is much easier and cheaper to retain an existing customer than to turn a prospect into a new buyer. Therefore, you should do your best to maintain their trust and positive thinking about your brand.
Metrics to check SaaS sales funnel effectiveness
It goes without saying that any sales funnel needs to be optimized. But before making any improvements there, we need to evaluate the primarily created funnel and see what needs to be fixed and what worked out well.
There exist some important metrics that can help to check SaaS sales funnel effectiveness.
- Monthly Recurring Revenue (MRR)
MRR is a measure of the predictable and recurring revenue components of your subscription business.
When evaluating your MRR, you shouldn’t take into consideration one-time and variable fees. You should mainly focus on:
- New MRR: revenue coming with new customers;
- Expansion MRR: expanded revenue that comes from upsells and cross-sells;
- Churn MRR: lost revenue from customers who cancelled or downgraded their subscription.
In a nutshell, the formula for counting your MRR will be the following:
2. Customer Lifetime Value (LTV or CLV)
CLV stands for the profit your business makes from any given customer. When you know your CLV, you will know how many resources you can spend to acquire new customers, retain them, and reduce their attrition. Apart from that, it allows you to define what kind of upsells and cross-sells you can give to the best customers.
To calculate your CLV, you need to pay attention to the following aspects:
- ARPA (Average Revenue per Account);
- Gross margin;
Taking these three things into account, you can find out your CLV using the following formula:
3. Customer Acquisition Cost (CAC)
Every SaaS company knows that acquiring new customers is a costly and not so easy thing. This, in its turn, makes CAC a very important metric to track.
CAC implies all the resources and efforts necessary in order to convince your prospects to purchase at yours and to turn them into your customers.
Being aware of your CAC allows you to determine your actual profit margins, improve the CLV metric, detect and optimize the biggest expenses on acquisition.
If you’re going to find out your CAC, use the following formula:
4. Customer Churn
Customer churn in SaaS means the number of customers who canceled their recurring revenue subscriptions.
The simplest way to calculate this metric is to take churn and divide it by the number of customers you had on the first day of a certain period:
5. Revenue Churn
Revenue churn rate allows us to see how much revenue a SaaS company loses as a result of churned customers or downgraded subscriptions.
The formula to calculate this rate is the following:
If you want to learn more about how to utilize data analysis in implementing paid acquisition strategy for SaaS businesses, check out our article.
How to Optimize your SaaS sales funnel
Having worked on your sales funnel and having defined the metrics of its effectiveness, it’s time to optimize it.
It is worth mentioning that if you want your SaaS to prosper, constantly convert leads into customers, and, above all, have those customers stay with you, you need a well-optimized sales funnel.
- Review your customer personas on a regular basis.
A good practice here is to ask yourself: “Who is my wrong client?”.
Try to describe those “wrong customers” in detail. After that, you will easily find out whether most of those people who sign up for free trials are your ideal customers or not.
A product for everybody is a product for nobody.
- Shorten your sales cycle, if it is complicated.
The main idea here is to check how much your customers are willing to go through these or those procedures. Just leave only the necessary steps and features and remove those that hurt your conversions.
In other words, try to avoid any complexity and do your best to provide your customers with clear guides and answers to all their questions.
- Reduce churn rates.
It is obvious that high churn rates undermine the health of your sales funnel.
There exist a dozen ways to reduce your customer churn:
- Be proactive and reach out to your customers to show them that you you care about them and want them get the most out of your product;
- Ask for your customers’ feedback in order to see what you can do to improve your services;
- Determine how you can add value to your products or services and let your customers get more for their money;
- Pay attention to the customers that are at risk of churning before they cancel. You should detect those who are gradually reducing the use of your product and conduct a survey among them;
- Try to determine who are your most valuable customers and focus on them. It may happen that you have a lot of at-risk customers. No one is immune to this, but you can’t waste all your time and resources to reach out to all of those people. You should consider your customers profitability first, not just the probability of losing them.
- Keep measuring funnel metrics.
As is clear from the above, the SaaS sales funnel should be constantly checked for its effectiveness.
Keep in mind such metrics as monthly recurring revenue, customer lifetime value, customer acquisition cost, customer churn, revenue churn, and you will see a full picture of what needs to be fixed in your sales funnel.
- Sell your products or services to active users.
There’s usually a small number of new customers who purchase from the funnel. So, the better option is to focus on the active users of your SaaS product.
You can also offer custom discounts or other additional values to them.
- Run more ads to increase your brand awareness and make them catchy.
If you’re going to pass the work on your ads to a marketing agency, make sure that:
- their pricing models correlate with your expectations;
- they have a clear strategy to solve the tasks you set and precise KPIs;
- their industry expertise and experience with platforms are relevant for your business;
- the agency doesn’t focus on CPA only;
- they use a good toolkit for campaign management and optimization.
If you are looking for PPC advertising assistance, Teamedia is ready to help and be your long-term partner! We have more than 7 years of experience in providing Google, YouTube, Facebook, Instagram, LinkedIn, Bing, Twitter, Reddit, and Capterra ads for SaaS companies. We will dive deep into your business, choose the most efficient channels to achieve your campaign goals, and help you focus on the most profitable segments to increase conversion rate and reduce cost per lead.
- Improve your landing pages UX and use the A/B testing.
Your landing pages are one of the first places where your prospects appear to get to know your company and your offering. Therefore, your landing page should:
- be segmented according to your users’ needs;
- guide its visitors to a clearly defined goal and values you offer in a variety of scenarios;
- show your SaaS product’s features and answer the questions that might arise in your users’ minds;
- be without any distracting elements;
- have a mobile version;
- look trustworthy: have an SSL certificate, be without unnecessary redirects, be intuitive and easy to use, etc. ;
- have positive reviews;
- contain a link or a section where users can reach out to support in case they have questions.
The sales funnel stays one of the pivots which help SaaS providers to survive in today’s harsh competition. It helps to better understand their prospects’ behavior and motivations to make them choose you instead of your competitors.
To make your sales funnel work for your subscription business and bring you revenue, you need to constantly track its condition by various metrics, make conclusions based on which you can fix the weaknesses which stop prospects from converting into your customers.
Teamedia knows how to increase the number of leads and conversions at each stage of the SaaS sales funnel. We know that at different stages your prospects use completely different phrases when they conduct searches on the Internet. Therefore, we always adjust your message to your prospects’ specific needs and communicate it to the right people and at the right time. So, your customers will be directed to appropriate landing pages that contain information currently relevant to them.
In a word, a well-optimized PPC ad can be a powerful tool that can help you stand out from your competitors and always be relevant for leads at whatever stage of the sales funnel they are in.