Conversion Rates for SaaS Companies
A conversion rate is a critical metric for gauging the performance of your efforts as a SaaS marketer. This metric measures the number of prospects who convert—or complete a desired action—across a multitude of different marketing channels, including the website, ads, email, and more.
This desired action could be signing up for an email newsletter, downloading a piece of content, requesting a demo, opting in to a free trial, or buying or renewing a subscription to a product. The conversion rate formula is:
(number of conversions / total number of prospects in the audience) × 100%
Marketing teams need to track many conversion goals. In order to track the effectiveness of your overall marketing program, you should measure the conversion rate of each marketing call to action (CTA), asset, channel, and audience segment. By measuring each of these conversion rates, your marketing team will have reliable data to better iterate and optimize marketing programs and campaigns to achieve your goals and drive revenue.
To help you optimize your conversion rate, we’ll show you numerous SaaS conversion rate benchmarks that you can use as a starting point for your work.
Average Conversion Rates for SaaS Businesses
There are two main categories of SaaS business models: low-touch and high-touch. Low-touch businesses focus on getting visitors to sign up for free trials and subscriptions through their website, whereas high-touch ones focus more on enterprise-level demo requests and direct sales. Because the sales process differs for each of these business models, they each focus on different conversion goals.
Low-touch business models
Here are some examples of conversions in low-touch business models: free trials with no credit card requirements, free trials with credit card requirements, and “freemiums” to paid subscriptions.
- Free trials with no credit card requirements: 8–10% (SmartKarrot)
- Free trials with credit card registration requirements: 25% (SmartKarrot)
- Freemiums: 1–10% (TechCrunch)
High-touch business models
For high-touch business models, here’s a breakdown of conversion rate benchmarks showing funnel metrics for each stage of the B2B inbound and outbound marketing funnels.
Inbound marketing funnel:
- Nurturing new contacts and subscribers to become marketing qualified leads (MQLs): 5%
- Scheduling a meeting with an MQL: 20%
- Converting MQLs to sales accepted leads (SALs): 43.75%
- Converting SALs to sales qualified leads (SQLs): 63.33%
- Converting SQLs to opportunities and assigning revenue amount: 43.33%
- Converting opportunities to wins and receiving revenue: 31.25%
From top to bottom, new contact to win, the average funnel conversion rate is 0.05%.
Outbound marketing funnel:
- Performing targeted outreach to prospects to drive meetings: 15%
- Converting to SALs: 42.5%
- Converting SALs to SQLs: 55%
- Converting SQLs to opportunities and assigning opportunity amount: 50%
- Converting opportunities to wins and receiving revenue: 37.5%
From top to bottom, targeted lead to customer, the average conversion rate benchmark is 0.03%.
5 Additional Metrics to Consider
Although driving conversions and revenue is a marketer’s ultimate goal, there are other important metrics to consider along the way. Here are 5 additional metrics that should be in the forefront of every SaaS marketer’s mind:
- Revenue churn: This metric measures monthly or annual revenue losses from customer churn as a percentage of overall revenue. Customer churn – the monthly number of lost customers as a percentage of overall customer count – is also an important metric to track. A high churn rate may signify that you need to invest more in customer retention and product adoption programs.
- Time to value: This is a critical moment in the user journey when a user realizes the value in your SaaS product. Knowing when that moment is can help a SaaS company optimize the user journey so that customers reach it more quickly. The quicker that a customer discovers the value of your SaaS product, the more likely you are to retain the customer and avoid churn.
- Monthly recurring revenue (MRR) and annual recurring revenue (ARR): These metrics indicate the amount of monthly or annual revenue a SaaS company generates. It is beneficial for your marketing team to be aware of your current MRR and ARR and how you contribute to these values.
- Customer acquisition cost: This metric measures the amount it costs to attract and acquire a new customer. To calculate customer acquisition cost, add up the total monthly sales and marketing cost as well as any other relevant costs like salaries and overhead, and divide the result by the number of customer acquisitions.
- Customer lifetime value: Customer lifetime value measures the total revenue a customer account generates over its lifetime. Customer lifetime value increases proportionately to customer account lifetime.
Factors That Can Limit SaaS Conversion Rates
Whether you’re trying to increase free trials or demo requests, improving your conversion rate begins with your website. There are various factors on your website that can impede your conversions, no matter which SaaS model your business falls under. Here are some things to think about to ensure your website is optimized for conversions.
- Poor communication of value proposition. Even if your SaaS product has a strong value proposition, communicating it poorly will lower conversion. Most importantly, you want to convey how, exactly, your product will help make the prospect money or will help make their lives easier.
- Unclear messaging. If the messaging of your marketing materials is unclear, prospects won’t understand how your SaaS solution can solve their problems or is superior to competitors’ solutions they may currently be using. If you think your messaging is falling flat, then it’s time to dive back into user research and make sure you really understand your audience and their pain points.
- Low SEO ranking. If you’re not optimizing your web pages for high performance in Google’s search-ranking systems, the search visibility of those web pages will be low. Using relevant keywords in title tags, in headings, and throughout landing page content will help to increase search visibility and conversion as a result.
- Poor web content layout. Certain web page layouts can pull prospects’ attention away from where you want it and dilute the focus of your messaging. Consider how you want a visitor’s eyes to travel along your web page and make sure your main messaging and CTA stand out from the rest of the page.
- No sense of urgency. If there’s no sense of urgency in your headlines or CTAs, such as making the prospect feel like they’re losing money or time by not using your product, then they won’t feel compelled to convert now. Instead, they’ll tell themselves they can just come back later.
Conversion Rate Optimization for SaaS Companies
Now that you understand the importance of your website in your overall conversion goals, it’s time to begin optimizing it. Here are some conversion rate optimization (CRO) tips for SaaS marketers.
Conversion Rate Optimization Tactics
The first step in any CRO program is to measure your current conversion rate, or your baseline rate. Then, you can set your goal conversion rate and start working on strategies and corresponding tactics to get you there.
Some common CRO tactics include displaying customer testimonials on web pages to provide proof and create a sense of FOMO, adding chatbots to your website to encourage your prospect to engage now, and testing a slew of above-the-fold headlines and CTAs to capture your prospect’s attention immediately.
Leveraging Machine Learning for SaaS Conversion Rate Optimization
The best way to ensure you’re maximizing your SaaS conversion rate is by testing many of these types of CRO tactics at once to see what resonates and what doesn’t with your audience – and therefore what’s improving your conversion rate and what’s not. At the same time, it’s critical that you provide each visitor to your website with a personalized experience that’s relevant to their firmographic data like their job title, job level, or their company’s industry, as well as to previous behaviors they’ve taken on your website or with your brand on other channels.
Intellimize’s Continuous Conversion™ solution embraces these priorities and makes SaaS conversion rate optimization easy. It uses machine learning to automatically test a virtually unlimited number of your ideas at once and find which combination of ideas on each page is best to show each visitor and therefore help you maximize your chances of converting each visitor.
With Intellimize, SaaS companies like Okta have driven 1,500 more website leads and a 10% lift in free trial conversions in just 90 days, while Snowflake has driven a 60% increase in landing page conversions.
Request your demo today and see how we can dramatically help you improve your website conversion rate too.
