Software as a Service, or SaaS as it is more commonly known, has seen amazing growth over the last two decades.
Access to cloud-based services and vast leaps in online technology have seen the global spending on SaaS increase by 10% year on year. The sector itself was worth some $117 billion in 2021 and that is only set to increase dramatically over the next few years.
It’s no wonder that SaaS is often a big focus for entrepreneurs, startups and established companies, not just for its convenience but the way it can help automate and streamline several processes including that all-important sales funnel and marketing strategy
Here we look at how to optimize your SaaS sales funnel, audit effectively and ensure you are always at the cutting edge of delivery for your customers around the world.
What is a SaaS Sales Funnel?
The sales funnel is a fairly simple concept when it comes to marketing, wide at one end and narrowing at the other. At the wide end, you have potential customers and practically everyone else with a problem that needs to be solved. At the narrow end, you have a lot fewer people and they should, if you have done your job properly, be the ones who are more interested in your product and are ready to buy.
The messaging that you put out at each stage of the sales funnel, however simple or complex it is, will be critical. On the wider end, you may be sending more generic information to your potential customer. By the time you reach the narrow part of the funnel, your message is likely to be highly specific, more technical in some cases and, just as importantly, tailored to that individual customer’s wants and needs.
Getting it right and maximizing conversions depends on several key factors:
- Who your customer is.
- What they are trying to achieve.
- How you can help (aka are you the right fit for their problem?).
- Where the customer is on the sales funnel.
The SaaS sales funnel is a software solution that is accessed through the cloud and gives businesses a lot more flexibility in how they approach their marketing activity. It provides a more nuanced solution to developing potent and impactful sales messages that can be fully integrated, monitored and measured for effect.
If need be, businesses can run integrated and often complicated sales funnel or conversion strategies and juggle several different balls at once while still retaining tight control of their processes.
Understanding the World from Your Customer’s POV
Critical to the successful implementation of a SaaS sales funnel is understanding your prospect (who they are and what they need) and using this knowledge to tailor messages that hopefully move them towards converting into a paying customer.
You may have a product that targets a very narrow demographic (for example, one that is aimed at expectant mothers or teenagers preparing to go to university) or something much wider (for example, a mobile phone or new diet/healthy eating app that appeals to a wide range of people). Each demographic will have a different POV and you must drill down as much as possible to uncover the selling points that will have the most effect, creating strong buying personas along the way.
What Your Sales Funnel Looks Like
Each business will have a different sales funnel and a lot will depend on the product and the type of customer they are trying to connect with. The huge benefit of an integrated SaaS sales funnel is that it allows you to spot the gaps where prospects are dropping out and subsequently alter your approach to reduce this while increasing conversions.
A Sales Funnel Should Not Be Set in Stone
The SaaS sales funnel should be seen as a live process. It is not set in stone and is not expected to deliver results for time immemorial without any significant changes. As you collect data and audit your processes, you will be constantly tweaking and adding to your process based on clear analysis and testing.
A Sales Funnel Audit is Essential
Part of the bedrock of a successful sales campaign is the feedback you get on how it is working and where the gaps are in your approach. To do this, you need to carry out regular and focused audits on the functioning of your SaaS sales funnel.
A sales audit gives you real-time feedback on how things are going and allows you the opportunity to make impactful changes, however small or large. To do this in the most efficient and meaningful way, your auditing needs the following qualities:
- Specificity: Audits often fail when they cast too wide a net. You end up with so much statistics and information that it becomes difficult to understand what needs to be implemented within your marketing strategy. Focusing your audit on one particular issue or metric helps you target the parameters that matter and make changes which are more meaningful and impactful.
- Relevance: You also need to target the metrics that are relevant to your business product or service and your customers. Bounce rate may be easy to understand but you need to translate that into a measurable action that is going to be transformative. On the other hand, if your churn rate is outpacing your acquisition rate then you know you have a serious problem that needs to be solved.
- Speed: The final attribute is the speed with which you carry out your audit. It needs to be done quickly and should be easily repeatable. Focusing on one specific area of your sales funnel performance generally makes this much easier.
What Metrics Inform Your SaaS Sales Funnel?
In the old days of the traditional sales funnel, we had just a few metrics to worry about. The digital age has transformed marketing in many different ways, not least by providing us with tons more data. Picking the appropriate metrics to monitor and audit is an essential part of the SaaS sales funnel and you need to know your stuff if you want to get it right.
Here are just a few of the most important SaaS sales funnel metrics:
1. Monthly Recurring Revenue
MRR is a strong metric for subscription businesses and will be used by big players like Amazon Prime. They’ll look at revenue being brought in by regular subscription payments, adding in new customers and conversions that come from cross-selling on the platform. They’ll also look at churn MRR, the loss of revenue when a customer either cancels their subscription or downgrades it.
2. Customer Lifetime Revenue
CLV looks at the average amount of revenue that you get from one individual customer. This is an important metric as it can determine how much effort you put into marketing to them in the first place, the money you spend on reducing churn and which cross-sells and upsells are likely to work most effectively.
On top of this, you also have another metric, the Customer Acquisition Cost or CAC, which reveals how much you spend on average through your marketing to turn someone from a prospect into a paying customer.
3. Sales Funnel Conversion Rates
Conversion rates within the sales funnel are generally seen as a major KPI for businesses and accurate measurement and understanding of what is going on are critical. Each stage of the funnel will have a different sales approach and measurement is particularly valuable when you introduce a new campaign.
For example, you may have developed a landing page that you hope is going to convert a certain demographic to buy your product. The focus of your audit is going to be how many people view this page, click on the link and buy the product. Testing different approaches (for instance, moving the buy or ‘find out more’ button or link to a more visible part of the page) can help you fine-tune your campaign and boost conversions.
4. Churn Rates
If your churn rate (the speed with which customers drop out of the sales funnel or stop buying your products or services) exceeds your acquisition rate, then you have a problem. In short, you are moving your business into a negative revenue terratory.
Churn rates can vary between different industries and sectors so much will depend on the type of business your run and the products or services you sell.
5. Net Promoter Score
NPS is how likely a customer is to recommend you to their colleagues, friends and families. This is one audit measurement that requires you to contact the customer directly and ask for feedback through a single-question survey (how likely are you to recommend…scaled between 1 and 10, for example).
While more time-consuming, it does give you a clear insight into how many people love your product, those that are neutral and those that are not impressed.
Carrying Out an Audit and Finding Opportunities
It’s one thing to carry out regular audits for your SaaS sales funnel but you must have a process that leads to direct and affirmative action depending on the results. Ideally, you want your audit to form the basis for building more conversions, retaining customers and reaching new ones so that you have an increased revenue flow.
1. Asking the Right Questions
A strong audit that reveals what you need to do next starts with asking the right questions:
- Which pages are working effectively and why?
- What pages have the highest bounce rate and how can you improve this?
- How are these pages most directly related to conversion performance?
- What questions are potential customers asking and are they being answered fully by your business?
One of the key factors is how you optimize pages that are likely to have a real-time impact on your conversion rates. If you’re selling software, this could be your demo page where potential customers sign up for a free trial. It could also relate to your contact page if potential customers have any queries or require a tailored solution, your sign-up and pricing pages, as well as onboarding elements.
While other parts of your sales funnel are important, it’s critical to get these components fully optimized and make them meaningful for your customer. That starts with asking the right questions and finding the answers.
2. Get Your Messaging Right
You need to look at your overall messaging and how you use it in specific areas of the sales funnel. If you have a large team, it’s worth getting them to describe what they think your product is all about to a stranger and seeing how these accounts match up with the version you want to present. Another approach is to contact existing customers and prospects directly and ask them specifically about how they view your product and your sales approach.
- Is your messaging clear and concise?
- Are you confusing customers with too much information?
- What are your USPs and how do these impact different demographics?
- What can you add to make things easier for customers to buy?
One of the key factors in successful customer capture is understanding your demographics and having marketing strategies and messaging that are aimed at them specifically, whatever stage of the funnel they are in.
It can be difficult to get all the information you need from data that is supplied through analytics for your site. A more comprehensive way to improve conversions and optimize that sales funnel is to ask your customers directly.
3. The Value of Surveys
The best way to do this is through targeted surveys. Customers are often willing to help businesses they like to provide better services.
Surveys can be short and to the point or a little more complicated but their main intention is to deliver usable information concerning your website, product and areas like your sign-up and onboarding processes. For example, you may want to investigate ways of streamlining your sign-up page, making it more likely that customers to press the buy button.
In short, surveys allow you to get a fresh perspective directly from your most important asset – the customer – and the information you gather can be critical to your conversion process.
4. Filling in the Blanks
If you carry out an audit effectively, it should highlight places where you are not providing your customer with exactly the right information at a specific time. This should help you add to your sales presentation and make your approach more meaningful for the customer. Examples include:
- Is your approach (and your product) helping to fully solve the customer's problem? Is there more you can do?
- Does your product integrate well with other systems or products on the market? Can you offer tailored solutions?
- Is your help and support team responsive and proficient? Can they answer all the questions prospects may have?
5. Finding Tailored Solutions
The more you move down the sales funnel, the more you need to tailor your sales approach and the better you can do this the more successful your conversions should be. The right messaging for individual X, Y or Z becomes increasingly important at this time and makes a huge difference.
That’s why it’s mission-critical for any business not to take their buying personas for granted. They may have been developed at the start of things and you might think they are set in stone. This is not true.
They will change over time, they’ll be added to and refined to create a fuller picture of the ‘ideal’ customer, what they are looking for deep down, and how they are likely to engage with your product and why. Buying personas should be expanded as more information comes in to include a host of individuals who will have their wants and needs.
6. Implementing Changes
This may be something as simple as reorganizing your main sales page or making your software demo more attractive (for example, increasing the length of the free period or opening up more features). It can be more complicated such as segregating your customers into more groups and developing different marketing messages for them.
7. Measuring Results
Of course, you need to have a way of meaningfully measuring the results that you get. It’s worth bearing in mind that changes can also take time to become effective. It may be several months before you see results that you confidently assess as having worked and which have increased conversions or made your sales funnel operate more seamlessly.
Audit, Implement, Test, Repeat: The Mantra of a Successful Sales Funnel
Finally, as we’ve said, the process of fine-tuning your sales funnel is an ongoing, live process. That doesn’t mean you should be tweaking it every day and finding new parameters to change in the hope of boosting conversions or retaining more customers.
It’s important to be strategic and that’s what the SaaS sales funnel helps provide you with compared to the more simplified and traditional sales funnel that we have come to know over the years.
Get it right and it can revolutionize the way you acquire customers, how you retain them and how you use vital business metrics to deliver on your goals. It will also give you high confidence that your sales processes are optimized and fit for purpose as you move into the future.