Conversion Rate Optimization for SaaS Companies
Profitability depends on your ability to turn visitors into users and users into paying customers. This is the double-conversion dilemma. Even small conversion gains can make a difference.
That’s why SaaS conversion rate optimization (CRO) is essential for driving growth.
In this guide, you’ll learn about CRO for SaaS companies, how it improves SaaS growth and profitability, and what CRO strategies are needed to strengthen your sales funnel and improve lead generation.
- What is CRO and why is it crucial for SaaS?
- Benefits of CRO for SaaS brands
- How to measure conversion rates in SaaS
- The SaaS conversion journey
What Is CRO and Why Is It Crucial for SaaS?
Conversion rate optimization, or CRO, is the art and science of continuously raising the value of website visitors. It’s the ongoing process of increasing the rate at which visitors take specific actions, such as subscribing, requesting a demo, or completing a purchase.
Conversion rate optimization for SaaS applies this process to the SaaS customer journey, improving the flow from sign-up and trial to purchase, onboarding, and beyond.
How is this done? With the scientific method.
Six steps of the scientific method
For example, let’s say you’re trying to improve pricing page conversions. A CRO consultant will create hypotheses about how to improve the page’s performance and run a series of tests to discover what works. They will then repeat this process to achieve continuous improvements.
The optimization process is especially valuable to SaaS companies because their valuation is tied to long-term revenue growth. A conversion rate boost of 1% doesn’t just increase revenue by 1%. It increases the company’s value by 1%.
SaaS companies also have a longer, more complex customer journey. You must convince visitors to try the product, then onboard them sufficiently for them to get value out of the trial, and then entice them to commit to a longer-term purchase. This is not a linear process.
It is not unusual to increase the number of people signing up to try the app and then finding that fewer people overall are becoming buyers.
Additionally, many SaaS products will require a salesperson to get involved due to cost or complexity.
To ensure sales, you must improve conversion rates at each stage while maintaining the quality of the prospects — and every small increase can translate to significant growth in revenue.
For SaaS conversion optimization best practices, read this article.
Benefits of CRO for SaaS Brands
Let’s look at six benefits of CRO for SaaS.
1. CRO Increases Revenue
The CRO process uncovers sticking points where people stop using the product or fail to progress through the pipeline. Through experimentation, it finds ways to unstick, re-engage, and turn those people into paying customers.
And here’s the interesting thing: In SaaS, conversion rate improvements are multiplicative rather than additive.
So if you improve customer acquisition by 20% and sales conversions by 10%, you won’t see a 30% lift. You’ll actually see a 32% lift.
Additive: 0.20 + 0.10 = 0.30 * 100 = 30% boost
Multiplicative: 1.2 * 1.1 = 1.32 * 100 = 32% boost
Over time, this compounding effect can add up, making CRO a core growth strategy for SaaS companies.
2. CRO Lowers Acquisition Costs
Conversion optimization raises the percentage of leads or users that convert into customers, giving you more sales without an increase in customer acquisition costs (CAC). This improves the efficiency of your ad spend, making your marketing dollars go further.
It also creates a virtuous cycle. By testing every element of the conversion funnel, you can uncover the friction and pain points that lower conversion rates. This gives you the insight to create highly effective campaigns that convert well.
3. CRO Increases Organic Search Traffic
SEO and CRO are partner strategies, working together to improve traffic and conversions. SEO attracts qualified traffic. CRO ensures visitors have a good user experience and take their next step to becoming a customer.
4. CRO Improves The User Experience
To improve SaaS conversions, CRO removes friction points that can harm the user experience. It creates a site that puts users’ needs first, which boosts satisfaction and brand perception. The user experience of your marketing website sets the expectation for the user experience in the application.
5. CRO Optimizes Growth through Testing
SaaS growth has three levers: acquisition, sales conversions, and churn. All of these levers can be improved with a process of continuous testing and optimization.
6. CRO Provides Data To Improve Marketing Spend
CRO for SaaS can help you identify the markets and channels that will be most profitable for you. And as we’ve already seen, it can lower acquisition costs, making your SaaS company more profitable.
How to Measure Conversion Rates in SaaS
The conversion rate formula is:
(Number of Conversions / Number of Visitors) * 100 = Conversion Rate %
Divide the number of conversions by the number of visitors, and multiply by 100. This gives you the conversion rate of whatever you’re testing — form completion, download, or purchase, for example.
Keep in mind, because SaaS has multiple touch points and conversion events, measuring conversion rates can be tricky. You’ll need to track conversion rates across the entire customer journey. You also need to take into account your sales volume, the time it takes to close deals, churn rate, and customer lifetime value (CLV).
It can help to understand SaaS conversion rate benchmarks.
B2B SaaS Conversion Rate Benchmarks
Use these conversion rate benchmarks to gauge the success of your marketing and sales efforts.
SaaS marketing conversion rate benchmarks
- Website visits to leads: 2-5%
- Leads to marketing qualified leads (MQLs): 20-30%
High-touch SaaS sales conversion rate benchmarks
SaaS products that require a sales team generally have an ACV (average contract value) of $6K to $15K on the low end. Extremely large deals, often called enterprise SaaS, start at six figures. Here are the conversion rate benchmarks for high-touch SaaS sales:
- Marketing-qualified leads (MQLs) to sales-qualified leads (SQLs): 13-27%
- SQLs to Opportunities: 50-62%
- Opportunities to Closed Won: 15-31%
Conversion rate benchmarks for high-touch SaaS (Gartner)
Low-touch B2B SaaS conversion rate benchmarks:
Low-touch B2B SaaS products have an ACV (average contract value) of $100-$5,000. These products are typically sold on a month-to-month subscription ranging from $10 to $500.
- Free trials with no credit card required: 25% of SaaS businesses
- Free trials with credit card required: 40-60%
- Freemium conversion rates: 1-10%
More B2B SaaS conversion rate benchmarks:
- User activation rate: 36%
- Product adoption rate: 14-55%, with an average of 33%
- Customer churn rate: 3-5%, with a goal of <3%
- Customer retention rate: 79-90%
The SaaS Conversion Journey
As with other B2B products, the SaaS customer journey moves from awareness to consideration and conversion. But in SaaS, these stages are much more complex, and the customer journey continues long after the sale.
Because of this, it’s impossible to map the Saa customer journey in a way that applies to every SaaS business. We can, however, describe the key stages of a SaaS customer journey for both low-touch and high-touch SaaS products.
The Stages of a Low-Touch Saas Customer Journey
- Awareness – The user becomes aware of their problem and your product.
- Education – The user learns as much as possible about their problem, your product, and how it solves the problem.
- Acquisition – The user downloads a trial or free version of the product.
- Onboarding – The user goes through a tutorial to understand how the product works.
- Activation – The user begins to use the product and recognize its value.
- Conversion – The user decides they need all the features of the product and upgrades from the trial or free plan to a premium plan.
- Retention – The product becomes an essential part of the user’s life. They use it daily or weekly and won’t consider churning.
- Referral – The user is so happy with the product, they become an evangelist, giving you word-of-mouth marketing and referrals.
- Renewal – Through renewals, add-ons, and upsells, the user continues to increase their lifetime value.
The distinguishing feature in this model is the trial or freemium offer. With most other online purchases, the customer makes the buying decision based on a product description, images, and testimonials. With SaaS, they want to be sure the user experience is good, the features do what they want, and the product will fit into their workflow.
Through the trial offer, users are able to experience the product themselves. Even a short trial gives customers a low-risk way to decide whether your product is right for them. The challenge, of course, is to avoid giving away too much.
If you’re offering a freemium model, you need to give users a stripped-down version of the product that lets them experience success but also leaves them wanting more. That’s a hard balance to strike, but if you can get it right, this model can bring in lots of new customers.
A free trial may give users access to all your features (including premium ones) for a specific time period. The trick here is getting the time period right. A trial of 7 days may not be long enough for users to fully explore your features. A 30-day trial will give them more time to fall in love with your product but can add to your costs.
The Stages of a High-Touch Saas Customer Journey
- Awareness – The prospect becomes aware of their problem and your product.
- Education – The prospect researches options, including features and benefits of products in their selection pool.
- Demo – The prospect requests a demo, with key stakeholders present.
- Product purchase – The prospect selects your product.
- Implementation – The product is installed and configured for the customer’s specific needs.
- Onboarding – Users are trained to use the product.
- Adoption – The product becomes part of users’ daily routine.
- Upsell – The customer upgrades or purchases additional features or seats.
- Renewal – The customer sees the value of the product and renews their subscription every year.
Notice that this model doesn’t include a trial. High-touch SaaS products are usually more complex, which means a trial isn’t possible. Instead, prospects rely on a demo to understand how the product works.
Unlike a trial, a demo doesn’t let the buyer navigate the product themselves, but it does let them see it in action. It also lets them talk to an account representative and get their questions answered.
In both low-touch and high-touch SaaS products, growth is achieved through long-term subscriptions, upsells, and contract expansion. For that to happen, though, you have to help users understand the value of the product and not only adopt it but become super-users.
Conversion rate optimization allows you to improve every stage of the customer journey — regardless of the type or structure of your journey. It ensures a positive user experience that translates into better adoption rates, lower churn rates, and higher revenue.
Different Conversion Events in SaaS
To generate a sale in SaaS, you must successfully move users to action at multiple points along the customer journey. Let’s look at some key conversion points for SaaS.
Free Trial Sign-Up: When a user signs up for a free trial of your SaaS product, it indicates interest and the intent to explore your software.
Paid Subscription: The user upgrades from a free trial or freemium plan to a paid subscription. This is where you start generating revenue. It’s also the point at which you implement customer marketing to build loyalty and increase the lifetime value of the customer.
Onboarding Completion: Successful onboarding is key to user adoption and retention, so completion rates matter. Track user engagement throughout your onboarding sequence to understand where engagement drops. Then test different tactics, such as gamification, to keep users engaged.
Adoption: One of the key challenges after purchase is getting users at a client account to use the product. This requires helping a champion sell your product internally. New accounts, log-in rates, and session lengths will tell you how well you’re doing at that. The usage metrics tracked in CRO allow you to track the features people use most to understand where you can add or improve features.
Usage Frequency: When a user’s engagement drops, it generally signals that they’ll churn in a few months. As with adoption rates, CRO retention metrics track users’ log-in rates, session length, and the number of actions they take within a session. It’s a good idea to start customer re-engagement campaigns as soon as you see this metric lag.
Upgrades/Downgrades: Users might upgrade to higher-tier plans for more features or downgrade to lower-tier plans based on their needs. These actions impact your revenue and can indicate user satisfaction or changing requirements.
Referral Sign-Up: Happy customers tend to make referrals, but you can incentivise this action as well. To improve this metric, CROs optimize your process for engaging with prospects who enter the pipeline from a referral, while actively encouraging referrals from loyal users.
Renewal: Customer renewal rates directly impact your revenue. CROs know that it’s vital to track and optimize the timing and rate of renewals.
Unsubscribes: A low churn rate is another key to SaaS profits. The CRO process identifies events that trigger churn and develop campaigns to re-engage users. To optimize those campaigns, CROs use data around the events that can make a churning customer change their mind and decide to continue their subscription.
These conversion events are key to growth, which is why conversion rate optimization for SaaS focuses heavily on testing unique ways to improve them. One of those methods is conversion funnels.
Mapping Conversion Funnels and Key Moments
While running routine tests to improve key SaaS metrics, optimizers create conversion funnels for each stage of the customer journey. For example, they build funnels that:
- Increase trials or demos
- Boost acquisition
- Improve onboarding
- Raise retention rates
- Maximize lifetime value
Each funnel focuses on a specific micro-conversion. Together, they improve conversion rates across the entire customer journey.
To understand how this works, we’ll need to look more closely at conversion funnels and how they work.
A conversion funnel, also known as a sales or marketing funnel, is a framework used in digital marketing to illustrate the stages a prospect goes through before taking a desired action.
It’s called a funnel because, similar to a real-world funnel, there are fewer people at the bottom of a funnel than at the top. The top of the funnel will include anyone who lands on your website or engages with your content. Your goal is to engage qualified prospects and weed out everyone else. As a result, every stage of the funnel has fewer people in it, and at the bottom, you only have serious prospects.
Prospects don’t necessarily move through a funnel in a linear fashion, but the funnel model helps optimizers know how each stage of the customer journey is performing as part of the whole.
We typically break the funnel into three broad stages:
- TOFU: top of funnel
- MOFU: middle of funnel
- BOFU: bottom of funnel
In SaaS, it’s also important to include a fourth stage: Below the Funnel.
Each part of the funnel aligns with a specific stage of the customer journey, giving you eight distinct stages in a B2B SaaS conversion funnel. Keep in mind, though, this also gives you eight drop-off points where prospects can leave the funnel.
Awareness Stage (TOFU): At the widest part of the funnel, the prospect has just become aware of your product. This stage is optimized by raising awareness of your brand and product. Strategies include content marketing, social media, SEO, and advertising. Frequency of impressions is essential at this stage.
Interest Stage (MOFU): In this stage, users are aware of your brand or product and have decided to learn more about you. They may engage with your content, sign up for newsletters, or explore your product’s features and benefits. Content such as ebooks, webinars, and case studies can be effective here. WIth gated content, you are building an ever expanding list of prospects to move to the next stage. Relevant content is the driving force at this stage.
Consideration Stage (MOFU): Users at this stage are considering your offerings more seriously. They may compare your product with competitors’, read reviews, and seek additional information. They may also consider a trial subscription or look for a walk-through video to understand how your product works. Anticipate their questions and objections at this stage.
Intent Stage (BOFU): At this point, users are actively considering making a purchase or taking a specific action. They may add items to their cart, request a quote, or sign up for a free trial. Conversion optimization and targeted messaging are essential here. Strategies for removing friction from the sign-up processes proliferate here.
Evaluation Stage (BOFU): The user is now in a trial or evaluating a demo. At this stage, the on-boarding process must be optimized. In a product-led growth (PLG) approach, the product is designed to make it intuitive and easy to use. However, optimizers know that instructional materials will be needed to help users be successful with the product quickly..
Conversion Stage (BOFU): This is the ultimate goal of the funnel. Users convert by making a purchase or upgrading from a free plan. The application becomes the salesperson. Optimizers look for ways to highlight upgradeable features and offer ways to reduce costs by increasing the length of the commitment. .
Post-Conversion Stage (Below the Funnel): Use and adoption are the focus at this stage of the funnel. Look for opportunities to nurture customer relationships, provide excellent customer support, and encourage repeat purchases or ongoing engagement. Your CRO should have usage metrics at the ready to evaluate usage and adoption rates. Done right, optimization at this stage boosts loyalty and advocacy.
Advocacy and Loyalty Stage (Below the Funnel): Loyal customers who love your brand will often become advocates, referring others and doing word-of-mouth marketing.
Elevate Your CRO Game: Next Steps for Your SaaS Company
Even small improvements in your conversion rates can impact revenue and growth.
At Conversion Sciences, we’re not a standard CRO agency. We use the scientific method to identify and fix the issues causing SaaS revenue leak. Contact us today to talk with our experienced full-service team of Conversion Scientists today.
Expertise: conversion rate optimization, AB testing, marketing strategy, digital marketing, analytics, landing page design, computer programming, entrepreneurship
Speaking: IBM, Inbound, LeadsCon, Content Marketing World, Affiliate Summit, and more
Books and Training: Your Conversion Creation Equation, Video CRO, Marketing Videos that Convert, CRO Best Practices
As Seen On: ClickZ, Search Engine Land, Marketing Land, Conversion Sciences Blog, Intended Consequences podcast
Education: Texas A&M University, BS Computer Science and Management
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