Guide to SaaS Conversion Rates & How to Improve Them

SaaS conversion rate

In the fast-paced world of SaaS companies, success hinges on a simple but powerful metric: conversion rates. It’s all about turning website visitors into paying customers, and that’s where saas conversion rates and conversion rate optimization (CRO) come into play. Picture this: every click, every scroll, and every action taken on your website holds the potential to boost your profitability. But here’s the kicker – not all visitors convert. That’s where CRO steps in, unleashing the secret sauce that unlocks your true growth potential.

In this blog post, we’re diving headfirst into the world of conversion rates and CRO for SaaS companies, revealing proven strategies and industry insights that will take your business to the next level. Get ready to optimize, optimize, optimize – because your journey to skyrocketing conversion rates starts right here.

What is Conversion Rate Rate Optimization?

Conversion Rate Optimization (CRO) is a process of improving the effectiveness of a website or digital marketing campaign by increasing the percentage of visitors who take a desired action, such as making a purchase, filling out a form, or subscribing to a newsletter. In simple terms, it is all about converting more visitors into customers. It’s a key process for SaaS companies, especially for companies that are doing SaaS SEO or SaaS PPC campaigns.

The concept of CRO was first introduced in the early 2000s when online businesses started to realize that driving traffic to their websites was not enough; they needed to focus on converting that traffic into actual revenue. Initially, CRO was primarily focused on improving website design, user experience, and messaging to increase conversions.

As the field of CRO evolved, it became more data-driven and started incorporating elements of psychology and behavioral science to understand why visitors take certain actions. A/B testing, which involves testing different versions of a webpage to identify the most effective one, became a popular method for optimizing conversion rates. This approach allowed businesses to scientifically test different elements and determine which ones lead to higher conversion rates.

Over time, CRO has become more advanced with the advent of sophisticated analytics tools and machine learning algorithms. Today, businesses can use advanced tracking and analytics tools to gather detailed data about user behavior and identify areas for improvement. Machine learning algorithms can analyze vast amounts of data and provide insights into user preferences, allowing businesses to personalize their website and marketing campaigns for better conversion rates.

Companies now have access to a wide range of CRO techniques, including heat mapping, user session recordings, surveys, and user testing, to gain valuable insights into user behavior and preferences. This allows them to make informed decisions and implement targeted optimizations that are more likely to lead to higher conversion rates.

Now that we understand what Conversion Rate Optimization is, let’s dive into how conversion rate calculation depends on a SaaS company’s monetization and sales model.

What Factors Affect Conversion Rate Calculations

The first step is for the marketer to determine what counts as a conversion for their specific SaaS company. This could be sales, email newsletter sign-ups, free trial sign-ups, or any other action that indicates a user has moved further down the sales funnel. Once the conversion type is defined, the marketer can then start collecting data from the appropriate sources.

Conversion rate calculation in SaaS companies can vary depending on the monetization and sales model they use. For instance, some SaaS companies may follow a marketing qualified lead (MQL) to sales qualified lead (SQL) to revenue model. In this case, the conversion rate would be calculated based on the number of MQLs that convert to SQLs, and then the number of SQLs that convert to revenue. Each stage in the sales funnel represents a conversion point, and the conversion rate can be calculated at each stage.

On the other hand, some SaaS companies may use a free trial model. In this case, the conversion rate would be calculated based on the number of free trial sign-ups that convert to paying customers. The conversion rate would be determined by dividing the number of paying customers by the number of free trial sign-ups and multiplying it by 100 to get a percentage.

Similarly, SaaS companies that follow a freemium model would calculate their conversion rate based on the number of free users that convert to paid users. This is another conversion point in the sales funnel that can be measured by dividing the number of paid users by the number of free users and multiplying it by 100.

Ultimately, the conversion rate calculation for a SaaS company depends on their specific monetization and sales model. By understanding their conversion type and where the conversion points occur in their sales funnel, marketers can accurately calculate conversion rates and measure the effectiveness of their marketing efforts. Not measuring the success of your marketing (especially in areas such as SEO) is also one of the key SaaS SEO mistakes that you can avoid. You can avoid this common SEO mistake, and other mistakes by using our 14-step expert level SaaS SEO checklist.

How to Calculate SaaS Conversion Rates

Now that we understand the importance of tracking conversion rates in SaaS marketing, let’s dive into how a marketer can actually calculate these rates. The first step is to determine what counts as a conversion for your specific business. This could include sales, email newsletter sign-ups, free trial sign-ups, or any other action that signifies a successful conversion.

The type of conversion you choose will affect where you collect data from. For example, if your conversion is sales, you will need to collect data from your sales team or CRM system. If your conversion is email newsletter sign-ups, you would collect data from your email marketing platform. It’s important to clearly define your conversion and establish a system for collecting data from relevant sources.

When calculating conversion rates, the formula is simple: divide the number of conversions by the total number of opportunities or visitors, and multiply by 100 to get the percentage. For example, if you had 100 sales and 1,000 website visitors, your conversion rate would be 10%.

To get a full-funnel understanding of conversion rates, let’s break down the process step by step:

1. Leads to Marketing Qualified Leads (MQL)

This conversion rate represents the percentage of leads that meet specific criteria and are considered qualified for marketing efforts, meaning the marketing team can nurture the prospect through one of their flows, or even do personal outreach if the deal size is larger. It helps measure the effectiveness of your lead generation and qualification process.

2. Marketing Qualified Leads (MQL) to Sales Qualified Leads (SQL)

This conversion rate measures the percentage of MQLs that are deemed qualified for the sales team. The sales team can now engage with these prospects in order to convert them into paying customers. This conversion rate signifies the effectiveness of your marketing and lead nurturing efforts in handing over qualified leads to the sales team.

3. Sales Qualified Leads to Free Trial Users

This conversion rate indicates the percentage of SQLs that convert into free trial users. It shows how successful you are in moving potential customers from the sales stage to the free trial stage.

4. Free Trial Users to Paying Users:

This conversion rate reveals the percentage of free trial users who eventually become paying customers. It demonstrates the effectiveness of your product, onboarding process, and overall customer experience in converting trial users into paying customers.

By understanding these conversion rates at each step of the funnel, you can identify areas for improvement, optimize your marketing strategies, and ultimately increase revenue for your SaaS business. So let’s dive deeper into each of these conversion rates and uncover valuable insights to drive your SaaS marketing success.

Full-Funnel Conversion Rates Explained

In order to have a full-funnel understanding of conversion rates, it’s important to break down the different stages of the customer journey. Let’s start with the conversion rate from leads to marketing qualified leads (MQL).

Leads are potential customers who have shown some interest in your product or service, whether it’s through filling out a form, signing up for a newsletter, or downloading a resource. However, not all leads are created equal. Some may be more qualified than others, based on specific criteria such as demographics, behavior, or engagement.

Lead to MQL for SaaS

The conversion rate from leads to MQL is a measure of how many leads meet the criteria to be considered marketing qualified. This can vary depending on your target audience, industry, and marketing strategies. According to HubSpot, the average conversion rate from leads to MQL is around 5-10%.

Once a lead becomes an MQL, they have shown a higher level of interest and are more likely to be receptive to your marketing efforts. The next conversion rate to look at is from MQL to sales qualified leads (SQL). This transition occurs when the MQL meets certain criteria that make them a good fit for your sales team to engage with.

MQL to SQL for SaaS

The conversion rate from MQL to SQL can vary depending on factors such as lead quality, sales and marketing alignment, and lead nurturing strategies. According to a study by Marketo, the average conversion rate from MQL to SQL is around 20-30%.

Once a lead becomes an SQL, they have been identified as a potential customer who is ready for the next stage of the sales process. The next conversion rate to consider is from SQL to free trial users. This transition occurs when the SQL takes action to try out your product or service through a free trial or demo.

SQL to Free Trial for SaaS

The conversion rate from SQL to free trial users can vary depending on factors such as the quality and appeal of your product or service, the ease of the trial process, and the effectiveness of your sales team in converting SQLs. According to a report by Totango, the average conversion rate from SQL to free trial users is around 40-60%.

Finally, the last conversion rate to think about is from free trial users to paying users. This transition occurs when the user decides to continue using your product or service beyond the free trial period and becomes a paying customer.

Free Trial to Paying Users for SaaS

The conversion rate from free trial users to paying users can vary depending on factors such as the value and effectiveness of your product or service, the user experience during the trial period, and the effectiveness of your onboarding and retention strategies. According to a study by ProfitWell, the average conversion rate from free trial users to paying users is around 20-30%.

Now that we have a full-funnel understanding of conversion rates, let’s explore some benchmark metrics for a SaaS company.

In the SaaS industry, the conversion rate from lead to MQL can vary depending on the sub-vertical. For example, in the analytics sub-vertical, the average conversion rate is around 4.3%, while in the engineering product & design sub-vertical, it is around 4.2%. In the finance & accounting sub-vertical, the average conversion rate is around 2.8%, and in the human resources sub-vertical, it is around 2.9%.

Moving on to the conversion rate from MQL to SQL, we see some variations as well. In the infrastructure sub-vertical, the average conversion rate is around 24.4%, while in the legal sub-vertical, it is around 15.7%. In the marketing sub-vertical, the average conversion rate is around 20.5%, and in the office management sub-vertical, it is around 18.3%.

These benchmark metrics give us an idea of the average conversion rates in different SaaS sub-verticals, but it’s important to remember that each company and industry is unique, and these rates can vary based on various factors.

B2B SaaS Benchmark Conversion Rates

Based on limited public data available, we’ve put together charts to get a sense of benchmark conversion rates for your funnel stage, or company size.

Benchmark Rates: Full Funnel Conversion Rate by Size of Company

Stage of FunnelSmall Business ($1M-$10M)Small-to-Midsize ($10M-$100M)Middle Market ($100M-$1B)Enterprise ($1B+)
Lead2.3%1.4%1.2%0.7%
MQL37%41%40%34%
SQL32%39%39%40%
Revenue46%39%35%31%
Source

Benchmark Rates: Lead-to-MQL Conversion Rate by Industry

IndustryLead-to-MQL Conversion Rate
Aerospace & Defense34%
Automotive31%
Aviation37%
B2B SaaS39%
Biotech42%
Business Consulting28%
Commercial Insurance40%
Construction17%
Cybersecurity39%
eCommerce23%
Engineering35%
Entertainment34%
Environmental Services45%
Financial Services29%
Higher Education & College45%
Industrial IoT22%
IT & Managed Services25%
Legal Services32%
Manufacturing26%
Medical Device24%
Oil & Gas32%
PCB Design & Manufacturing42%
Pharmaceutical41%
Real Estate27%
Software Development32%
Solar Energy45%
Transportation & Logistics36%

How to Calculate Conversion Rates for Digital Marketing

To begin with, conversion rate is a critical metric that determines the success of your online marketing efforts. It tells you how effective your campaigns are in turning visitors into customers or achieving other desired actions, such as newsletter sign-ups or downloads. In order to figure out your conversion rates for each online marketing channel, here are a few steps you can take:

1. Set up conversion tracking: The first step is to ensure that you have proper conversion tracking in place for each marketing channel. This can be done by adding tracking codes or pixels to your website that capture the actions you want to measure, such as purchases or form submissions.

2. Determine your goals: Clearly define what specific actions or goals you want to track for each marketing channel. This could be sales, leads, downloads, or any other desired action. Having clear goals will help you measure the success of your campaigns accurately.

3. Analyze data: Once you have set up conversion tracking and defined your goals, it’s time to dig into the data. Use analytics tools like Google Analytics or platform-specific analytics to track the number of visitors, conversions, and conversion rates for each marketing channel. Check out our guide on SaaS SEO tools to get a more in-depth coverage of the various SaaS SEO tools you can use.

4. Calculate conversion rates: To calculate the conversion rate, divide the number of conversions by the number of visitors or clicks for each marketing channel. For example, if your PPC campaign generated 50 conversions from 1000 clicks, your conversion rate would be 5%.

5. Compare and optimize: After calculating the conversion rates for each marketing channel, compare the results to identify the most effective channels. This will help you allocate your resources and budget accordingly. Also, analyze the conversion rates over time to identify any trends or changes that may require optimization.

Remember, determining conversion rates for online marketing channels is an ongoing process. Continuously monitor and optimize your campaigns to improve your conversion rates and drive better results.

saas conversion rate 2

How to Calculate Conversion Rates for Offline Marketing

Determining conversion rates for offline marketing channels can be a bit trickier compared to online channels. While online channels have the advantage of tracking tools and analytics, offline channels like billboards, magazine ads, newspaper ads, radio ads, and TV ads often lack the same level of measurement. However, there are still ways for marketers to gauge the effectiveness of these offline channels in driving conversions.

One method is to use dedicated landing pages or unique URLs in the offline advertisements. By directing people to a specific webpage or URL, marketers can track the number of visits and conversions that are generated from the offline channel. This can help in determining the conversion rate for that particular channel.

Another approach is to use coupon codes or unique phone numbers in the offline advertisements. By providing customers with a discount code or a specific phone number to call, marketers can track the number of redemptions or calls that result from the advertisement. This can provide insights into the conversion rate of the offline channel.

Additionally, surveys and customer feedback can be valuable in determining the impact of offline channels. By asking customers how they heard about a product or service, marketers can gain insights into which offline channels are driving conversions. This can help in assessing the conversion rates for different offline marketing channels.

While offline conversion tracking may not be as precise as online tracking, these methods can still provide valuable information to marketers. By using unique URLs, coupon codes, phone numbers, and customer feedback, marketers can gain insights into the effectiveness of their offline marketing efforts.

Next, let’s move on to discussing the benchmark conversion rates for online marketing channels such as SEO, SEM, PPC Ads, Social Media, and Email Marketing.

What are the Benchmark Conversion Rate Metrics by Digital Marketing Channel?

It’s important to note that these benchmark conversion rates are just averages and can vary significantly depending on the specific circumstances of each company, their industry, and any multitude of internal or external influences. That being said, let’s dive into the benchmark conversion rates for online marketing channels!

1. SEO
According to HubSpot, the average conversion rate for leads generated through SEO is around 14.6%. This means that out of every 100 visitors who find your website through organic search, around 14 of them will convert into leads.

While we’re on the topic, here are some other “optimizations” that will help improve SEO for your SaaS company:

2. SEM
WordStream suggests that the average conversion rate for leads generated through SEM (Search Engine Marketing) campaigns is 2.70%. This means that for every 100 clicks on your ads, about 2.7 of them will convert into leads.

3. PPC Ads
Instapage states that the average conversion rate for leads generated through PPC (Pay-Per-Click) ads is 2.35%. This means that out of every 100 people who click on your PPC ads, around 2.35 of them will convert into leads.

4. Social Media
According to eMarketer, the average conversion rate for leads generated through social media advertising for B2B companies is approximately 2.74%. This means that out of every 100 people who click on your social media ads, about 2.74 of them will convert into leads.

5. Email Marketing
GetResponse reports that the average conversion rate for leads generated through email marketing campaigns is around 2.58%. This means that out of every 100 people who receive your email campaigns, approximately 2.58 of them will convert into leads.

So there you have it! These are the benchmark conversion rates for Lead to MQL for SaaS companies for various online marketing channels.

Now, let’s move on to the next topic about the benchmark conversion rates for offline marketing channels.

What are the Benchmark Conversion Rate Metrics by Offline Marketing Channel?

When it comes to offline marketing channels and their conversion rates, two important metrics to consider are the Lead to MQL (Marketing Qualified Lead) conversion rate and the MQL to SQL (Sales Qualified Lead) conversion rate. These metrics give us insights into how effectively a SaaS company is able to move leads through the marketing and sales funnel.

Now, you might be wondering, what are some benchmark conversion rates for these offline marketing channels? Well, I found this great page on the HubSpot website that provides benchmark metrics for various marketing channels, including offline ones.

According to the data on the Hubspot page, the average Lead to MQL conversion rate for offline marketing channels is around 12%. This means that for every 100 leads generated through offline marketing efforts, approximately 12 of them become Marketing Qualified Leads.

Moving on to the MQL to SQL conversion rate, the benchmark metric for offline marketing channels is around 20%. This indicates that out of those 12 Marketing Qualified Leads, around 2 or 3 of them will qualify as Sales Qualified Leads.

Now, let’s talk about some factors that can limit or hurt SaaS conversion rates.

What Factors Affect Conversion Rates?

When it comes to SaaS conversion rates, there are several factors that can hinder or even hurt the final outcome. These limiting factors can be seen from the perspective of a prospective customer, who might experience certain challenges or frustrations during the conversion process. Let’s take a closer look at some of these factors and understand why they can be detrimental to SaaS conversion rates.

One of the primary factors that can limit SaaS conversion rates is a complicated onboarding process. As a potential customer, you might be excited about trying out a new software solution, but if the onboarding process is convoluted and confusing, it can quickly dampen your enthusiasm. From long and cumbersome signup forms to a lack of clear instructions, a complicated onboarding process can lead to frustration and ultimately deter potential customers from converting.

Another factor that can hurt SaaS conversion rates is a lack of trust. As a prospective customer, you want to feel confident that the SaaS provider is reliable and trustworthy. If there are no testimonials or reviews from existing customers, or if the website lacks security badges and certifications, it can create doubt in your mind. Without trust, the likelihood of converting into a paying customer diminishes significantly.

Furthermore, pricing can be a limiting factor in SaaS conversion rates. As a prospective customer, you want to ensure that the price you pay for a SaaS product aligns with the perceived value and your budget. If the pricing is not transparent or if there are hidden fees and complex pricing tiers, it can lead to confusion and hesitation. Additionally, if the pricing is perceived as too high compared to the competition or alternative solutions, it can discourage potential customers from converting.

A lack of personalized communication can also hinder SaaS conversion rates. As a prospective customer, you expect to feel valued and understood by the SaaS provider. If there is a lack of personalized communication, such as generic email responses or a failure to address specific concerns, it can create a sense of disconnect. Without a personalized touch, potential customers may feel overlooked or unimportant, resulting in a decrease in conversion rates.

In conclusion, several factors can limit or hurt SaaS conversion rates. From a complicated onboarding process to a lack of trust, pricing issues, and impersonal communication, these factors can frustrate prospective customers and deter them from converting. To maximize conversion rates, SaaS providers must prioritize a seamless onboarding experience, build trust through testimonials and security measures, offer transparent and competitive pricing, and provide personalized communication to potential customers.

Why Conversion Rate Optimization is Important to Improve Profitability

Conversion rate optimization (CRO) is an essential strategy for improving profitability for B2B SaaS companies. By optimizing conversion rates, businesses can maximize the value from their existing website traffic and marketing initiatives. Let’s dive into why CRO is crucial and how it helps improve ROI on initiatives such as SEO, SEM, PPC, and other online marketing efforts.

Maximizing Conversions, Maximizing Revenue: CRO focuses on increasing the percentage of website visitors who take a desired action, such as signing up for a trial, requesting a demo, or making a purchase. By improving conversion rates, B2B SaaS companies can effectively turn more of their existing traffic into paying customers. According to Econsultancy, even a 1% improvement in conversion rates can result in a significant increase in revenue.

Cost-Effective Growth: Instead of solely focusing on acquiring new traffic, CRO enables companies to extract more value from their existing traffic sources. This approach is particularly beneficial for B2B SaaS companies that often have high customer acquisition costs. By optimizing conversions, businesses can achieve growth without a proportional increase in marketing spend. For instance, a study by Invesp found that companies with effective CRO strategies are more likely to experience higher revenue growth compared to those without.

Improving ROI on Marketing Initiatives: CRO helps enhance the ROI of various online marketing initiatives, including SEO, SEM, and PPC. By optimizing landing pages, forms, and user experiences, companies can increase the likelihood of conversions from organic search traffic (SEO) and paid search campaigns (SEM, PPC). For example, a case study by ConversionXL showed that by implementing CRO strategies, one company achieved a 52% increase in conversion rate and a 300% increase in lead generation from organic search.

Enhancing User Experience and Satisfaction: CRO focuses on understanding and improving the user experience throughout the customer journey. By making the conversion process smoother, more intuitive, and personalized, B2B SaaS companies can create positive user experiences that lead to higher customer satisfaction and loyalty. According to a report by Accenture, 91% of consumers are more likely to shop with brands that provide relevant offers and recommendations.

Data-Driven Decision Making: CRO relies on data analysis, A/B testing, and user feedback to drive optimization efforts. By collecting insights about user behavior, preferences, and pain points, companies can make informed decisions about website design, messaging, and marketing strategies. These data-driven optimizations can significantly improve conversion rates and overall profitability. In fact, according to Adobe, companies that use data-driven strategies are more likely to have an advantage over competitors and achieve higher conversion rates.

In conclusion, CRO plays a crucial role in improving profitability for B2B SaaS companies. It allows businesses to maximize revenue from existing traffic, optimize marketing ROI, enhance user experiences, and make data-driven decisions. By implementing CRO strategies and continuously testing and optimizing conversion elements, companies can unlock their full potential for growth and profitability.

If you’re thinking of investing in SEO for your SaaS company, or increasing your SEO budget, check out our framework to guide SaaS SEO budget creation, and how you can create a profitable SEO operation for your company.

If you’re looking for an actionable, personalized guide on how to implement a conversion rate optimization process for your company, feel free to request your action plan from our team! We help companies create profitable digital marketing operations that are designed to provide returns for years, if not decades!

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https://www.trailblazermktg.com/about

Ameer is a seasoned SaaS SEO agency owner, and strategic marketing expert, with over a decade of experience in driving successful SEO and strategic growth programs for countless companies. He has helped companies like Domino's Pizza, Scott's Miracle Gro, and Sleep Country Canada grow their businesses through search engine optimization.


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