SaaS Companies: You Should Take Conversion Rates with a Grain of Salt

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December 28, 2023

SaaS Companies: You Should Take Conversion Rates with a Grain of Salt

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These days, it seems like everyone and their mother is selling a product or service that “improves conversion,” and “content rate optimization” (CRO) is all the rage. 

It’s not hard to understand why everyone is obsessed with tracking and improving this metric—conversion (especially making a sale) is the goal, after all.

💡 Knowing how to properly calculate conversion rates is crucial for SaaS companies. 

However, the calculation is not as simple as it may seem on the surface and can be misleading in some cases. 

In this article, I’ll get into the nitty-gritty of SaaS conversion rates—and I mean all of it: types of SaaS conversions, how to calculate, industry benchmarks, biggest pitfalls, and optimization strategies.

Let’s start with the basics… 

What Are SaaS Conversion Rates? 

A conversion rate, in broad terms, is the metric that gauges the percentage of users who have completed a desired action. This could be anything from subscribing to a newsletter to signing up for a webinar to making a purchase. 

In terms of SaaS, it often (but not exclusively) refers to free trial conversions. Meaning, how many trial users finally became paying customers? 

It’s a metric that can be used to measure the effectiveness of your marketing and other efforts. 

Tracking your rates and comparing with industry benchmarks (more on that later) can have many benefits, namely: 

  • Making better decisions based on proven data
  • Understanding how well your SaaS is doing
  • Highlighting your most effective conversion channels 
  • Gaining insights into what doesn’t work. 

That being said, it’s important to note that average conversion rates will vary a good deal depending on both the type of conversion as well as the type of SaaS product.

4 Types of SaaS Conversions

To get more precise insights, it’s possible to measure the individual conversion rates of each of your CTAs, marketing channels, and audience segments. Also, keep in mind that the different stages of the customer lifecycle will have their conversion rates as well. 

Before we get further into the numbers, let’s look at some key conversion types in the SaaS customer life cycle. 

saas conversion rate benchmarks
The 4 different types of SaaS conversion rates

Website Visitor to Trial User 

First, you’ve got to convince people to test out your product. This type of conversion is all about transforming website browsers into trial users. 

The quality of your marketing, website content, user experience, and calls to action will all affect conversion at this stage.  

👉 Note that trials can either be opt-in or opt-out, the former meaning customers can access a free trial without putting in any payment information and the latter requiring a payment upfront. 

The model you choose will impact conversion rates both in terms of signing up for a trial and then converting from a trial user into a paid user. Speaking of…

Trial to Paid User

Converting from a paid user to a trial user happens when you manage to convince your users that your product is worth paying for. Things like your onboarding process and user support can make a big difference at this stage. 

Trial length and type also tend to have a significant impact on trial-to-paid-user conversion rates. 

Freemium to Paid User

Freemium SaaS models allow users the opportunity to use the basic functions of a service for free, attracting a large user base. The challenge then comes in convincing users that they need to pay for premium features. 

Freemium-to-paid user conversion rates are largely dependent on how valuable your users believe your extra features are. So, showcasing those extra features as well as highlighting the limitations of the free plan is crucial at this conversion stage.   

Upgrades

Another important SaaS conversion is when users transition from their current plan to a higher-tier subscription. 

Users upgrade based on their needs and overall satisfaction with the product. Additionally, factors like user support, personalized communications, and a simplified upgrade process can have a big impact. 

SaaS: Calculating Your Conversion Rate 

saas conversion rates
SaaS conversion rate calculation

Whatever the type of conversion you’d like to calculate, you can turn to this single formula to get your percentage rate: 

Conversion rate = (conversions / total number of opportunities) * 100%

What you plug into this formula will depend on the type of conversion you’re calculating. 

I’ll illustrate with a simple example. 

Let’s say that during November, your website attracted a total of 25,000 visitors. Out of these, 1,500 decided to sign up for a free trial. 

In this case, your “number of opportunities” would be your number of website visitors. 

So, we’d calculate:

(Number of trial users / total website visitors)* 100% or (1500/25,000)*100%

Which gives us 10%. 

Your trial user conversion rate is 10%. 

So you now know how to calculate your conversion rates which is a great thing as maybe you have your boss breathing down your neck, and now you can present him with the numbers.

There’s just one thing…

SaaS Conversion Rates Can Be Misleading

Measuring conversion rates is all fine and dandy (and can be valuable), but make sure you don’t let the numbers lead you astray. There are several reasons you should take these numbers with a grain of salt. 

Let’s get into it. 

❌ Attribution is complicated

The customer journey is complex.

Customers don’t just convert after having one interaction with a brand. Rather, conversion happens after being exposed over time on different channels. 

This is important to keep in mind when it comes to using conversion rates to evaluate your various marketing channels because it can be hard to pinpoint where conversion really comes from. 

Let’s say you have a high conversion rate for a Facebook marketing campaign where you’re measuring the percentage of purchases as it relates to ad impressions. 

Can we be sure that the ad was the deciding factor in their buying decisions? 

👉 Users go through many different touchpoints before converting. While attribution may seem “straightforward” for something like ads, it’s hard to even assign a number to something like content marketing since conversion doesn’t happen after stumbling upon one piece of content.

We get more into this in our piece about content marketing attribution if you are interested in learning more about the complexities of attribution when it comes to content and the best ways to measure it. 

❌ Conversion rates don’t reflect the value of brand building

The conversion rate calculation doesn’t take into account user intent and this can be misleading when assigning value to your marketing through conversion rates. 

For example, say you are measuring the percentage of purchases in relation to your number of website visitors. 

You have a robust content and SEO marketing strategy with tons of informational content like blogs, eBooks, and case studies on your website. This brings in tons of traffic but doesn’t lead to a proportionately large amount of conversions during the past month.

Your low conversion rate means you should stop this top-of-the-funnel content production immediately and adopt a new strategy, right? 

Well, not necessarily.

There is still tons of value in getting eyes on your site. 

👉 When it comes to SaaS, buyers’ cycles are long, and building brand awareness has its value. 

Imagine users are regularly coming to your website for information, but they have no intention to buy. Well, familiarity with your brand means that when they are ready to buy, they’ll be likely to turn to you to make their purchase. 

The conversion rate calculation would be more accurate if we could take into account the intent of people visiting your website. As in, how many people who came to your site to buy (as opposed to for information) ended up making a purchase?  

❌ Not all conversions are equal

It’s important to keep in mind that not all conversions bring the same value to your business.

What do I mean by this?

We can start with a basic example. 

Let’s say you are measuring the percentage of website visitors who filled out a contact form. If your website copy is misleading and your messaging misaligned, you could end up with a huge contact list yet very few of these leads have any interest or need for your product. 

Yeah, you have a high conversion rate, but your leads aren’t worth much!

When it comes to SaaS, customer lifespan is crucial for subscription-based models.

The conversion rate calculation doesn’t differentiate between trial users who convert to long-time paid users versus those who churn after two months. 

Since there’s no room for nuance when it comes to conversion rates, it’s crucial to consider this metric alongside other valuable metrics, like Customer Lifetime Value, customer retention rate, and churn rate

❌ Conversion can be delayed

Remember our conversion rate formula? 

Here it is again in case you forgot:

Conversion rate = (conversions / total number of opportunities) * 100%

When coming up with the number of conversions to use in this formula, it’s important to count only the conversions resulting from the total number of opportunities for your given period. Otherwise, you won’t get an accurate look at leads created versus leads converted. 

But what happens if an opportunity waits a loooong time to convert (say, a year)? 

This type of scenario is not uncommon for B2B SaaS. 

If conversion happens over an entire year, you could wait to report your conversion rate until the end of the year. But, realistically you probably need to do your reporting quicker than that. 

What to do about this? 

One option is to calculate conversions thus far...  but this approach may lack accuracy, and comparing results between different quarters could be misleading

Another approach is to perform multiple calculations for varying periods—maybe three months, six months, etc. Longer periods will yield more accurate results, but shorter ones will provide a quicker turnaround for reporting.

The last option would be to estimate future conversions. For those leads who haven’t yet converted, you could estimate how many will convert based on previous rates, but it will be just that—an estimation.  

See the problem? 

saas free trial conversion rate
The potential drawbacks of calculating your SaaS conversion rate

SaaS Conversion Rate Benchmarks

So you are now aware of the potential pitfalls and blind spots when measuring conversion rates, but you still find yourself wondering, “What is a good conversion rate for B2B SaaS?” 

As promised, let’s take a look at some industry statistics because it never hurts to see how your numbers stack up. 

b2b saas conversion rate
SaaS conversion rates vary by industry

This report from First Page Sage looks at free trial and freemium conversion averages of 86 SaaS companies, largely B2B. They lay out SaaS average conversion rates by industry, including: 

Visitor to trial conversion rate

  • Advertising/AdTech= 9.1%
  • CRM= 9.7%
  • Cybersecurity= 7.4%
  • HR = 8.1%

Trial to paid conversion rate

  • Advertising/AdTech= 24.3%
  • CRM= 29.0%
  • Cybersecurity= 21.9%
  • HR = 22.7%

They also break down conversion rates by free trial type, coming to the following conclusions: 

  • For website visitor to free trial, opt-in free trials have much higher conversion rates than opt-out free trials (8.5% versus 2.5.% of organic traffic).
  • From free trial to paid, opt-in free trials have significantly fewer conversions than opt-out free trials (18.2% versus 48.8% of organic traffic). 
  • Website visitor to freemium has a higher conversion rate than free trials (13.3% of organic traffic).
  • Freemium to paid is the type of conversion with the lowest rates (2.6% of organic traffic). 

When comparing your conversion rates to other companies, remember that averages will depend on the industry, your product's complexity, and the trial's length, among other factors. 

👉 Instead of fixating too much on industry averages, it's better to focus more on tracking your own conversion rates over time and actively seeking ways to improve them.

After all, your business model is unique and you’ll be able to make more strategic decisions armed with your own data.

How to Improve Your SaaS Conversion Rates?

Increasing conversion means looking into what is and isn’t working about your current conversion channels as well as optimizing your website and product to be as user-friendly as possible. 

Let’s get into the specifics.

Get more qualified traffic

If you’d like to improve your conversion rates, you’ll need to start by digging deeper because you’re going to need more insight. 

For SaaS companies looking to convert their website traffic to paid users, a good place to start is to look at your bounce rate or the percentage of users who leave your site after visiting one page, meaning users aren’t all that interested in the content of your site.

For reference, the average 2023 SaaS bounce rate is 64.56% according to a report by DataBox. Note that this average is higher than in other industries like eCommerce. 

Having a higher-than-average bounce rate can reflect a problem with attracting qualified traffic (people who are actually interested in what you have to offer). 

To fix this issue, you’ll first need to hone your company’s positioning and marketing messaging. Poor positioning is a common problem for SaaS companies and will undoubtedly lead to low conversions. 

Strong positioning will help the right users land on your website. So, get back to the basics and make sure you know:

  • Exactly what your product is
  • What it does for people
  • How it’s different from competitors’ products. 

Then, make sure that you are communicating all this through your marketing copy.

The second point to investigate when it comes to unqualified traffic is your SEO strategy.

Instead of producing content to focus on high-volume keywords related to your industry, make sure you really get to know your users and choose topics that align with potential user’s search intent. 

You can read our piece on SaaS keyword research to learn more about the best approach to choosing content topics and keywords and the mistakes you should avoid. 

Improve user experience

The user experience of your website and app can make all the difference when customers decide to convert at all different stages of the customer lifecycle. It’s all about reducing friction to guide users to sign up for a trial and then finding ways to make upgrades seamless and enticing.  

Let’s look at some specific strategies that SaaS companies can implement to enhance the user experience (and thus conversion) along with some examples of companies who do it well. 

#1 Simplify the sign-up page for free trials 

Simplicity is key, especially when encouraging users to make the move to sign up for a free trial. Minimize steps users must take and stick to collecting basic information initially—you can gather more details from users at later stages.

Optimize for SaaS conversion
Trello optimizes for conversion through simple sign up.

We can see how Trello, a project management tool, simplifies its sign-up page for free trials by requiring only an email to get started.

Paired with a clear and simple call to action, users are enticed to create an account with minimal steps, facilitating a seamless onboarding experience.

#2 Personalize onboarding 

Create a personalized onboarding experience by incorporating welcome screens. 

Tailor the content to match users' interests and preferences. This not only makes users feel valued but also provides them with a smoother introduction to your platform.

SaaS conversion rate example
HubSpot makes personal recommendations based on your business.

Here’s an example of personalized onboarding from HubSpot. 

Upon signing up, users are greeted with tailored messages and recommendations based on their company type and goals. This personalized approach helps users navigate the platform more quickly and easily.

#3 Use interactive assets to guide users on how to use your product

Opt for interactive assets, such as step-by-step guides or interactive tutorials, to assist users in understanding how to use your product effectively. 

Breaking down product information into digestible chunks is more user-friendly than overwhelming users with an all-in-one product tour at the beginning.

Conversion rates for SaaS
Intercom's interactive assistant makes onboarding go smoothly.

Intercom, a customer communication platform, uses an interactive assistant to guide users on how to use their product. 

The platform integrates interactive tips and guided tours within its interface, providing users with step-by-step instructions to explore features at their own pace.

#4 Employ pop-ups or messages to help users discover more features

Strategically implement pop-ups to highlight additional features or functionalities of your product. This can be especially helpful in encouraging users to upgrade to a higher tier or from a freemium model to a paid subscription. 

These pop-ups can act as subtle guides, making sure users are aware of the full range of capabilities your platform offers.

conversion rate optimization for SaaS
Grammarly encourages users to sign up for their premium subscription.

We can see how Grammarly, the writing assistant tool, gives users a peak at the type of features included in the paid version of their tool. 

Grammarly shows users where their text could be further improved and entices users to upgrade to access more information. 

Wrapping up on SaaS Conversion Rates

Knowing how to calculate your own conversion rates will empower you to make better business decisions. 

Just be aware of the potential complications and pitfalls when it comes to calculating this crucial metric. 

If you zero in on conversion rates alone and never investigate any further, you risk being led astray. 

Always look at conversion rates alongside other metrics for a more holistic view. 

And as important as conversions are, remember that for SaaS, customer retention and satisfaction are also just as important. 

So, yes, calculate your conversion rates.

Track them over time.

Optimize for them.

Just keep in mind that conversions are milestones, not the finish line. 

Alexis Herrington

I’m the new SEO hire at ScaleCrush! A former teacher, I love transforming complex topics into easy-to-understand content. I’m always busy learning all about marketing and love sharing my thoughts along the way.

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