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Yikes, that was the best article on SaaS that I've read all year. So much great information. A few things jumped out to me as off: > Conversion rates of low-t

by a13n 9y ago

Yikes, that was the best article on SaaS that I've read all year. So much great information. A few things jumped out to me as off: > Conversion rates of low-touch SaaS trials with credit card not required: > 2%+: extremely good Really? 2% seems awful. If a company signs up for your trial, they must have a problem they're trying to solve. If you don't solve 98% of peoples' problems, it seems like you have a problem getting people engaged with your product. Our (bootstrapped low-touch B2B SaaS's) trial -> paid conversion is closer to 8%. This doesn't feel "extremely good". I think we can do much better. > Virtually no low-touch SaaS business achieves net negative churn; their churn rates are too high to outrun. What about Intercom and Front? Are they just outliers? I would guess that this is actually true, but only because most low-touch SaaS business don't have scaling pricing - they have fixed plans. If you have pricing that scales with usage/value, you'll make much more each month from expansion revenue. Overall I loved the article, and wish I could have read it a year ago before we launched our SaaS company. Thanks patio11 and Stripe.

abalone 9y ago
> If you don't solve 98% of peoples' problems, it seems like you have a problem Nah, great products are about focus. You definitely don't want to scope your focus as "98% of peoples' problems."
- a13n 9y ago
  Not 98% of people... 98% of people who had a problem that they felt signing up for your trial would solve. It's not like trial signups are coming from random people across the globe.
amitmathew 9y ago
I think the 2% metric refers to all users from top of the funnel to paying customer. I've always found the metrics in this deck helpful: https://www.slideshare.net/totango/2012-saa-s-conversions-benchmark https://www.slideshare.net/totango/2012-saa-s-conversions-be....
- a13n 9y ago
  That would make more sense. But then it's weird that for credit-card-required the conversion rate is 40-60%. That's definitely trial -> paid, not visitor -> paid.
PeterisP 9y ago
There's a big gap between someone at a company signing up for a trial and them getting enough convincing leverage to get the company to consider that seriously. All too often someone at the company is getting their problem solved (possibly by the free/trial plan), but they aren't at a position where they are able to drive any purchases whatsoever for that company.
jcadam 9y ago
Well, I've had my little SaaS up and running for about 6 weeks. - The landing page gets about 30-70 hits per day (excepting the occasional spike) -- how many of those are bots and crawlers, I wonder? - I've had a grand total of FIVE (5) trial sign ups. - No buyers yet - My linode bill is currently about ~$120/month. - Still within the free tier on S3 and Mailgun. - You know, when I'm the only one using the app, I don't place much stress on the infrastructure. Now, I can't really say one way or another if I'm getting to that 2% because I'm just not getting enough trial sign-ups :) EDIT: Oh, yea, link for the curious: https://www.contabulo.com https://www.contabulo.com Bah, I've posted it here before.
- robodale 9y ago
  Why is your linode bill so high with so few users? I see a 32GB plan is $120/month. Do you really need that?
  - jcadam 9y ago
    1. App Server (all my Clojure services... and the one transient service written in golang) 2. Postgres (Master) 3. Postgres (Standby) 4. Elasticsearch server (yea, only one right now, you know, few users) 5. One linode running RabbitMQ 6. The linode running NGINX that sits in front of the app server and does all of the reverse proxying Also, 7. The linode running the marketing site (wordpress). I know, I know, I'm a nerd and just couldn't help myself with the architecture. Hey, at least it should be fairly scalable.
    - lettergram 9y ago
      Don't need the standby server, just use automated backups. You also don't need the linode running nginx, with so few users put it on one server. Finally wordpress should be $5/month or less. Right there you could drop at least $15 / month.
      - lugg 9y ago
        $15 / month. Kind of not even worth thinking about when you're a developer and should be internally billing yourself for $100/hour+.
the_bear 9y ago
Yeah, that's the one part of the article that seemed off to me. For my low-touch, no-credit-card-up-front SaaS product we get about 25% trial-to-paid conversion rate. I think it's possible we're above average, but we're not doing 10x better than "extremely good" peers. Maybe there's just so much variance that it's impossible to give a good benchmark, but even still, 2% seems low. I also suspect that marketing has a lot to do with it. A company that's much better at marketing than product will be better at getting someone to sign up for a trial and worse at converting them, so maybe their numbers would be down in the 2% range. I feel like I'm the opposite (bad at marketing, but pretty good at product)
- csa 9y ago
  Your numbers are great, and congratulations. That said, I will guess that you are leaving money on the table by not having a wider target audience for your marketing. Also, the idea that a company is “better at marketing than at converting” isn’t really the correct way to look at it. Basically the math says that you want to keep increasing the width of the net you cast as long as it is profitable. In some cases, you will find a profitable group to market to, but the reasonable conversion rate for that market (i.e., people who end up loving or product) is just naturally lower than your high-conversion group. As a simple example, someone may have a very technical finance newsletter that they sell to finance professionals, and they covert that group at a high rate (and a high price). This newsletter can probably also target HNW individual investors profitably, but they will not likely have the same conversion rate.
BWStearns 9y ago
> Really? 2% seems awful. If a company signs up for your trial, they must have a problem they're trying to solve. If you don't solve 98% of peoples' problems, it seems like you have a problem getting people engaged with your product. Also think about how many of those signups are for "products" that never get delivered. Some side project that is thinking about charging and the dev never bothers implementing, some startup is thinking of switching from per-client contracts to a self-service model and either doesn't make the switch or dies/gets acquired before they manage it. None of those situations are Stripe not meeting someone's needs, and a single developer can create an arbitrary number of those trials throughout a year.
- a13n 9y ago
  The article isn't talking about super-early-stage SaaS, it's about SaaS in general. While 2% might be good for a just-implemented product, it comes off as poor for a mature one.
MarkMc 9y ago
> Conversion rates of low-touch SaaS trials with credit card not required: > 2%+: extremely good I think that is the percentage of website visitors who eventually become paying subscribers. Eg. 10% of visitors sign up for a trial and 20% of those trial users pay for a subscription at the end of their trial period. Patrick - can you confirm this?
- a13n 9y ago
  Then how come for credit-card-required he says 40-60%? That must be trial to paid.
47 9y ago
I do not have lot of experience in SaaS. I do have experience dealing with conversion rate in ecommerce. I believe you usually cannot compare conversion rate across different businesses in different markets. Comparing SaaS businesses in different markets is like comparing apple and oranges.
nphadke 9y ago
The article doesn't mention this but if there is a freemium component to the product, a 2% conversion rate is actually not bad. Not great, but not bad either. From what I've seen, a 3-7% conversion rate would be quite good for such a product.

by a13n 9y ago

abalone 9y ago

> If you don't solve 98% of peoples' problems, it seems like you have a problem Nah, great products are about focus. You definitely don't want to scope your focus as "98% of peoples' problems."

a13n 9y ago
Not 98% of people... 98% of people who had a problem that they felt signing up for your trial would solve. It's not like trial signups are coming from random people across the globe.

amitmathew 9y ago

I think the 2% metric refers to all users from top of the funnel to paying customer. I've always found the metrics in this deck helpful: https://www.slideshare.net/totango/2012-saa-s-conversions-benchmark https://www.slideshare.net/totango/2012-saa-s-conversions-be....

a13n 9y ago
That would make more sense. But then it's weird that for credit-card-required the conversion rate is 40-60%. That's definitely trial -> paid, not visitor -> paid.

PeterisP 9y ago

There's a big gap between someone at a company signing up for a trial and them getting enough convincing leverage to get the company to consider that seriously. All too often someone at the company is getting their problem solved (possibly by the free/trial plan), but they aren't at a position where they are able to drive any purchases whatsoever for that company.

jcadam 9y ago

Well, I've had my little SaaS up and running for about 6 weeks. - The landing page gets about 30-70 hits per day (excepting the occasional spike) -- how many of those are bots and crawlers, I wonder? - I've had a grand total of FIVE (5) trial sign ups. - No buyers yet - My linode bill is currently about ~$120/month. - Still within the free tier on S3 and Mailgun. - You know, when I'm the only one using the app, I don't place much stress on the infrastructure. Now, I can't really say one way or another if I'm getting to that 2% because I'm just not getting enough trial sign-ups :) EDIT: Oh, yea, link for the curious: https://www.contabulo.com https://www.contabulo.com Bah, I've posted it here before.

robodale 9y ago
Why is your linode bill so high with so few users? I see a 32GB plan is $120/month. Do you really need that?
- jcadam 9y ago
  1. App Server (all my Clojure services... and the one transient service written in golang) 2. Postgres (Master) 3. Postgres (Standby) 4. Elasticsearch server (yea, only one right now, you know, few users) 5. One linode running RabbitMQ 6. The linode running NGINX that sits in front of the app server and does all of the reverse proxying Also, 7. The linode running the marketing site (wordpress). I know, I know, I'm a nerd and just couldn't help myself with the architecture. Hey, at least it should be fairly scalable.
  - lettergram 9y ago
    Don't need the standby server, just use automated backups. You also don't need the linode running nginx, with so few users put it on one server. Finally wordpress should be $5/month or less. Right there you could drop at least $15 / month.
    - lugg 9y ago
      $15 / month. Kind of not even worth thinking about when you're a developer and should be internally billing yourself for $100/hour+.

the_bear 9y ago

Yeah, that's the one part of the article that seemed off to me. For my low-touch, no-credit-card-up-front SaaS product we get about 25% trial-to-paid conversion rate. I think it's possible we're above average, but we're not doing 10x better than "extremely good" peers. Maybe there's just so much variance that it's impossible to give a good benchmark, but even still, 2% seems low. I also suspect that marketing has a lot to do with it. A company that's much better at marketing than product will be better at getting someone to sign up for a trial and worse at converting them, so maybe their numbers would be down in the 2% range. I feel like I'm the opposite (bad at marketing, but pretty good at product)

csa 9y ago
Your numbers are great, and congratulations. That said, I will guess that you are leaving money on the table by not having a wider target audience for your marketing. Also, the idea that a company is “better at marketing than at converting” isn’t really the correct way to look at it. Basically the math says that you want to keep increasing the width of the net you cast as long as it is profitable. In some cases, you will find a profitable group to market to, but the reasonable conversion rate for that market (i.e., people who end up loving or product) is just naturally lower than your high-conversion group. As a simple example, someone may have a very technical finance newsletter that they sell to finance professionals, and they covert that group at a high rate (and a high price). This newsletter can probably also target HNW individual investors profitably, but they will not likely have the same conversion rate.

BWStearns 9y ago

> Really? 2% seems awful. If a company signs up for your trial, they must have a problem they're trying to solve. If you don't solve 98% of peoples' problems, it seems like you have a problem getting people engaged with your product. Also think about how many of those signups are for "products" that never get delivered. Some side project that is thinking about charging and the dev never bothers implementing, some startup is thinking of switching from per-client contracts to a self-service model and either doesn't make the switch or dies/gets acquired before they manage it. None of those situations are Stripe not meeting someone's needs, and a single developer can create an arbitrary number of those trials throughout a year.

a13n 9y ago
The article isn't talking about super-early-stage SaaS, it's about SaaS in general. While 2% might be good for a just-implemented product, it comes off as poor for a mature one.

MarkMc 9y ago

> Conversion rates of low-touch SaaS trials with credit card not required: > 2%+: extremely good I think that is the percentage of website visitors who eventually become paying subscribers. Eg. 10% of visitors sign up for a trial and 20% of those trial users pay for a subscription at the end of their trial period. Patrick - can you confirm this?

a13n 9y ago
Then how come for credit-card-required he says 40-60%? That must be trial to paid.

47 9y ago

I do not have lot of experience in SaaS. I do have experience dealing with conversion rate in ecommerce. I believe you usually cannot compare conversion rate across different businesses in different markets. Comparing SaaS businesses in different markets is like comparing apple and oranges.

nphadke 9y ago

The article doesn't mention this but if there is a freemium component to the product, a 2% conversion rate is actually not bad. Not great, but not bad either. From what I've seen, a 3-7% conversion rate would be quite good for such a product.