New customers are critical for growing a successful SaaS startup. Until you have a solid customer base producing sufficient recurring revenue as well as a manageable churn rate, you should be keeping a close eye on your conversion rate.
If your conversion rate is low, you need to step back and take a look at your business. Do you have a sales problem, a marketing problem, poor product-market fit, or something else? Below we cover five reasons your SaaS startup's conversion rate might be low, how to assess each possible problem, and what you can do to improve.
4 Ways to Improve SaaS Conversion Rates
1. Examine your sales processes
If your sales cycles are long or complicated, this can explain a low SaaS conversion rate. If you’re trying to attract qualified leads or enterprise customers instead of a “self-serve” sign-up method, then it’s reasonable to expect things to be drawn-out in terms of gaining new customers.
Free trials can help increase your SaaS conversion rate, but you need to have robust nurturing sequences in place to move these users to paid customers. 62% of SaaS companies report that they get 10% or more of their business from using free trials as part of their sales process, while 16% of companies say they get over half of their new customers this way. If you think testing out a free trial model might increase your sign-up rate, it’s definitely worth considering.
With that being said, it’s important to recognize fast sign-ups for free trials aren’t necessarily an indicator of explosive growth – you need to take your sales model into account and examine the habits of the customers that are subscribing. Are they serious about the product, or do they forget about the sign-up as soon as they arrive?
Noah Lorang from Basecamp tweeted his thoughts about the pros and cons of getting fast sign-ups versus a slower rate of people who took the time to consider a product before they subscribed.
@cllaudiu Pro fast: getting people using the product is the best way to sell it, should remove obstacles to getting people going. — Noah Lorang (@noahhlo) October 22, 2015
His views were that trying to get lots of fast sign-ups means you’re likely to end up with a large number of customers who:
Won’t activate the product
Won’t be long term customers
Won’t become promoters of your brand
On the flip side, a smaller number of sign-ups from people who’ve spent more time reading and learning about your product, and who might have requested a demo and spent time talking with your sales team, are more likely to:
Become active users
Find value in your product
Refer other customers to you
@cllaudiu Pro slow: no point in getting signups from people who aren't actually interested or for whom the product is a bad fit (1/2) — Noah Lorang (@noahhlo) October 22, 2015
@cllaudiu and getting people to read a little more before they sign up might actually get them to try it more thoroughly/seriously (2/2) — Noah Lorang (@noahhlo) October 22, 2015
If you’re worried that your sales process might be hindering your SaaS conversion rate, it’s important to look at your existing customers and how engaged they are with your product. If sign-ups are slow but your activation rates and retention rates are high, this may not be as concerning as it seems.
2. Revamp your marketing tactics
If you’re marketing your SaaS product and getting little ROI in terms of sign-ups, the adjusting your messaging and tactics might improve your conversion rate.
Most SaaS companies fall into the trap of presenting long, boring lists of features that have no emotional connection with any potential customers. The fact is nobody wants your product. They want a solution.
Your target customers have a problem — they're wasting time; they're wasting money; they're stressed from the chaos — your job is to tell them how your product makes it all disappear.
Whatever your product is or does, you need to frame it in your marketing as solving a core problem for customers and promoting a solution that will deliver value that is measurable and tangible for them, in their language.
Boosting your SaaS conversion rate might be as simple as sharpening up the copy on your landing pages or improving the messaging on your homepage. Pricing pages, in particular, are generally lacking in promoting the value of a product. This is especially important if your product is at a higher price point or has solid competition in the same market.
Paying attention to your marketing messages goes hand-in-hand with where you’re focusing your marketing attention. You should be continually testing different methods and platforms to attract new sign-ups from a variety of places. If one of your marketing channels slows down completely, you may have exhausted your market in that area (it happens), and in that case, it’s time to explore new tactics and different audiences to promote your product.
3. Examine your product-market fit
Poor product-market fit is a leading contributor to poor conversion rates. If customers aren’t interested in your product or don’t feel it will bring any value to their business or their lives, then you have a bigger problem to fix than sales or marketing.
If you’re at an early stage and struggling to get a good flow of sign-ups, it’s important to reach out to your customers to find out how their experience has been from the moment they discovered your product to the stage they are currently at in their journey with your business.
Whether the feedback is good or bad, it will help you generate ideas to improve your processes and product(s) in order to attract more subscribers.
Ideally, 50% of your new sign-ups as a SaaS startup should be from direct or organic traffic sources, which means your current users are enjoying your product, telling their friends, and sharing with their network. If your product isn’t inspiring your users to talk about it, then you’ve got some work to do!
4. Is seasonality dragging down your conversion rate?
Depending on your product and industry, seasonality can cause a drop-off in new subscriptions. If certain times of the year are giving you cause for concern, take the opportunity to figure out what you can do to leverage this, or counteract it in some way.
You can also take advantage of these slow periods by:
Identifying new markets
Surveying your customers
Following up with dormant customers you might be able to reactivate
Exploring ways to adapt for future seasonal downtimes
Final Thoughts on Improving SaaS Conversion Rates
To summarize, slow sign-ups aren’t necessarily a problem. They can mean that your sales process takes into account more qualified leads, bigger deals, and the longevity of your subscribers. However, if your low conversion rate is seriously getting in the way of cash flow and growth, then it’s a good idea to explore product improvements as well as sales and marketing strategies that help you align better with what your customers are looking for.