Tips & Tricks

The SaaS Sales Funnel: Everything you need to know about building a well-oiled sales machine for your SaaS

Sendspark, #1 video platform for business
December 20 2021

Get ready to get SaaS-y about sales funnels 🤣🤣🤣! 

In this blog, we’ll explain just what a SaaS sales funnel can do that no other sales and marketing approach can come close to. 

Then, we’ll give you the lowdown on how you can build a SaaS sales funnel that converts like a beast — and finish up with ten pro tips that most people out there don’t know about!

Sounds good? Then let’s go!

Why are sales funnels so important for SaaS?

Sales can be hard, labor-intensive work. As subscription products, SaaS apps only realize revenue slowly over time. That means it’s very hard to support a high up-front cost sales operation. 

Plus, SaaS businesses tend to focus on growth as their main driver of revenue and profitability. The more expensive it is to acquire new users, the harder it is to grow. 

These twin issues allude to two important metrics that we’ll consider later: Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC). Successful, rapid growth in SaaS depends on optimizing the ratio between these metrics — and SaaS sales funnels have proven time and again to be the most efficient way of achieving that. 

But let’s not get ahead of ourselves. A SaaS sales funnel is essential because:

  • SaaS businesses need to grow fast, and a sales funnel is virtually infinitely scalable with no extra cost because it’s largely automated
  • A SaaS sales funnel doesn’t leave itself open to human error: it delivers the same experience, consistently
  • When 96% of visitors to your website won’t be ready to buy when they land and 62% of customers need to hear your pitch between 3 and 5 times before they trust it, nurturing leads over time is essential — and a sales funnel is designed to keep cold leads in play until they warm up
  • Sales funnels keep your eyes on the result. They stop you from getting distracted by vanity metrics (traffic, email open rate, etc) and force you to pay attention to what matters: conversions

Your SaaS sales funnel should reflect product maturity

The way you configure your sales funnel should vary based on the maturity of your SaaS product. 

Most markets are commonly broken down into these five segments:

Diffusion of Innovation chart

Source: Everett M Rogers, “Diffusion of Innovations”

  • Innovators: When your product is brand new, your first audience will be Innovators (2.5% of the market). These guys love new things for their own sake and don’t tend to mind a few glitches. Innovators are great for getting feedback, but their numbers and love of novelty mean you’ll eventually have to reach out further.
  • Early Adopters: Early Adopters (13.5%) are looking for innovations, but they expect a product to work well. Keeping them happy needs a reliable product and good support
  • Early Majority: This 34% segment wants a proven product — they are not risk-takers. Only by building strong bonds with Innovators and Early Adopters can you give the Early Majority confidence, but once they’re on board, their risk aversion will make them loyal customers. They form 34% of the market, but the Early Majority are looking for proven solutions. They’re risk-averse, but you can play that to your advantage - once they’re on board, they’re not keen to look for alternatives
  • Late Majority: Another 34% segment, who are even more risk-averse, more cautious, and less tolerant of anything going wrong. 
  • Laggards: They don’t want to change unless there’s no other choice. These folk (16%) will always be a challenge!

The stages in your funnel, the content you use, and the messaging you’ll need to develop all depends on the mix of these segments in your audience. 

How many stages should be in a SaaS sales funnel?

Well, that depends…you should have “as many as you need”…😐

OK, that’s not particularly helpful, but it is true!

There’s no one-size-fits-all approach for building a SaaS sales funnel that will work for every business. Selling a video recording and messaging tool for Sendspark is a different exercise from selling a CRM solution with SalesForce - but they’re both SaaS. 

The classic “AIDA” funnel has four stages: Attention, Interest, Desire, and Action. 

AIDA Model Chart

Source: Freshworks.com

Various alternative versions break one or more of these down into - for example, splitting “Interest” into two sub-stages, one for “Interest” itself and one for “Evaluation”. Some versions add “Advocacy” at the end, as customers are turned into referrers. 

What the AIDA model has in its favor is that it’s a very clear account of the mental states potential customers need to progress through to become customers:

  • Awareness - They need to know you exist!
  • Interest - They need to become interested in your service
  • Desire - They need to want your service
  • Action - Then they need to buy it!

What this means for your product depends on who your audience is. That’s why you need to build out customer personas based on the data you have about the characteristics of your current users and the data you collect from their interactions with your website and your app. 

If your data shows that your audience is very price sensitive and that you’re in a very competitive market, you might want to elaborate on an “Evaluation” stage to make sure you’re providing the right info to prospective buyers at the right time. 

If you offer a free trial but your product has a steep learning curve, you may decide that a simple sign-up doesn’t count as a purchase. Perhaps only when users have activated (ie used the tool and realized the value it offers) do you consider the “Action” stage complete - and so onboarding activities would feature in your funnel, alongside marketing and sales. 

Sales Funnel Chart

Source: Dewzilla.com

So rather than specify a particular model, we’ll keep it super simple and talk about the top, middle, and bottom of the funnel you decide to build. 

Top of funnel

The top of the funnel (TOFU) is marketing and lead generation. You’re aiming to attract people who might have an interest in a problem that your service solves.

So the channels to use are organic search/SEO, organic social media, paid search and social media advertising, email marketing, attending trade shows, etc. 

Top of Funnel Video Email Example

Using video in email as TOFU content

The best content types for TOFU are:

  • How-to guides
  • Explainer videos
  • Blog posts
  • Downloadable Lead Magnets

Make sure your marketing automation is tracking users who visit this content, so that you can keep tailoring what they see and build out your personas even more. 

The transition from TOFU to the middle of the funnel (you guessed it...MOFU🤣) comes when the visitor engages back with you - usually by handing over contact details and permission to use them. 

These transition points are critical to a successful SaaS sales funnel, and you should pay very close attention to the rates of leads making it over each threshold. 

Middle of funnel

Of course, getting a lead’s contact details won’t always signify the transition from TOFU to MOFU. 

The middle of the funnel is when a potential user is actively exploring and evaluating different solutions — it may take many visits to your site and many emails from your drip campaign to create that intent. 

MOFU content will usually be on your website or some other owned media. Content types that work well at this stage include:

  • Presentations
  • Video demos
  • Case studies
  • Product comparisons and specifications 
  • Webinars
  • White papers

The Video Sales Letters we wrote about in this earlier blog are a classic example of MOFU content. They’re all about showing why your solution is the right one for the viewer, helping them to compare the market and shortlist the options. 

Bottom of funnel

Can you guess what BOFU means…? 🤨 

Right. 

This is where you convert interest into action, by addressing final qualms, answering outstanding questions, minimizing the sense of risk that opting for your solution involves, and maximizing the promised return. 

In traditional sales, you’d be doing a lot of this face-to-face, but what’s so great about a SaaS sales funnel is that you can automate most if not all of it through workflows built into your website. 

You’ll want:

  • Pricing and comparison tables
  • User testimonials - especially video testimonials
  • Reviews
  • Compelling conversion landing pages
  • A fast, simple sign-up workflow
  • Primary onboarding materials for new users

We’ve used the simplest TOFU/MOFU/BOFU funnel format in our explanation here because we want to be clear: the shape of your SaaS sales funnel should be determined by the data you collect from leads and users and what they do in practice, not by a preconceived notion of the “best” structure. 

What should you be measuring to improve your sales funnel?

And that brings us on to the best metrics to use for building and optimizing your SaaS sales funnel. 

Vanity metrics will lead you in the wrong direction. If you want to build a scalable, optimized sales funnel, these are the high-level KPIs you need to track:

  • Customer Acquisition Cost (CAC) — Your average sales and marketing spend per new user. This tells you how efficient your funnel is. 
  • Customer Lifetime Value (CLV) — What the average customer spends over their time with you. The longer they stay as a paying customer, the higher CLV is. If you’re churning new users very early, it will affect your CLV — so look at who you’re signing-up and how you’re onboarding them
  • CLV/CAC Ratio: If this is less than 1, you’re losing money acquiring new customers in the way you’re doing it - so rethink fast!
  • Monthly Recurring Revenue (MRR) - For most SaaS companies, this is one of the most important metrics. Increasing MRR shows that your business is growing. 

But beyond the top-level numbers, the trick to making a sales funnel work is optimizing each touchpoint right down at the micro-level. And that’s what we’ll look at in this final section. 

10 killer hacks for a high-converting SaaS sales funnel 

  • Design your sales funnel around the hero content you’ll be offering: depending on whether this is a downloadable lead magnet, a webinar, a demo, a survey, etc, the other content and materials will need to revolve around that. 
  • As leads progress down the funnel, their needs change. Your personas need to take account of their growing awareness of their problems, the possible solutions, and the new information they take on board. Be aware of this and plan for it. 
  • Want a shortcut to designing your funnel? See what your competitors are doing: visit their websites and go through their sales funnels, up to the point of buying from them. You’ll get a sense of what they do well (to emulate) and where there are gaps (which you can fill). 
  • When you’ve converted someone, always push your advantage! An upsell offer on the “thank you” page for completing the initial sign-up flow will catch a lot of people when they’re in a buying mood. Conversely, don’t just take no for an answer. If somebody abandons their cart mid-process, follow up with a downsell - a cheaper offer that may appeal. 

Optimize your funnel

Source: Spotify.com

 

  • Keep nurturing your leads. The biggest mistake salespeople make is giving up too soon - and what’s great about an automated funnel is, you won’t be tempted to do that. As we already pointed out, people need multiple touchpoints to build trust. And even if they do like your solution, it may not be the right time for them to buy. So keep on sending them updates to make sure you’re front of mind when they are!

Video Emails Drive Funnel Conversions

Video in email drip campaigns is a great way to make your messaging stand out

  • You’ll get more people to the bottom of your funnel if you plug all potential leaks! When users are looking at your funnel content (emails, landing pages, etc) remove all navigation options that don’t take them to the next stage. A homepage link on a sales form is an invitation for users to become distracted and drift away. 
  • Use stories in your content. People are emotional and they like to empathize with other people’s situations. Create an emotional appeal by stressing how people will feel when they’ve solved the problem your app addresses. Study the wording your competitors and your audience use and mirror that language in your content. 
  • Use exit-intent pop-ups with a final offer to lure people who are navigating away from your funnel back!
  • The key to successful sales funnels is continuous optimization. So A/B test every touchpoint, see which version of your content converts better, and keep on tightening up the ratchet. 
  • Use video content wherever you can! Video beats text for conveying emotion, for storytelling, and for creating that sense of individual attention that a lot of sales funnels lack. A tool like Sendspark can help you build:
  1. Demos
  2. Presentations
  3. Client Testimonials - with our Request Video feature
  4. Video Sales Letters
  5. Email nurturing campaign content
  6. Social ads
  7. And much more

Conclusion

So there you have it! Everything you need to know about SaaS sales funnels 😉.

If you need even more on creating a SaaS sales funnel that harnesses the awesome power of video in messaging, then check out our recent blog on creating a video email that converts like crazy. 

It dives deep into why you need to use video emails as part of your sales funnel and how you can make sure they provide maximum impact. 

Sendspark makes it quick and easy to create videos that you can send via email, share on social, or embed on your website - and to analyze their performance. Sign up now if you want to start recording and sharing videos for free. 

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