SaaS Marketing Funnel: How to Build a Functional SaaS Funnel in 2024

When was the last time you wanted to make a big purchase, and you just went ahead and placed your order without doing any due diligence? Actually, have you ever done that?

I think you know where I’m going with this. 

The modern consumer is not lazy. Plus, the internet has increased access to information. Customers don’t take advertisers at their word anymore. This is especially the case when they’re making business decisions like signing up for software that requires monthly payments.

Potential SaaS customers research advertising claims, compare competing products, and scour reviews before making purchasing decisions. These steps form part of the SaaS customer journey.

The SaaS marketing funnel illustrates this journey, identifying where you’re losing prospects and opportunities to improve your marketing processes.

Read on to learn how to prepare an effective marketing funnel.

What is a SaaS Marketing Funnel

A SaaS marketing funnel is a visual tool representing the stages leads go through to become customers. The image below illustrates the steps potential customers go through before and after buying a software product.

Some marketing funnels contain four to five touchpoints. However, a complete funnel should take leads from the awareness stage to the point where they’re brand advocates. This is really essential because SaaS companies rely on recurring revenue to grow.

The SaaS marketing funnel gets its name from its shape, which starts wide at the top with many prospects but narrows as unqualified leads are weeded out.

The term marketing funnel is sometimes used interchangeably with sales funnel. They both track the buyer journey in the same way – from first contact to conversion. But there is a difference. A marketing funnel is a strategy tool, while a sales funnel is an action-based process.

This distinction, however, is becoming irrelevant with trends toward merging the sales and marketing functions.

Why is a Marketing Funnel Important for SaaS Companies

Understanding how your target customers shop helps you optimize your marketing efforts. When you know what information prospects look for, you can create tailored content that guides them to buying your products.

87% of buyers choose brands that share helpful content at every stage of the decision-making process.

A well-designed marketing funnel doesn’t just help you create relevant content. It ensures you deliver it to the right customers at the right time. 

For example, you shouldn’t show customers looking for answers to a pressing question content like business case studies; it’s irrelevant to their current search. They’re likely to respond better to insightful guides and whitepapers that educate them about their pain points and the available solutions.

Marketing funnels prioritize marketing activities. In theory, the bigger the mouth of the funnel, the more sales at the end. But that’s not always the case. 

If the number of prospects keeps growing, but your funnel conversion rates remain stagnant, the marketing funnel will show you where you’re failing to convert and where you need to focus your SaaS product marketing efforts.

Stages of a SaaS Marketing Funnel

Different businesses use different names and structures for their marketing funnels. One of the classic structures is the AIDA model – Awareness, Interest, Desire, and Action.

• Awareness – prospects discover brands and products with targeted brand awareness campaigns.
• Interest – prospects explore SaaS product features and functions with engaging and educational content. They’ll visit your landing pages and do a bit of research on your company.
• Desire – leads develop trust with brands through informative content comparing your offerings with others in the market. They may start reviewing case studies and may sign up for a product demo.
• Action – leads finally pull the trigger. They may now upgrade from a free trial to a paid plan. Others will sign up for the paid plans right away.

SaaS marketing is different from other marketing types. With traditional funnels, the last phase of the funnel is action. SaaS funnels have an additional step – Retention. 

Subscription-based businesses make their money from recurring revenue. Consequently, SaaS marketing teams must have customer retention strategies to maintain and maximize business growth.

Whether you use the AIDAR model or make your own, the marketing funnel has three main parts: a top, middle, and bottom.

Top of the Funnel

The top of the funnel (TOFU) is the first part of a marketing funnel. The goal is to create awareness by driving traffic to your website blogs. At this stage, you’re not pushing the hard sell. Instead, you’re building relationships with potential customers and establishing your brand as a trusted authority.

The content you create at TOFU should help prospects understand their problems. For example, an eCommerce business owner hoping to decrease cart abandonment isn’t necessarily looking for an automated email marketing app.

It is your opportunity to educate the potential buyer and demonstrate subject matter expertise. Then, you may generate demand for your SaaS product when the user starts to understand the importance of an automated email marketing app in preventing cart abandonment.

Examples of Top of the Funnel Strategies

Popular TOFU content includes How-to blog posts, guest podcasts, webinars, and lead magnets such as online calculators, quizzes, and other free tools.

1. Webinar/ Podcasts

Co-hosting or making a guest appearance on another organization’s blog, podcast, or webinar is a great way to extend your brand’s reach and cement your reputation as an industry expert. 

For example, Writer’s CEO, May Habib, has been making a string of guest appearances across various webinars and podcasts. And not just any podcasts and webinars—ones related to AI content writing and overall content creation, which are closely related to their SaaS product.

Webinars are interactive, allowing you to create personalized experiences for target audiences.

2. Ebooks

Ebooks are popular lead magnets used by all major SaaS brands. They can help you hit two birds with one stone.

First, ebooks are typically super comprehensive. That means you could use them to educate a user about a subject they’re struggling with. Next, you can use them to collect their email addresses. This allows you to add the user to your email marketing list, where you can nurture them with more relevant content.

Middle of the Funnel

The Middle of the funnel (MOFU) is the second part of the marketing funnel. Prospects entering this stage become marketing-qualified leads (MQLs). They engage with brands to find solutions to specific pain points. Hence, they can be passed to your sales team for qualification before the sales process is initiated.

You want to position your product as the best in class at this stage.

Qualified leads understand their pain points but aren’t sure which available solution is the best. 

Let’s circle back to the example of the eCommerce business owner. They have decided that an automated email marketing tool is one of the best ways to reduce cart abandonment. However, they don’t know which service provider offers the most bang for the buck.

That’s where you’ll need to create product comparisons, demos, and other similar content types to show what makes your product the right solution for the job.

Examples of Middle of the Funnel Strategies

MOFU content includes product demos, case studies, product comparisons, and free trials. 

1. Product Demos

Your SaaS video marketing strategy would be incomplete without demo videos. Demo videos are a way to present product features and functionalities in a compelling and easy-to-consume way.

This two-minute explainer video from Trello shows users how to use the application step by step. 

When people can visualize using your app and how it can resolve their pain points, you bring them closer to converting.

2. Product Comparison Articles

Let’s say our eCommerce store owner from earlier Googles “best email marketing platform.” The results page will bring up articles like those in the image below. 

Roundup articles have high search volumes and better click-through rates than individual product reviews. They also have a relatively higher buy intent.

I always advise SaaS brands to create product comparisons and “alternative to” articles. They’re a low-hanging fruit you can capitalize on. One of those types of SaaS content you can produce to pull relevant traffic and put your product on the map.

They’re especially a hack for SaaS startups that don’t have much brand recognition. You can piggyback on the popularity of existing platforms to introduce users to your SaaS product. 

For example, if you have a relatively new email marketing solution, you could create a product roundup article featuring some of the top and most recognizable email marketing solutions. Then, introduce users to your solution within the article.

Bottom of the Funnel

The Bottom of the funnel (BOFU) is the final stage of the marketing funnel. It is where leads become customers. You’ve captured their attention and built a trusting relationship; now, you can go for the hard sell. 

By the time leads reach this stage, they’ve declared intent to buy your solution. Still, you don’t want to lose them at the close.

Examples of Bottom of the Funnel Strategies

BOFU content reinforces the buyer’s choice with customer testimonials, reviews, and optimized pricing pages. 

1. Customer Reviews

Customer reviews give your product social proof. This helps potential customers see your product has worked for other people.

Toggl Track’s conversion page leverages the power of two different types of social proof. It places a customer testimonial and a review site rating on the sign-up form, reminding users they are making the right choice.

2. Pricing Page

The pricing page is another place to reinforce the customer’s choice. 

This ClickUp example lists everything potential customers get when they sign up for a plan. The project management tool also places testimonials and awards on this page, proving the software is worth every penny.

Retention and Advocacy

According to the Pareto principle of business, 80% of profits often come from 20% of customers. Moreover, it’s cheaper to retain current customers than to acquire new ones.

Keeping existing customers comes down to creating value and providing a good user experience consistently. Here are a few elements that impact customer retention and loyalty.

1. Customer Onboarding

Customer onboarding is the process of familiarizing users with your products. You’ve probably had a product tour when you first signed in to an app or used a new feature.

In the above example, Kommunicate interactively guides users as they customize the chat widget. Unlike a comprehensive tour, the app helps customers as they use features, increasing engagement and familiarizing customers with other app features.

Another element of onboarding is setting expectations about what the product can deliver. Your service level agreement (SLA) should clearly state what your software can and cannot do. You don’t want to overpromise value you cannot deliver, as that leads to broken trust and customer churn.

2. Customer Service

Providing excellent customer service is vital to keeping customers happy. Statistics show that 67% of customer churn is due to bad customer experience. 

Things are bound to go wrong—a frozen dashboard or locked account. The key to providing a stellar customer experience is proactive communication and prompt problem resolution.

In this tweet, Cloud service provider DigitalOcean informs customers of a missing metrics feature causing graphs to appear empty. The platform uses a special Twitter handle for updates on issues, upgrades, or outages.

3. Self-service

Self-service portals are a popular customer support channel. The Harvard Business Review found that 81% of people prefer to solve problems themselves before asking customer service agents for help.

Creating a knowledge base with FAQs, How-to guides, etc., helps you facilitate self-service. It also saves you time and money by freeing support agents to handle complex queries.

Codecademy’s resource center provides documents and tools users can refer to, reducing time to value and introducing them to other useful features and tools.

4. Upsell

Customers choose SaaS products for one reason or another, and chances are they aren’t aware of the full range of features you offer. Your competition will try to grow their market share from your customer base, using value propositions you may already provide on different plans. 

Upselling allows you to advertise your product’s various features. This boosts user experiences and generates more sales. And if your customers are happy, they’d rather upgrade than start the buying journey with another company.

In the example above, Canva adds its branding and content planner features to the side menu, alerting freemium users of these premium features.

Another way to alert customers is when they reach the user limits of their current account. You know these users would benefit from more access to the features they use.

Dropbox notifies users when they have reached their storage limit, using the opportunity to encourage them to upgrade to a higher plan. 

5. Customer Satisfaction Surveys

The simplest way to learn if customers are satisfied with your brand is by asking them. Surveys such as Net Promoter Score (NPS), Customer Effort Score (CES), and Customer Satisfaction Score (CSAT) ask users to rate products or services on a number scale. These give you an idea of how well you meet customers’ expectations. 

Another survey geared toward customer retention is the exit survey. As the name suggests, this survey happens when customers cancel their subscriptions.

The above survey is simple, asking users to share the reason they are leaving in their words. It also gives customers a chance to change their minds.

Even though you’re losing customers, this is an opportunity to understand why they’re leaving and use that data to improve your product and customer experience. 

I recommend conducting an exit survey during the cancellation process rather than sending emails later. Once they close their account, the chances of receiving feedback are slim.

6. Reward or Loyalty Programs

Everyone likes to be appreciated. Your long-term customers are no exception. 

Reward programs are a great way to show loyal customers you value their continued business. This strategy helps you retain your best customers and increase sales.

Rewards like subscription discounts or a free one-year upgrade are straightforward, providing value to loyal customers and keeping them locked in. 

It also cultivates brand advocacy.

Evernote incentivizes current customers to refer their friends and family by offering 10 points (the equivalent of three months of the premium service). Furthermore, when referees sign up for the premium plan, you get five more points.

How to Measure & Optimize Your Funnel

As you prepare your funnel, you need tools to measure and optimize your SaaS funnel. Below are key SaaS marketing metrics and strategies to maximize conversions.

Metrics To Track at Each Stage of the Funnel

Top-of-funnel metrics measure the performance of your content marketing in driving brand and product awareness. They include:

• Web traffic – how many people visit your website
• Bounce rates – how many people leave your site without interacting with it
• Cost per click – helps you measure the ROI of your paid campaigns

Middle-of-funnel metrics measure how engaging your content is. A few of the key metrics at this stage include:

• Time on page – how long visitors stay on your web pages
• Email or newsletter subscriptions – how many people sign up for email content
• Demo requests – how many people request demos of your product
• Free trial activation – how many people sign up for free trials

Bottom-of-funnel metrics measure how well you convert and retain customers. They include:

• Conversion rates – the number of leads that make a purchase
• Churn rate – how many cancel subscriptions to your service
• MRR – total revenue generated from active subscriptions
• LTV – how much a customer will spend before canceling the service

It’s important to choose actionable metrics that help you understand the performance of your SaaS marketing campaigns. Vanity metrics may look good, but they don’t help you grow. 

That said, any metric can be a vanity metric without sufficient analysis. For example, a high newsletter subscription rate isn’t impressive if your email open rates are low.

2. Strategies for Improving the Funnel Based on Data

Optimizing your SaaS marketing funnel is easy when you know when people drop out of your conversion funnel. For instance, if most free trial users don’t convert to paid plans, you know you have a problem with time to value.

Once you’ve identified your leaks, use the following tactics to plug the gaps.

• Create engaging content – content drives SaaS marketing; it’s how subscription-based businesses demonstrate value. Great content not only entertains but educates and helps solve user problems.
• Leverage social proof – 93% of customers use third-party recommendations to make buying decisions. Leverage reviews and testimonials to build trust and drive conversions.
• Use strong CTAs – calls to action facilitate the conversion of leads into customers. CTAs should be clear on the action people should take. Be sure to add them to all your content.
• Minimize capture forms – long contact forms are a turn-off for privacy-sensitive customers. Reduce the length of capture forms to avoid losing leads at the conversion stage.
• Take a multichannel marketing approach – customers expect personalized experiences, including marketing on their preferred channels. A multichannel strategy ensures you reach your target audience wherever they are.

SaaS Marketing Funnel FAQ

Summing Up

Understanding customers is paramount for the success of any marketing campaign. Savvy SaaS marketers use marketing funnels to trace buyers’ steps and optimize marketing efforts.

This article showed you the three major phases of the SaaS marketing funnel and how to nurture customers through each stage to maximize conversion. You saw examples of top-, middle-, and bottom-of-the-funnel marketing content and strategies for improving your SaaS funnel.

SaaS marketing differs from traditional marketing because customer retention is way more critical for business growth. The SaaS world is competitive, and buyers are spoiled for choice. As such, it’s vital to implement the six retention tactics that foster customer loyalty. 

Hopefully, you now have all the data you need to create an optimized SaaS marketing funnel that will ensure you never run out of leads.