SaaS Sales Funnel: The 5 Most Important Stages

Walking a prospect through a SaaS sales funnel isn’t unlike making a new friend. You have to make a good first impression, pique their interest, get to know each other, gain their trust, and develop the relationship over time. It takes careful thought and skill to map out the most effective SaaS sales funnel and keep prospects moving forward. And with SaaS sales, that first purchase isn’t the goal; it’s all about building loyal customers that renew and renew and renew.

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What Is a SaaS Sales Funnel?

SaaS sales funnels are all of the stages that a customer passes on their way to becoming actual software users. Note the use of the word “actual.” Unlike other types of sales funnels, SaaS relies on customers who renew their subscriptions.

This is because the SaaS sales process is different. It’s standard operating procedure for anyone in software sales to attract customers for a demo, get them to sign up for a trial period, and even entice them to pay for a month of service. Job done? Not exactly. Although this is a great way to pad your SaaS sales metrics, it’s game over in the long run if those customers don’t keep coming back for more.

How Is this Different from a SaaS Marketing Funnel?

There are some companies that use “marketing funnel” and “sales funnel” interchangeably. But we beg to differ. In most software companies, there is a sales department and a marketing department, and they do different things. Mostly, marketers make the stuff that allows salespeople to sell. Collateral, websites, white papers, and videos are only a few examples. In other words, the marketing funnel includes those activities within the sales process that enable sales.

Why is this important? Depending on your SaaS go-to-market strategy, your company might need a lot of marketing to occur in the SaaS funnel, or not much at all.

For example, some types of B2B SaaS, like Slack, use a product-led growth strategy, where the app itself engages the user and gets them to onboard, renew subscriptions, etc. Marketing efforts are critical here.

But other types of software, particularly enterprise SaaS sales, rely on a person to contact leads and nurture prospects. Here, activities that are most properly done in-person take the front seat, with less dependence on marketing.

And What About SaaS Sales Pipelines?

Another area of confusion relates to the number of funnel stages. Some salespeople take the idea of retention (where the customer renews their subscription) very seriously. There are some sales funnels that look more like hourglasses – there are just as many stages after the first payment as before it.

This could result from mixing the ideas of the sales funnel vs. sales pipeline. The sales pipeline is a list of everything that the salesperson does from beginning to end, up to and including amazing feats like customer advocacy. There are a lot of steps in the pipeline. On the other hand, a funnel represents the customer experience, and should be as short as possible. No customer wants to go through 12 stages of dealing with salespeople!

SaaS Sales Funnel Stages

To help clarify things, we’ve broken down the five basic stages of a SaaS funnel. They touch on all of the activities that go on during each stage, AKA, the pipeline. These activities will vary according to what you are selling and to whom you are selling it, and should be laid out in the details of a go-to-market strategy.

Awareness

First impressions count, but how do you make hundreds of first impressions? That depends on knowing your customer and where they happen to browse for solutions. Creating awareness can take place over the Internet and through a dynamic SEO strategy. If you have the budget, try advertising and social media. Or, if your target clients have complex needs and many gatekeepers, outbound sales techniques like phone calls and emails can be surprisingly effective. The trick in these cases is to identify the right person, and engage them with a value proposition that they can’t refuse.

Engagement

If you’ve got a lead on the phone, then encouraging their interest might just be a matter of a good script. On the other hand, if you are using inbound sales techniques, this means signing up to receive content and emails, consenting to a talk with a rep, or interacting with a chatbot. But it’s not always an intuitive matter to get prospects to engage with your messaging. To maximize engagement when contact is virtual, it’s essential to:

• Track the customer journey through the website
• Use A/B testing to optimize page layouts and forms
• Use calls to action at important points

Intent

At this stage, you’re no longer nudging a busy prospect to take the next step. Instead, they have a feel for your value proposition and want to know more about your solution. SaaS is a great thing to be selling at this point because demos make fantastic sales tools. Simple products can often get away with a 7-day trial version, while complex packages often come with a 30 day tryout and in-person demos and support.

Even if the prospect bows out afterwards, the demo is still your friend. If you’ve established a rapport with the prospect, use it to find out what went wrong, and bring that up with the dev team. If trial users aren’t in touch, then track events like activation rates and feature usage. It could be that the demo doesn’t onboard in a way that leads users to important features, or that the software has tools that nobody wants.

Conversion

Another difference between marketing and sales – when marketers talk about conversion, they often mean that a prospect has clicked on a CTA or called a rep. But for sales, conversion means money. The prospect has turned into a customer by purchasing, for instance, a month-long subscription to your software.

This is the first of two crucial moments for sales metrics and the SaaS funnel. Showing revenue is what it’s all about. But don’t celebrate yet! It’s vital to discover what your conversion rate is by comparing, for example, how many leads showed intent to how many converted. There is a ton of variance when it comes to this figure because trials can occur in multiple ways. But, for free trials where no credit card info is required (“opt-in” trials), the conversion rate is 25%.

Retention

The second crucial moment for the sales funnel is when the customer renews their subscription, or simply continues using the software (in the case of usage-based models). Retention is a never-ending story, because it’s always important to minimize churn. Again, it’s difficult to nail down an “average” retention rate because the nature of the software and the client make a big difference. But a good customer (“logo”) retention rate for a small SaaS company is about 95% on an annual basis (as there will be some replacement of churn by new customers).

Key Takeaways

• A SaaS sales funnel describes the various stages passed through by a prospect as they (hopefully) become long-term customers
• The SaaS sales funnel is supported by marketing activities, while the details of what the salesperson does at each level of the funnel are laid out in a sales pipeline
• The five basic stages of a SaaS sales funnel are awareness, engagement, intent, conversion, and retention