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B2B SaaS Conversion Rate Industry Benchmarks - What Should Be Your Takeaway?

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B2B SaaS Conversion Rate Industry Benchmarks - What Should Be Your Takeaway?

Posted by Priya Nain

10/27/22 6:31 AM | Comments

B2B-SaaS-Conversion-Rate-Industry-Benchmarks

A strong conversion rate is the only difference between a successful and a struggling SaaS business.

Still, no magic number can predict the company’s future. A 5% conversion rate may be the gold standard for one, and it might be a nightmare for others.

Knowing what benchmark you should set for yourself will save you from failures and disappointments.

In this article, we will analyze the ins and outs of B2B SaaS conversion rate, including how to calculate it.

What is B2B SaaS Conversion Rate?

Conversion percentage is the number of people completing the desired action out of the total number of people. Now, your definition of the desired action might differ depending on your goal and the medium you choose.

For example– in email marketing, the conversion would be defined by the people clicking on the CTA button. Whereas on a website, it might change to people buying the product.

But for a SaaS business, it usually boils down to the number of people who end up purchasing your services compared to the total number of visitors.

How to Calculate Conversion Rate?

As discussed earlier, the conversion rate primarily depends on what conversion is to you. After that, you can divide the number of customers converted by the total number of people.

Source

Let’s understand this with an example.

Suppose there is a business selling an online time management tool. Its website receives 50,000 unique visitors monthly. Out of those, 2000 complete the payment and buy the product.

So, the conversion rate would be = (2000/50000) X 100.

If you also said 4%, you are right. 

What is the Importance of B2B SaaS Conversion Rate?

1. To Plan Effective ROI

Not all your marketing channels will give you equal returns, but knowing which ones will, can transform your conversion game.

To plan your resources effectively, compare the conversion rate of each advertising channel and set out to invest in the promising players.

2. To Manage Lead Pipeline Better

Your sales team might be pushing the leads through one end of the pipeline, but how many are actually turning out to the other side?

It’s crucial to have a grip on the conversion rate metric to analyze past trends and plan for the future accordingly.

3. To Gain Market Insights

Nothing can save your conversion rate if you are selling to the wrong audience. Your audience should at least have a buying intent for you to nurture it.

That’s why analyzing this metric is critical to fill the gap between your target audience and visitors.

4. To Optimize Processes

If your leads aren’t converting, who’s to blame? 

Maybe your landing pages aren’t designed effectively, or the CTAs aren’t clear about what they offer.

Whatever may be the case, complicated navigation can tank your chances of conversion. Look out for the nooks and corners where your potential customer is leaving the website before they make a purchase and prioritize the user-centricity of your SaaS website.

What is a Good Conversion Rate?

A B2B SaaS business attracts leads to the funnel through any of the following ways.

  1. Free Trial (With credit card details): A limited-time free trial is provided to the customer only if they add the payment details. To continue services, they have to buy a subscription. Example- Netflix

  2. Freemium: A freemium model is when a business offers its basic features to all customers free of cost but asks for an amount to upgrade capabilities. Example- Slack

  3. Free Trial (Without credit card details): SaaS businesses understand that sharing credit card details is a commitment many customers aren’t willing to make. To still keep them in the pipeline, companies offer a free limited-time offer and, after its expiration, ask for payment to continue services. Example- Drift

The conversion rate varies based on which model you have chosen for your business.

Freemiums see a conversion rate between 1-10%.

Free trials with payment details enjoy a conversion rate of 25%.

And free trials without payment details see a conversion rate between 8% and 10%.

How are B2B SaaS Conversions Different From Other Businesses?

You can’t beat yourself up by comparing your conversion rate with other businesses. SaaS has a different customer base, market requirements, and cost than other industries.

Let’s examine it in contrast with an ecommerce business. The conversion rate for such an industry is around 3%, while SaaS has an average rate of 7%. This difference is because the ecommerce audience has a weaker purchase intent than a B2B SaaS consumer.

Also, there is much more competition for ecommerce players, whereas a SaaS business product has few key competitors with similar offerings.

A SaaS business follows an elaborate funnel to convert a lead to a buyer, which is not the case with most of the other industries.

Source

What is a B2B SaaS Funnel Conversion Benchmark?

A SaaS industry follows a six-step process to weed out the invalid leads from the pipeline.

  1. New Visitor: Any unique visitor to the business website

  2. Lead: When the visitor shows interest in any offered services

  3. Marketing Qualified Leads (MQL): Marketing team gives a score to the lead based on the client’s reputation and potential

  4. Sales Qualified Leads (SQL): Sales verify the possibilities with the client and score it for further action

  5. Opportunity: A good lead turns into an opportunity that needs to be pursued for closure

  6. Close Deal: When the client agrees to the commercials, the deal is marked as successfully closed

A healthy funnel should at least match the standard benchmark for each stage. Otherwise, you will limit your growth with a tapered funnel.

Here are your go-to notes to compare your conversion rate for various advertising channels.

Source

Things to takeaway:

  1. The conversion rate can be different for different channels.
  2. It’s essential to understand your definition of conversion rate.
  3. It can also vary based on your company's size. An enterprise business will obviously have more funds to spare than a budding one.

How to Amp Up Your Conversion Rate?

100% conversion rate is unrealistic, irrespective of which product you are selling, to whom, and how much you spend on advertising.

But it shouldn’t hold you back.

Instead, strive for conversion rate optimization with data-driven benchmarks.

Provide value to the potential customers, and that too, urgently. Also, pay attention to the details and especially your interface. Each word and image on your website or email should bring the visitor closer to the desired action.

And don’t forget to re-engage with your stray deals to tap into the lost potential. You can cut to the chase and hassle with the right tools that boost your product sale.

Talk with a Growth Expert

Topics: SaaS Acquisition

   

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