I. Introduction

A sales funnel is a structured way to acquire customers at scale. It allows you to understand the sales process from the buyer’s perspective and make improvements that achieve better results for your SaaS business.

The VP of Sales creates a funnel strategy with sales and marketing teams, sets funnel performance metrics, and greenlights investments in funnel software and tools. The VP also decides the performance targets for sales teams.

II. What is Funnel Building?

A. Defining Sales Funnel and Its Components

A sales funnel is the sequence of steps a user takes from awareness to deal closing. The stages of the sales funnel are described by the AIDA model: awareness, interest, desire, and action.

B. Why Funnel Building is Essential for Sales Success in the SaaS Industry

Customers are the lifeblood of a SaaS business. The SaaS sales and marketing strategy is laser focused on acquiring, monetizing, and retaining customers. SaaS salespeople are constantly looking for opportunities to increase conversions and optimize the sales process. A sales funnel is a tool to meet these goals.

SaaS companies use the funnel to track prospects across the customer journey, adjusting strategies and marketing methods in response to their behaviors. By optimizing each stage of the funnel, businesses can increase revenue by maximizing the value of each customer.

III. Understanding the Stages of a Sales Funnel

A. Top of the Funnel (TOFU): Lead Generation

The first stage of a sales funnel is brand awareness. It is where potential customers become aware of your product, which is also the main goal of a marketing funnel.

You can attract as many potential customers as possible via social media, search engines (SEO), word of mouth, or referrals. Also create lead magnets, valuable content via case studies, blogs, and webinars, offered free in exchange for contact information.

B. Middle of the Funnel (MOFU): Lead Nurturing and Qualification

In the second stage of the sales funnel, the focus turns to building a rapport with leads and continuing to communicate the value of your product. As you will have started engaging actively with leads, you will have information that helps you determine whether they’re likely to convert into paying customers. You can then categorize them based on the likelihood that they will convert, assigning each lead a score. Those likely to become customers should receive high priority.

C. Bottom of the Funnel (BOFU): Conversion and Closing

The final stage of the sales funnel is where the customer is in a position to buy. If they believe your product offers value, they will sign up for a paid subscription. You can also point them to a free trial or another incentive like white-glove onboarding assistance if you have a complex product.

The purchase process should be simple and seamless. Your SaaS contract should explain performance obligations and billing in a direct and clear way.

Your conversion and deal closing rate will tell you how well your sales funnel is performing. If your closing rate isn’t meeting or exceeding the industry benchmark, an examination of the funnel will become necessary.

IV. Strategies for Effective Funnel Building

A. Customer Persona Development

The more the customer data, the more effective your sales funnel. You’ll use that data to create buyer personas, a fictional representation of your customers based on their demographic, psychographic and technographic data.

B. Content Creation and Distribution

Content marketing is a powerful strategy for surfacing prospects to the top of the funnel. SaaS companies create different types of content addressing target audience's pain points and interests. The content is shared on the company website and within social media posts linking back to the website. LinkedIn is the top-performing channel for B2B SaaS companies while Facebook works better for B2C SaaS.

C. Lead Generation Tactics

Website and landing page optimization, social media marketing, referral marketing, and blogging are examples of the digital marketing tactics used to acquire leads. If your product is simple to understand and start using quickly, you can offer a free trial that allows prospects to realize value on their own.

D. Lead Nurturing Techniques

Based on your buyer personas, create targeted content and share via drip email marketing campaigns. Create irresistible calls to action (CTAs), convey social proof, and A/B test your messages. Determine a good time to jump in with a sales pitch during the nurturing phase. Retargeting Facebook ads are effective in nurturing warm leads and keeping you front-and-center in their minds.

E. Conversion Optimization Strategies

Your sales funnel can tell you when conversion and leaks are happening.

For this, you’ll need real-time data tracking to see the customer journey and friction points along the way. Another way to understand the customer experience is through Customer Satisfaction survey (CSAT) and make the necessary changes to improve conversions, upsells, and customer retention rate.

V. Best Practices for Funnel Optimization

A. Tracking and Analyzing Key Metrics

The common quantitative metrics to measure the performance of a sales funnel are:

• Conversion rate, the percentage of highly qualified leads that convert to paying customers and fulfill the goal of the bottom-of-funnel stage.

• Cost per acquisition, the cost of acquiring new customers.

• Customer lifetime value, which tracks revenue from a single customer throughout the business relationship.‍

• Click through rate, the percentage of email recipients who clicked on the email sent to them during the nurturing stage.‍

• Customer engagement score, which indicates how engaged customers and free trial prospects are with your product, as expressed on a scale of 1-100.

B. A/B Testing and Continuous Improvement

A/B testing is a powerful tool to test different versions of your sales funnel to determine which one performs better. You can test your landing page design, CTA, free trial sign-in process, interactive product experiences, and more.

C. Aligning Sales and Marketing Efforts

The marketing team sees customer behavior at the start of the sales cycle while sales sees it at the end of the cycle, when the deal closes. When sales and marketing teams have a way to share the information they’ve gathered through interacting with leads and customers, they can together create better customer journeys and generate more high-quality leads.

D. Leveraging Automation and Technology

Sales funnel automation utilizes software tools and systems to streamline and optimize the various stages of your sales funnel, from lead generation to conversion and retention. It automates repetitive and manual tasks, saving time, money, and resources, while boosting the customer experience and sales performance.

VI. Tools and Resources for Funnel Building

A. CRM Systems

Using a CRM software, you can manage and track your interactions with potential and existing customers throughout the sales funnel. This can include tracking customer interactions, managing sales leads, and automating sales processes.

B. Marketing Automation Platforms

A marketing automation platform streamlines lead nurturing, sending out follow up email using conditional logic and minus human input. Most marketing automation platforms come with built-in tracking features that show the performance of sales funnels, surveys, and forms.

C. Analytics and Reporting Tools

Funnel analysis tools map the flow of website visitors to the step-by-step buyer’s journey that result in signups or conversions. They inform you about the number of visitors moving through each step and highlight problem areas.

D. Landing Page Builders

You can use ready-made layouts to create landing pages without much effort. The newer page builders are AI-powered with smart features that allow you to create high-performing landing pages within minutes.

E. Email Marketing Software

A number of email marketing tools are available to automate and personalize your email campaigns. The popular ones include Mailchimp, Constant Contact, and ConvertKit.

VII. Building a strong Bottom of Funnel

A. Why companies struggle with Bottom of Funnel conversion rates

Getting BOFU prospects to convert is often the most challenging part of SaaS sales. This is when prospects are faced with the choice to pay and use or sign up for a free trial and use your product anyway. Unless they’re entirely convinced about the value of your product, they’re unlikely to buy or try. So, valuable content at all stages of the funnel matters.

Sales and marketing teams should anticipate the questions and doubts prospects may have at various stages, and provide the content or assistance required to shape a positive experience. This will go a long way in nudging prospects to stick with your company at the end of the finish line.

VIII. Conclusion

A. Recap of the Importance of Funnel Building

A sales funnel is an indispensable SaaS tool to track prospects’ behaviors and gain insights that drive improvements in customer experience and contribute to more deal wins. A number of tools are available to automate sales funnel building and capture funnel performance.

B. Actionable Steps for VP of Sales to Implement Funnel Building

Particular focus on these elements of funnel building will result in a well-designed funnel:

• Create detailed buyer personas

• Invest in a lead-scoring platform that integrates with CRM, billing, and third-party data for behavioral scoring

• Build persuasive landing pages

• Implement powerful email campaigns

• Invest in funnel analytics and monitor team progress