How to Create a SaaS Marketing Funnel
As a famed venture capitalist, Marc Andreeson said: “software is eating the world.” As a result, Saas or Software as a Service companies play an essential role in solving just about every business or consumer problem these days.
But not every software company is a success. Most of them fail due to any number of reasons, such as a lack of demand for a product. But one thing is for sure, the companies that succeed invest a lot of time and energy into building their marketing funnels.
Creating a successful SaaS marketing funnel does not have to be intimidating. Of course, it will require some extra work, but you will be surprised by the results if you do it the right way.
What is a marketing funnel?
Think of a marketing funnel as the journey someone takes from discovering your business to becoming a customer. So, a marketing funnel consists of a few stages that prospects have to pass through to become clients.
Each stage in the marketing funnel is to push your leads into the next step up. Of course, you will lose a few leads, but you have to understand that not every person needs your services. If you try to appeal to everyone, you will ultimately appeal to no one.
It is ok to lose some unqualified leads, but a good funnel will convert them into customers at a high rate.
Stages of the marketing funnel
You can’t expect your leads to pay for your services if you don’t figure out how to take them through every stage of the funnel. Which begs the question, what are those stages exactly?
There are as many funnel types as there are stars in the Milky Way galaxy, and most of them are good choices for SaaS businesses. But you have to choose the one you consider to be the best for your particular product. Here are two general examples of marketing funnels.
The most popular funnel model is AIDA. It's an acronym for Awareness, Interest, Desire, and Action. Different businesses have used this funnel model over the last century to attract new customers. Some of the methodologies have changed, but the basic principles remained the same:
Nobody will buy from you if they do not know that you exist. So the first thing you have to do if you want someone to purchase from you is to build awareness around your company or services. There are different ways to create awareness, and we’ll cover a few of those below. Just know that you will have to experiment with a few to find out what works best for you.
Once people know that your business exists, they can enter the sales funnel. But that doesn’t mean that all of them will proceed to the next step.
Once the prospects know about your offer, they will evaluate whether it can solve their problems. Educate them about your solution in depth.
At this stage, the prospect is unsure if your product will solve his problem and might be looking for alternatives. So it’s your job to convince them that your offer is the most compelling.
This is the final stage of the AIDA funnel. At this stage, you have fewer prospects in your funnel, but you can be sure that only the most interested ones have remained. Most remaining prospects are ready to become customers if you have done everything correctly during the previous stages. Then, all you have to do is prompt them to buy.
TOFU, MOFU, BOFU model
The AIDA funnel model has proven to work very well for most types of business. But there is another funnel model which is also very practical: the TOFU, MOFU, BOFU funnel. The TOFU, MOFU, BOFU acronyms stand top, middle, and bottom of the funnel.
The roles of each stage of this model are similar to those in the AIDA model but somewhat more compressed. Let’s go through each.
TOFU ( Top of the funnel)
This is the first stage of the funnel and is similar to the Awareness and Interest stages from the AIDA funnel. At this stage, you should create awareness of your company and give your prospects more details about how you can help them solve their problems. At this stage, you should aim to capture their email addresses.
MOFU (Middle of the funnel)
In this funnel stage, your prospects know what your business does but are still looking for different options. It is similar to the Desire stage of the AIDA funnel. To convince them that your services are the best choice for them, you should invite them to attend webinars or send them other types of content that prove your business’s advantages.
BOFU (Bottom of the funnel)
This stage is similar to the Action stage of the AIDA funnel. Some prospects will be interested in paying for your services at this point in the funnel. But others might want a special offer or a free trial. This is the right time to send them emails to convince them to purchase your services in both cases.
A big mistake many businesses make is that they do not keep in contact with their customers after they purchase their services. Therefore, it is vital to send an email to thank your customers for purchasing a subscription.
This shows your customers that you genuinely care about them and don’t just want money. It is also good to periodically send your customers resources about using your services more efficiently.
What tactics and channels to use for each stage
The right strategy should accompany each stage of the funnel. Here are the most valuable tactics and channels to use for each stage:
There are two ways to create awareness of your business. They are inbound marketing and outbound marketing. The inbound marketing strategy makes prospects discover your company by themselves, while in the outbound marketing strategy, you are the one that makes someone discover your company.
SEO is the most common and most accessible form of inbound marketing. SEO stands for Search Engine Optimization. If you optimize your website to contain the right keywords, your website will rank higher in search engines like Google. This way, more prospects will discover your company when they type keywords related to your business in the search bar.
When people visit your website and discover your company, they automatically enter the first stage of the funnel, which is the awareness stage.
There are two main types of SEO: on-page SEO off-page SEO. Here are a few key SEO tactics:
- Select the right keywords
Your website’s content should not only be informative for the reader but should also be optimized to rank higher in search engines. You can do that by including the right keywords in the website’s and blog posts’ content and headings.
To find the right keywords, you should use an SEO tool like Ahrefs or SEMRush that will provide you with information about each keyword’s popularity and difficulty. You could also look at what keywords your competitors use and try to use those.
- Optimize your HTML
Search engines use the keywords included in your website’s HTML elements to rank it in searches. The most important HTML elements are title tags, meta description, alt tags, URL slug, and subheadings.
- Publish consistently
You should post new content frequently because search engines rank recent blog posts higher than older ones in search results.
Optimizing your on-page SEO is not enough to attract a lot of prospects to your website. Therefore, you should also do some off-page SEO.
Off-page SEO refers to all activities implemented outside of your website that can influence ranking in search engines. One of the best ways to improve your off-page SEO is to create backlinks.
Backlinks are links located on other websites but go to your website. Search engines tend to rank websites that have more backlinks higher. Backlinks are divided into natural links and links created through self-promotion.
Natural links are created by bloggers or other people who had a good experience with your company or simply want to write about your company on their blog or other places online without you asking them to do that.
The links created through the self-promotion are similar to natural links, except that you ask certain bloggers to write about your company or you post some guest posts on popular blogs.
Both on-page and off-page SEO has an essential role in creating awareness of your company, and you should not overlook it.
SEO is not enough to attract new prospects. It means you should look for new ways of attracting more prospects.
PPC stands for pay-per-click, and it is a form of outbound marketing. In outbound marketing, you reach out to the prospects and make them aware that your company exists instead of waiting for them to discover you.
But before creating any kind of ad, you have to know who you are advertising to. This is why it is crucial to have the right buyer’s persona for your services.
In simple terms, a buyer’s persona represents your target audience. The best way to find your software’s buyer persona is to take a closer look at its current users. Then, try to respond to the following questions:
- How old are they?
- What do they use my software for?
- Where do they live?
- Are they business owners, or are they consumers?
- Which industries do they work in?
And so on. The answers to those questions are general guidelines for identifying your buyer persona or audience based on your current users. Still, you should experiment with reaching out to different audiences to see what sticks.
One of the most popular types of PPC advertising is Google Ads. Google Ads allows you to advertise your business on the Google results page when users search for specific keywords.
Well, is this not the same as search engine optimization? Not at all. Although SEO will make your page rank higher in search results when someone searches for a specific keyword, it will not rank your website on the first page by default. What Google Ads does, ensures that your website will rank among the first results. But, of course, you have to pay Google when someone clicks on the ad in exchange for this.
Google Ads has a simplified method and an advanced method of creating awareness for your company.
With the simple method, you can create a professional-looking ad in just a few minutes. Here are the steps you have to take to create a great ad effortlessly:
- Create a Google Ads account
- Enter your business’s name, URL, and keywords
- Select your audience’s location
- Write copy for your ad
- Select your budget and billing
For the advanced method of creating Google Ads, you have more options for what type of ads you want to develop and different goals for each type. The process of creating an advanced Google Ad is different for each type of ad, but here are the goals you can choose:- Sales
- Website traffic
- Product or brand consideration
- Brand awareness and reach
- App promotion
- Or create a campaign without a goal’s guidance
After choosing the goal you want for the ad, you must select your ad type. While in the simple method, you can only create ads that appear on the results page, in the advanced method, you have a few other options, which are:
- Search (which appear on the results page)
- Display (which appear on different websites in Google)
- Shopping (which advertise a certain product)
- Video (which appear on YouTube videos)
- Smart (which appear on the results page and different websites in Google)
- Discovery (which appear on YouTube, Gmail, Discover, and more)
After you choose the desired ad type, you have to follow Google's instructions for creating that type of ad.
Finally, Google Ads works particularly well for most B2C SaaS software. But there are other PPC advertising platforms that you should consider to create awareness of your company, like LinkedIn.
Even though LinkedIn is one of the best solutions for B2B SaaS marketing, some companies still hesitate to use it. In addition, LinkedIn ads are more expensive than other alternatives, such as Google Ads.
Despite this, LinkedIn offers some features you can not have on other platforms. For example, you can sort your prospects by industry, company, and job title with LinkedIn.
The best part of this is that you have access to this type of prospect targeting for free. Targeting the right prospects ensures that you will have a successful ad campaign.
LinkedIn Ads has two significant benefits for B2B SaaS companies, which are:
- Easily understand your prospects, including their industry, what companies they work for, and their job titles.
- Your ads are targeted at qualified prospects. Therefore, paying more is not a problem because you reach people who understand your product’s value and afford it.
Although LinkedIn has a wide selection of advertising options, B2B SaaS companies will only need three of them. They are:
- Advertised Content: This is the most general type of LinkedIn Ad. It is a post that you advertise to your audience. That post can be already published to your Company Page or one that is not published.
- Message Ads: Unlike Sponsored Content, which is displayed in New Feeds, Message Ads are shown in your audience’s inboxes. You should use this ad to make your ads look friendly and informal.
- Text Ads: These can appear in the LinkedIn header or the sidebar. This type is recommended for creating brand awareness.
On LinkedIn, you can target your audience in two methods:
Warm traffic: Individuals are aware of your brand but still aren't users. If you have LinkedIn's Insight Tag installed on your site, you can retarget LinkedIn users who have managed to visit high-intent pages on your sites, like your pricing or free trial page.
Cold traffic: Individuals who have never heard of your company. You can target these users based on their company and job title.
Facebook & Instagram
Facebook (FB) and Instagram (IG) are undoubtedly two popular marketing channels today.
What makes FB & IG different from pay-per-click advertising is that you are not charged for the number of clicks your ad gets but on the number of prospects it reaches. So, while setting up your ad, you select your budget per day and the number of days you want your ad to run. After that, you will see your total ad costs and how many accounts it will reach.
Facebook and Instagram allow you to create different audiences and save each one as a template for your ads. However, to have the best results, you should run other ads simultaneously and experiment with different audiences.
Because Facebook owns Instagram, Facebook Ads and Instagram Ads have many similarities. However, Instagram ads tend to work better for younger audiences, while Facebook Ads are better for reaching older audiences. So, understanding your buyer persona’s age gives you a better idea wherever you should choose Facebook Ads or Instagram Ads.
Lead magnets (MOFU)
Contrary to what most people think, SaaS ads aren’t even trying to convince people to buy their product. All they want you to do is enter their funnel. And to make prospects enter the funnel, you need their email address. So how do you obtain them?
If prospects click on your ad, they should either go to a landing page or a page on your website. If you choose to take them to your website, you should have a pop-up landing page there.
On that landing page, you will ask them to give you their email in exchange for a freebie, also called a lead magnet.
But why do you have to give them a freebie? Imagine the following situation: Someone sees your ad, knows that your company exists, goes to a landing page, and is asked to give you their email address. Is that enough for them to provide you with their email address? Probably not. They want something in exchange.
A lead magnet can be anything from ebooks, guides, videos, up to free trials, and discounts, as long as they are free.
To make the landing page more successful, you should offer a lead magnet that is valuable relevant and makes it justifiable for the prospects to give you their email addresses to receive it.
After you have your prospect's email addresses in your CRM, you should get to work nurturing them.
Email nurturing (BOFU)
After prospects give you their email addresses, they will rush to their email inboxes to check whether you truly delivered the goods. So to keep them happy and engaged, you should quickly deliver on whatever promise you have made on your landing page.
Also, do not forget to thank them for signing in for your newsletter and advise them to keep an eye on their inboxes because you will send them more valuable emails in the coming days. This signals to your prospects that you genuinely care about them.
After you send the freebie, it’s finally time for nurturing. The subsequent emails you send should show those prospects how your software works, its advantages, and how it makes their lives easier.
Remember, having those email addresses does not mean that you should spam their inboxes. Most people do not like having their inboxes full of emails from the same company. If that is the case, they unsubscribe from your email, drop out of the funnel, and you lose those prospects.
Instead, you should send an email 24 hours after sending the freebie, another one to two days after the second email, and the fourth one a few days after sending the third one.
After sending those emails, you should send emails weekly or twice a week. That is the optimal frequency most people like to receive emails from companies. This way, they do not feel disturbed by your emails, but they also don’t forget about your company.
But you should not limit those emails to written content only. People love video content, and you should aim to create and send them videos that they might find helpful.
You should also invite them to attend webinars. Webinars are great ways for SaaS companies that offer higher-priced software to show their prospects the importance of their product and create a better relationship with them.
At this point, all that’s left is prompting your subscribers to take action. This could be to try your software for free or use it at a discounted price.
If everything is a success and you make many sales, that still doesn’t mean you shouldn’t keep in touch with those customers and leads anymore. After all, Software as a service is a subscription business, meaning users have to choose to renew their payment every month or year.
So keep sending emails to your customers periodically (not too often either). In those emails, you can ask them about their experience with your software or maybe tell them about a special offer you have on a higher-priced subscription.
KPIs and measuring success
KPI stands for Key Performance Indicator, and it measures a business’s achievements to determine how well it is performing.
Although revenue might be the primary indicator most companies are analyzing, it should not be the only one because it is, in turn, influenced by other sub-indicators.
Understanding other indicators and improving them will ultimately help you increase your revenue. Some of the most commonly used KPIs in the SaaS marketing funnel are:
Customer acquisition cost (CAC)
You expect to have many new customers after you advertise your software, spend money on ads, and have other expenses. The CAC determines how much it costs your company to acquire a new customer and is calculated by dividing the total amount of money spent on a marketing campaign by the number of new customers.
Customer Lifetime Value (CLV)
This performance indicator determines the average amount of money a customer will spend on your software over the whole period of using your software. The simplest way to calculate the CLV is to multiply the annual average revenue per user (ARPU) by the average customer lifespan. If your CAC is more significant than your CLV, your business has a problem, and you have to solve it.
The churn rate helps you determine what percentage of users left your software over a certain period. To calculate the churn rate, you only have to divide the number of customers that left your software during a month/quarter and divide it by the number of users you had at the beginning of that period. After that, multiply the result by 100%.
Monthly recurring revenue (MRR)
This is one of the easiest KPIs to calculate because it equals the total revenue a company has in a month. To determine the annual recurring revenue (ARR), you must multiply the MRR by twelve.
Customer retention rate
This indicator is the opposite of the churn rate. It is calculated by dividing the number of customers you have at the end of the month/quarter/year by the number of customers you have at the beginning of that period and multiplying it by 100%.
The conversion rate determines the efficiency of a funnel. To calculate it, divide the number of new customers by the number of prospects that entered the funnel and multiply it by 100%.
The average revenue per user (ARPU)
This indicator shows how much money a customer spends on your software over a certain period. To determine the monthly ARPU, you have to divide the MRR by the number of users. To determine the annual ARPU, simply multiply the monthly ARPU by twelve.
Landing page conversion rate
This KPI helps you determine how effective your landing pages are. To calculate it, you have to divide the number of email addresses collected by the number of prospects that clicked on your ad and multiply it by 100%. If the number is too low, you should adjust your landing page or offer another lead magnet.
Key Takeaways for Creating a Profitable SaaS Marketing Funnel
No large company started with a super successful marketing funnel. The best way to improve your funnel is to experiment with new tactics and constantly make the necessary adjustments.
So keep monitoring your CAC, landing page conversion rate, conversion rate, and other KPIs to determine how profitable your funnel is and how to increase those numbers tenfold.