Conversion rate is an important metric that SaaS marketers use to determine the performance of their marketing efforts. A high converting website or product ensures that your company is growing.
The higher the conversion rate, the more effective your marketing is and the more likely it is to generate revenue and profit.
However, it is unrealistic to expect a 100% conversion rate. The median conversion rate in the SaaS industry across all subcategories is 3.0%, whereas the top-performing category (apps & devices) has a 6.2% conversion rate.
So what makes a “good” SaaS conversion rate? It varies from industry to industry and depends on a variety of factors.
Let’s first understand how a conversion rate is defined.
What is a SaaS conversion rate?
A SaaS conversion rate may be defined as a metric that measures the number of conversions (i.e. the number of people who complete the desired action) across a variety of marketing channels such as paid search, email newsletters, and website landing pages.
The desired actions may be:
- Signing up for an email newsletter
- Requesting a product demo
- Signing up for a free trial
- Purchasing or renewing a subscription to a product
- Downloading a piece of content
Conversion rate = Number of conversions/total number of visitors or enquiries of product
This formula will differ based on your business, your overall goals, and where you track your conversions.
SaaS firms measure conversion rate by the percentage of customers on trial who become paying subscribers. These firms mostly depend on paid search to drive traffic through click-through pages and form-fill pages. The conversion rates for form-fill pages, however, are very small.
Marketers determine the overall effectiveness of marketing campaigns by tracking the conversion rate of each channel, CTA, asset, and audience segment. With such data, marketers can optimize the elements of their marketing campaigns to achieve better conversion rates.
What’s a “good” SaaS conversion rate?
We cannot determine a single “good” SaaS conversion rate because it varies extensively across industry categories, businesses, and even goals. For example, paid conversion rates may be different from organic conversion rates.
The median SaaS conversion rates across seven industry subcategories in 2021 were:
Also, for the SaaS industry overall,
- Social converts 1 in 20 visitors,
- Email converts 1 in 5 visitors, and
- SaaS form pages convert only 1 in 50 paid search visitors
Nevertheless, to help you arrive at a “good” conversion rate for your SaaS marketing efforts, let’s look at the available data to see what the benchmarks are.
SaaS conversion rate benchmarks
There are two categories of SaaS business models – low-touch and high-touch.
Low-touch SaaS models involve selling the SaaS product to prospects with minimal face-to-face interaction. E.g. Basecamp, Atlassian (creator of Trello, Jira, Confluence), and Unicorn Train.
- The primary sales method is to offer a free trial of the product, which is promoted through email marketing and digital marketing.
- The prospect is encouraged to buy a subscription by optimizing the in-product experience and often placing CTAs within the product.
High-touch SaaS models follow a more traditional approach to marketing and selling. E.g. Salesforce, Reachbird, AppDynamics
- The sales team cold calls prospects or receives leads from marketing to book demos and follow-up meetings.
- The focus is on enterprise-level demos and direct sales. Sales personnel tailor packages to suit enterprise-level clients who could be looking to license hundreds of users.
Since the sales process is different for each of these business models, their conversion rates also differ.
Often, SaaS firms use a combination of these approaches. They start with a low-touch business model and then move to a high-touch model to land larger contracts and expand their business. E.g. Dropbox, Periscope, Tableau.
1. Low-touch business models
Low-touch SaaS models track conversion rates from free trial to paying subscribers to measure success. There are three channels for free-to-paid in SaaS products:
Free trials with no credit card requirements
The product is offered on a trial basis without credit card information. Typically, it leads to higher sign-ups and, therefore, a higher number of leads.
But the conversion rate is not high: ~1% is satisfactory whereas 2%+ is a good rate.
Free trials with credit card registration requirements
The product is offered on a trial basis with credit card details required up front. It results in a smaller number of signups but more qualified leads. The trial-to-paid conversion rate is higher than that for free trials without credit card requirements.
A 40% conversion rate is considered the baseline, whereas a 60% conversion rate is excellent.
Freemiums
The product is offered for free but there are paid plans for advanced features and functions. Multi-billion dollar companies like Spotify, Slack, and Dropbox use the freemium acquisition model.
Conversion rates are generally low, in single digits, around 3%. An Insight Venture Partners article noted that typical freemium companies had conversion rates between 1% and 10%.
There are some exceptions, though.
2. High-touch business models
SaaS firms employing high-touch business models tend to focus on benchmarks like MQL to opportunity and close rates. A majority of high-touch businesses sell to other businesses (B2B).
A six-step funnel is employed at B2B SaaS companies:
- Website visitor
- Lead
- Market-qualified lead (MQL)
- Sales-qualified lead (SQL)
- Opportunity
- Close
Typically, SaaS companies use the following definitions of these terms to work with:
Lead – A website visitor who has submitted contact information
MQL – A prospect from a firm that is a fit and has taken a desired action like opting in for a free trial, downloading a digital asset, or looking up a few key pages on the website. Ideally, 1/3rd of MQLs are converted to SQLs.
SQL – An SDR speaks to and qualifies a prospect from a firm that is interested and has the budget. The prospect also demonstrates a positive action like booking a meeting with an account executive (AE) through a salesperson. The average conversion rate from SQL to close is 20%, according to Brandon Pindulic, Founder of OpGen Media.
Opportunity – If the demo goes well and the prospect agrees to a contract, the SQL is converted into a sales opportunity.
We have laid out the conversion rate metrics for each step of the inbound and outbound marketing funnels:
1. Inbound marketing funnel
The average conversion rate from lead to closing is 0.05%.
2. Outbound marketing funnel
The average conversion rate from lead to closing is 0.03%.
No matter which SaaS model your company follows, improving your conversion rate begins with improving your website. Factors like vague messaging, ineffective communication of value proposition, cluttered layout, lack of SEO, or absence of a sense of urgency reduce your chances of getting high conversion rates. A content-driven SaaS SEO agency ensures sustainable growth of organic marketing and overall business.
Let’s see what steps we can take to improve conversion rates.
How can SaaS companies optimize their conversion rates?
SaaS marketers can use the following conversion rate optimization tactics:
1. Use short, easy-to-read landing page copy
Short landing page copy (ideally under 250 words unless you have a sophisticated product) written at elementary school or middle school level correlates with higher conversion rates.
There are a few exceptions, of course, in industries like cybersecurity, infrastructure, and marketing where simplification of language does not noticeably increase conversions.
2. Use emotions like joy and anticipation in landing page content
Instead of using pessimistic language to scare prospects into signing up for your product, use lively, value-focused language that creates anticipation and joy.
Focusing on the benefits is likely to increase conversion rates.
E.g. Instead of saying “avoid the hassles of…,” say “achieve efficiency by….”
3. Use short sign-up forms
Forms used to help visitors book demos or sign up for free trials are important for SaaS firms. They also serve as a source of leads to be further nurtured along the sales cycle.
Forms with one or two fields were found to generate higher conversion rates than forms with seven to nine fields. Unless you need a lot of information in the beginning, using a shorter form improves performance.
High-converting form pages are shown to have 200 words or lower. Although the readability level isn’t as important on form pages as on click-through pages, better results can be achieved by writing for a middle school audience.
4. Personalize the free trials
Use the visitor information collected during signups to serve customized offers. You can enrich your leads with past data and on-site data and make your users feel valued.
Once you have more information about your user, you can customize other elements like CTAs, content, and flows. This increases the chances of trials converting to paid customers.
5. Test and track regularly
Use A/B testing and keep tabs on customer feedback to optimize free trials and track the percentage of people who drop off during the trial and at what point they’re leaving.
Focus on tracking actions that converted customers have in common, such as reading a particular blog post before paying for a subscription.
Conclusion
It’s important to measure and optimize SaaS conversion rates because a higher conversion rate leads to faster growth. The quality of the website and landing page(s) contributes to improving conversion rates.
You can maximize your conversion rate by trying the aforementioned tactics to see what works best for your target audience. Compare your performance with industry benchmarks to give you a sense of how you’re doing and where you need to improve.
Image Sources – Unbounce, Jelvix, SaaStock, Intellimize
Pratik Dholakiya is the Founder of Growfusely, a SaaS content marketing agency specializing in content and data-driven SEO.
FAQs
The average funnel conversion rate of most businesses is %3. If your conversion rate is under %2, then maybe you should start conducting funnel analysis to see where it needs improvement. A funnel conversion rate above %2 is considered good, and a rate between 3.1% to %5 is great.
What is good conversion rate for SaaS? ›
For early-stage SaaS companies and startups, a conversion rate of 2-3% is considered acceptable and 5% is considered good. For more established businesses, the median conversion rate is 7%. However, to progress with your product and begin making a profit, you must understand how to optimize user conversion.
What is considered a good conversion rate? ›
What's a good conversion rate? A good conversion rate is above 10%, with some businesses achieving an average of 11.45%. Earning a good conversion rate places your company in the top 10% of global advertisers, which makes your conversion rate two to five times better than the average conversion rate.
What is a good B2B SaaS conversion rate? ›
Only a few companies, such as Recapture.io, see opt-in trial conversion rates as high as 25%. ✅ Ideally, freemium conversion rates are between 2-5% for B2B SaaS. But typically, the freemium conversion rate is around 1%.
How do you analyze conversion rate? ›
Conversion analysis overview
To get the conversion rate for any particular desired conversion, simply divide the number of users that took a particular action by the total number of users, then multiply that result times 100 to get the percentage, which is the conversion rate.
What is a good upsell percentage? ›
It's called the art of upselling. Simply put, ask for more and it's likely you'll get what you ask for. And by doing so, you'll optimize the value of every sale. The book Marketing Metrics says, “The probability of selling to a new prospect is 5%-20%.
How do you increase conversion rate SaaS? ›
9 Working Ways to Boost Your SaaS Conversion Rate [2021 GUIDE]
- Account for Varying Stages of The Buyer's Journey. ...
- Post Informative Content. ...
- Define Milestones; Nurture Your Customers. ...
- Send Triggered Emails. ...
- Shorten the Free Trial Period. ...
- Use Numbers. ...
- Provide Excellent Customer Service. ...
- User Testimonials.
What is the ideal Freemium Conversion Rate? Ideally, freemium conversion rates are between 2-5%. Typically, the freemium conversion rate is around 1%. These numbers may seem not as high to you, but trust me, if your freemium conversion rate is too high, it may be a problem as much as a too low rate.
What is MQL to SQL conversion rate? ›
On average, MQL to SQL conversion rate is 13%. Moreover, only 6% of those SQLs eventually lead to sales. When looking to differentiate between MQL and SQL, you should focus on four factors: lead behavior, lead scoring, type of conversion, and referral channel.
What is a bad conversion rate? ›
As a good rule of thumb, most companies reach a conversion rate of 2–3 percent. If your conversion rate is below 3%, you should start worrying.
Wondering what is a good conversion rate for websites? Let us tell you. A good conversion rate is between 2 percent and 5 percent. The thing with conversion rate is that even a jump of 0.5 percent can be a big deal.
What is a good online ad conversion rate? ›
If 6% of your website visitors join your mailing list or make a purchase, your website is 6% effective. But here's the thing: That's actually very good. In fact, a “good” website conversion rate falls between 2% and 5% across all industries.
What is a good conversion rate 2022? ›
Conventional wisdom says that a good conversion rate is somewhere around 2% to 5%, others will say it's anywhere above 10%. But it just depends. There's no one-size-fits-all rate. Conversion rates vary by industry, product, traffic source, landing page copy, what you define as a conversion, and so much more.
What is a good conversion rate for B2B website? ›
An average conversion rate for a website is between 2 percent and 5 percent. Website conversion rates higher than 5% are considered to be “good” or above the average. Moreover, top brands in many sectors enjoy much better results than 5 percent.
How do you optimize conversion rate? ›
Conversion optimization best practices—and why they're dangerous
- Use a strong color for all CTA (call-to-action) buttons.
- Place CTAs above the fold.
- Use urgency (e.g., time-limited offers) to drive sales.
- Always display testimonials.
- Use fewer form fields on your forms.
The conversion rate is a crucial KPI not only for your PPC campaigns but also for your website and landing page performance. Here's all the information you need about this KPI, what it is, why it's important, how to calculate it, and way more!
What does a high conversion rate mean? ›
Your conversion rate is the percentage of visitors to your website that complete a desired goal (a conversion) out of the total number of visitors. A high conversion rate is indicative of successful marketing and web design: It means people want what you're offering, and they're easily able to get it!
How much should you upsell a product? ›
After all, it's supposed to represent a quick win for your customers. They suggest that the price of the upsell shouldn't be more than 40% more than the item they're already looking at or buying. Retail Doctor puts that figure even lower, suggesting that the upsell be no more than an additional 25%.
What is an upsell ratio? ›
Stephen defines Upsell Rate as the percentage of customers within a cohort that purchases additional software or services (i.e., the # of customers that purchased more in the cohort divided by the total number of customers in a cohort).
How do you measure cross-selling? ›
Your aggregate cross-selling ratio improves - measured by the number of products or services divided by the number of clients.
How to increase free trial conversion rates
- Make it easy to use the product during the free trial.
- Make your core features low-friction to build a habit around.
- Figure out the right time frame your users need to form that habit.
- Personalize outreach during the free trial.
- Build a product-led sales strategy.
The Fan Conversion Ratio is an effective way of measuring an artists audience from Spotify. We share how this is calculated. This is the result of followers divided by monthly listeners.
Why is freemium so successful? ›
There's a lot of freedom, flexibility, and time offered with a freemium business model. People can explore your product and see if it works for them at no cost, and with no time limits. A free trial, on the other hand, often gives users the full product or service suite for free, but it's time limited.
Why is Spotify conversion rate so high? ›
80% of your mobile users have Facebook accounts, and apps see a 20% increase in conversion when signing up is as simple as pressing that blue button. It's likely that the Facebook integration played a huge part in the virality of Spotify, as reportedly every paying user brings 3 free users on board.
What is a good SQL conversion rate? ›
A good MQL to SQL conversion rate is 13% on average, but depends on lead source channel. For B2B, a good benchmark for MQL to SQL conversion is about 31% for websites and 24% for referrals.
What is good Sal to SQL conversion rate? ›
You want to see around a 40% conversion from SALs that your SDRs are actively working to qualified meetings for your AEs.
How can I increase Mql to SQL conversion rate? ›
Here are 5 ways to supercharge your MQL to SQL (to close) conversion rate in BtoB marketing.
- (1) Ensure your marketing and sales messaging are aligned. ...
- (2) Personalize your follow-up communications. ...
- (3) Analyze and evaluate your offerings and messaging annually. ...
- (4) Equip your sales team with success stories.
A click-through rate (CTR) is a metric, shown as a percentage, that measures how many people clicked your ad to visit a website or landing page. A Conversion rate is a metric, shown as a percentage, that displays how many website or app visitors complete an action out of the total number of visitors.
What is Amazon's conversion rate? ›
The average conversion rate for Amazon listings is 10 to 15 percent. The rate for Prime members is even higher, at about 74%. This is because a lot of people who visit Amazon are already set on buying something—if not that day, then in the near future.
Why is my conversion rate dropping? ›
One of the most common reasons for a drop in conversion rate is a change in traffic sources. For example, if you've started running ad campaigns on a new platform or targeting a different audience, it's possible that you're not getting as high-quality traffic as you were before.
A 2017 Moz e-commerce benchmark study showed that the average conversion rate for e-commerce websites was 1.6%. To understand that number, imagine this… Every 1000 visitors to a product page, 16 of them make a purchase. It's important to note that this number (1.6%) is just an average.
What is Facebook's conversion rate? ›
The average conversion rate for Facebook Ads across all industries is 9.21 percent, higher than that of Google Ads.
What is a good conversion rate by industry? ›
A good conversion rate is higher than 10%, with a small percentage of businesses obtaining 11.45% on average, while this number varies based on industry and channel.
What's the average conversion rate online? ›
Average Ecommerce Conversion Rate by Market and Device
For instance, Q2 2022 data shows that in the US, the average conversion rate for ecommerce shoppers on their mobile phones is two percent, while the conversion rates for desktops and tablets are higher at three percent.
What percentage of leads turn into sales? ›
What percentage of leads turn into sales? Whether in B2C or B2B sales, every lead you generate has the potential to transform into a paying customer. Unfortunately, not all of them do. According to the latest studies, only 10% to 15% of sales leads make it to the bottom of the sales funnel and convert into deals.
What platform has the highest conversion rate? ›
On Generating Conversions
Facebook is the one to beat when it comes to conversions. Facebook ads have an average conversion rate of 9.21%, which is higher than Google ads (3.75%).
Why is the conversion rate important? ›
Why are conversion rates important? Conversion rates are an effective way of comparing and contrasting the performance of multiple advertising channels. As with the example above, conversion rates are particularly important when running mobile user acquisition because they can measure the success of each campaign.
What is a good conversion rate email marketing? ›
Generally, 2% to 5% is seen as a good email conversion rate, but again it depends on the industry you are involved in. Surprisingly, there's never a precise answer to it. The best thing to do is to view anything higher than your current conversion rate as better, and work to improve it continually.
What is a healthy conversion rate Shopify? ›
What is a good conversion rate on Shopify? If you want a good conversion rate on your Shopify store, your rate should be above 3.7%. Anything above 3.7 percent puts you in the top 20% of Shopify stores for conversion rate, and anything above 5.2 percent can put you in the top 10%.
What is a good conversion rate for inbound leads? ›
But what's the average return on an inbound marketing campaign? The average inbound marketing conversion rate of all website traffic ranges from 1% – 10% depending on many factors including industry, seasonality, demand, reputation, SEO, copy/text, and the list goes on.
check out our ultimate guide to conversion rate optimization for more best practices.
- Rework Your Offer. Take a hard look at your offer. ...
- Talk About Benefits, Not Features. ...
- Target High-Quality Leads. ...
- Retarget Your Audience. ...
- Watch The Competition. ...
- Have Credibility. ...
- Use Email and Automation. ...
- Personalize The Content.
The average conversion rate, then, hovers between 2% and 10%. But keep in mind that these numbers are not contextual to your business, products, services, or offer. At ClickFunnels, for instance, we typically see much higher conversion rates for our main offers than what you're seeing here (between 10% and 40%).
What is a good pipeline conversion rate? ›
Across industries, the average landing page conversion rate was 2.35%, yet the top 25% are converting at 5.31% or higher. Ideally, you want to break into the top 10% — these are the landing pages with conversion rates of 11.45% or higher.
How do you optimize conversion funnel? ›
3 Strategies for Conversion Funnel Optimization
- Find Outlier Segments. The first strategy is to find customer segments that convert at a higher rate than the average. ...
- Fix the Biggest Holes. The second strategy is to fix the biggest holes or drop offs. ...
- Remove Steps Altogether.
Conversion rate is a marketing funnel metric that indicates the percentage of leads that become customers. Tracking this metric is crucial as the goal is to convert the most number of leads. Thus, monitoring the conversion rate can help you increase your revenue.
What is lead conversion rate? ›
What is Lead-to-Customer Conversion Rate? The lead-to-customer conversion rate, also known as sales conversion rate or lead conversion rate, is the proportion of qualified leads of a company that result in actual sales. The metric is critical to evaluating the performance of a company's sales funnel.
What is the conversion rate of a sales page? ›
The average landing page conversion rate falls around 2.35%. The top 25% sites are converting at 5.31% and above, while the top 10% are looking at 11.45% and above.
What percentage of leads turn into sales? ›
What percentage of leads turn into sales? Whether in B2C or B2B sales, every lead you generate has the potential to transform into a paying customer. Unfortunately, not all of them do. According to the latest studies, only 10% to 15% of sales leads make it to the bottom of the sales funnel and convert into deals.
Can conversion rate be more than 100? ›
If you're tracking more than one conversion action, or you choose to count "Every" conversion, your conversion rate might be over 100% because more than one conversion can be counted for each interaction.
Why is the conversion rate important? ›
Why are conversion rates important? Conversion rates are an effective way of comparing and contrasting the performance of multiple advertising channels. As with the example above, conversion rates are particularly important when running mobile user acquisition because they can measure the success of each campaign.
Luckily, those changes don't need to be terribly time consuming, and you don't have to improve too much at once.
...
Verify - Make your your results are statistically significant.
- Step One: Examine. ...
- Step Two: Implement. ...
- Step Three: Test. ...
- Step Four: Verify.
This leads us to our next point: full-funnel optimization. This is where you use marketing data to evaluate what's working and what isn't, and then look for ways to improve it so that you can enhance the customer journey.
How do you increase conversion rate? ›
How to Increase Conversion Rate
- Use a CRO planner.
- Shorten your forms.
- Include social proof.
- Track how people interact with your site.
- Add live chat.
- Test your offers.
- Conduct A/B testing.
- Increase trust and remove friction.
Funnel analysis is a great tool to measure the user journey, the conversion and the development of your users – step by step. When you set one up, define 4-8 steps and create a funnel visualization that's easy to understand! Extract insights!
How do you analyze sales funnels? ›
How to analyze your funnel
- The total number of conversions of the whole funnel during a specific reporting period (for website conversion funnels).
- The number of daily sign-ups and active users (for platform conversion funnels).
- Customer churn and revenue churn rates (for SaaS conversion funnels).
A funnel analysis is a method of understanding the steps required to reach an outcome on a website and how many users get through each of those steps. The set of steps is referred to as a “funnel” because the typical shape visualizing the flow of users is similar to a funnel in your kitchen or garage.
Short landing page copy (ideally under 250 words unless you have a sophisticated product) written at elementary school or middle school level correlates with higher conversion rates.
