Every SaaS (Software as a Service) company needs a set of conversion funnels that track how many people convert into users or customers. Companies can also use conversion funnels to track important actions such as filling out a form or using a feature.
In this post, we’ll run through an acquisition funnel. We’ll see how it performs at each step and identify the bottlenecks that are impeding growth. Then, we’ll run through a process for tackling the bottlenecks and learn methods to improve them.
Let’s begin by looking at a basic SaaS acquisition funnel.
SaaS Acquisition Funnel
Most SaaS companies need a high level, bird’s eye view of how their website performs at converting visitors to customers. This is known as an acquisition funnel, and in many cases, it would look something like this:
1. Visited Site
The top of the funnel; this is the number of people who come to your site.
2. Trial Signup (Trial of Freemium Signup)
Most SaaS companies offer some kind of free trial. After a person visits your site, this would traditionally be the next step in the funnel.
3. Used Product
Getting people to sign up for a trial is great, but not all of them will actually begin using your product. You’ll want to track the ones who do and the ones who do not in this step.
What every company needs – paying customers. This is the last step of the acquisition funnel; it triggers when a customer pays.
In KISSmetrics, the funnel may look something like this:
The KISSmetrics funnel report shows the number of people in each step. It doesn’t matter if one person makes 10 separate visits to your site, they are counted only once. It also doesn’t matter what WEBPAGE they landed on when they visit your site. This allows you to get the actual conversion rate.
Analyzing a Funnel
1. Find the Bottleneck
The first task in conducting a funnel analysis is to identify the bottleneck. In other words, identify the one step that doesn’t convert well.
Here’s what I’ve found in the example funnel above:
- The top of our funnel has a good sample size. We’d have to look at historical traffic to know whether or not this is a healthy level of traffic. But, for now, let’s assume it is. We’ll continue down the funnel to see if it’s our main issue.
- Our website does a good job of converting people into trials. The conversion from Visited Site to Signed Up is solid. Most SaaS companies have a 1-10% conversion rate to free trials, so our 15% rate is definitely healthy. There’s always room for improvement, but it’s not our main bottleneck at the moment.
- A good number of people who sign up actually start using the product. We could focus on this at some point down the road, but it isn’t our main hurdle in getting people to convert to paying.
- Billed is the step that is our main bottleneck. Of the people who used the product in the Used Product step, only 7.8% actually converted to paying for it. This is a clear barrier to growth, and our focus now should be on understanding why users don’t want to pay for our product.
2. Learn Why There Is a Bottleneck
We’ve learned where the bottleneck is. Now, we need to learn why there’s a bottleneck. More specifically, we need to find out why our free trial users don’t convert to paying customers.
The best tactic for improving conversions is to talk to the people who did and did not convert. We want to discover the different experiences of each group, and we can consider the following questions to help us do that:
Is a particular feature hard to find?
Did the users who did convert have any particular attributes or come from a particular source?
Are the people paying for our product the same people we’re trying to sell to?
Listen to what both groups have to say, and you’ll begin to understand the differences.
But, before we can talk to the people in either group, we’ll need to know who they are. Luckily, the KISSmetrics funnel report tells us each person who did or did not convert. You can view this for any step of any funnel report you create.
To find your non-converted users, just hover over the conversion step and choose to view the people not in this step. In our case, we’ll hover over the Billed step.
We click on that and get a list of people who made it to Used Product but decided not to pay. Here they are:
Since they signed up, KISSmetrics has identified these people and assigned them the email address they used.
Given that they didn’t convert to paying customers, we can email them asking for feedback on where we missed the mark. Once we get this feedback, we know what to focus on improving.
Now, let’s look at a more detailed funnel that can help you find bottlenecks within a specific area of your site.
Segmenting by Property to Further Analyze Your Funnel
Properties tell us various characteristics about each person. Their best use case is segmenting people into groups. And with the KISSmetrics funnel report, you can segment people by any property.
For our example funnel report, we’ll segment people by campaign name. This property is triggered through a UTM parameter. So, a person might visit your website by clicking on a link like this:
Their campaign name property will be “awesomePDF.” We know this because utm_campaign signals the campaign name, and =awesomePDF defines the campaign name property.
We’ll be viewing the people whose first campaign name triggered during our selected date range. This will show us how well each campaign performed at bringing us traffic and customers during our specified date range.
Here, we are segmenting by the campaign name property on our funnel report:
All our traffic this month came from five separate sources.
The five traffic sources:
- None — This includes people who have no campaign value assigned to them, or their campaign name was out of our date range.
- Facebook_ads — These are people who came to us via a paid Facebook ad.
- Webinar_howtogetleads — The name of a webinar we’ve done recently. Triggers when someone clicks on the link to attend the webinar.
- Blog_banner_ad — The blog has a banner ad that links back to the homepage. Those who visit the blog and click that banner ad are tied to this campaign name.
- Marketing_PDFs — Our PDF guides have links at the bottom footer of every page that link back to the homepage with this campaign name.
By looking at each of these campaigns, we can see how well each of them performed throughout every step of the funnel. Let’s break down each campaign:
The None category is an average-to-below-average performer for us. The None category can be considered a benchmark. It’s the conversion rate for everyone else, so your campaigns can be compared against it. It’s not necessarily good or bad, but it helps you judge what’s good and bad.
The Facebook ads campaign is tough to judge at the moment. Since our overall funnel isn’t performing well, it’s hard to determine the effectiveness of our Facebook ads. For now, we’ll have to turn off Facebook ads until we get our funnel fixed and are acquiring more customers. Once that happens, we can try paid acquisition again.
This particular webinar (“Webinar_howtogetleads” listed above) performed well for us. We might want to try promoting our webinars more heavily to see if they help convey the value of the product better and increase the conversion from engaged user to paying customer.
The blog banner ad converts the best through nearly every step of the funnel. Chalk up another point for our inbound marketing efforts, which so far outperforms our Facebook paid advertising.
Our PDFs bring nearly 300 people to our site and do remarkably well at getting people to sign up for the free trial. The momentum continues in getting people to use the product and eventually pay for it. Once again, inbound marketing produces customers. We’ll have to produce more of these and find ways to get them better distribution.
Zoom in on Your Acquisition Funnel
Our example funnel gave us a bird’s eye view of our acquisition funnel. If we want to understand each step of our acquisition funnel in detail, we’ll have to set up a more detailed micro funnel.
Many SaaS companies would find it useful to track how people convert through their signup flow. Here’s an example signup flow:
- Viewed Sign Up page — This step is triggered when a person views our Sign Up page.
- Entered Business Type — After they sign up, they are prompted to enter their business type.
- Entered Phone Number — Once they enter the business type, they are prompted to enter their phone number.
- Entered password — Users create their password after entering their phone number.
- Entered Website Information — Users enter their URL.
- Entered Guided Tour — After all these steps, they enter a guided tour of the product.
For this example, there is no option to skip any of these steps. Users have to enter their business type, phone number, password, and website information before they can move to the next step. It’s important to note that each step doesn’t mean they are going to new pages. They’re simply going through form fields.
Here’s how the funnel looks:
Since it’s long and detailed funnel we had to break into two screens.
We can see that each step brings the vast majority of people to the succeeding step in the funnel. The area where the most people drop off is the Enter Phone Number page.
Now, we apply the same process we did to our acquisition funnel. The only challenge this time is that we do not have the contact information for the people who did not convert.
Our best option is to use a Qualaroo survey on the Enter Phone Number page, setting it to appear after 10 seconds. It will ask the user if they have any hesitations, and if so, what those hesitations are. It’s an open question.
We’ll learn the differences between those who did and did not convert, find the pain points, and iterate. We may find that the people who didn’t enter their phone number were not in our target market. The only way to learn this is to gather the data.
Use Funnels to See How Healthy Your Acquisition Is
The KISSmetrics funnel report is the tool for understanding how healthy your acquisition is. It can help you identify roadblocks to growth by showing you where most visitors drop off.
With segmenting, you can learn which channels are the most and least effective at driving your growth.
By setting up smaller, micro funnels, you’ll be able to understand each step of your acquisition process. You’ll see which areas need improvement, as well as which areas are succeeding. In turn, getting more focused on improving these micro funnels will have a positive impact on your acquisition funnel, and thus your growth.
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