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Freemium SaaS: Customizing The Digital Marketing Funnel

Evolution Of User Acquisition And Retention: Adapting Metrics And Strategies

I recently worked with a freemium SaaS client. During my project, I searched for revenue generation benchmarks. It was challenging to find these benchmarks for customer acquisition and retention.

I iterated over frameworks. I ended with a customized digital marketing funnel to make it work for freemium SaaS products. I’ll share more about the customization here.

If you have any questions, get in touch.

Two identical-looking funnels. But you need to choose the one that suits you best.
Two identical-looking funnels. But you need to choose the one that suits you best.

Benchmarking Customer Acquisition and Retention Funnels

I was searching for benchmarks of customer acquisition and retention. In my case,

  • Customer acquisition: involves traditional marketing. It encourages customers to discover our product and upgrade from free to paid plans.

  • Customer retention: involves providing a sticky service to your customers so they continue using your product.

To address this lack of benchmarks, I modified the traditional funnel.

Understanding The Traditional Digital Marketing Funnel

Digital marketing funnel split into top, middle, and bottom.
Digital marketing funnel split into top, middle, and bottom.

Digital marketers modified the AIDA funnel from mass-media marketing to apply to digital channels. To organize marketing work, you can split a marketing funnel into three stages, as per Semrush:

  • Top of the funnel (ToFu): This is where people first become aware of the problem you can solve.

  • Middle of the funnel (MoFu): Prospects seek a solution. They evaluate their options.

  • Bottom of the funnel (BoFu): Here, prospects decide to use your solution. Then they transition from prospects to your customers.

The Challenge With Traditional Funnel

The issue with the traditional funnel for freemium products is that users use your product for free. They have not yet paid for your product. So, they are still prospects, not customers. But, they have reached the bottom of the traditional funnel by using your product. What next?

Once a user signs up for free, your challenge shifts to guiding them to upgrade to your premium paid product.

But, the user’s journey doesn't end here. The customer may use your paid product only for a month before quitting altogether. This highlights the importance of customer retention or recurring revenue. To address this challenge, implement strategies to retain customers over the long term. Enhance the user experience, provide ongoing value through updates and support, and establish loyalty programs.

Prioritize customer satisfaction and engagement, not just the initial conversion. This will help you build a customer base that generates consistent revenue over time.

The traditional funnel does not measure these challenges. So, let’s customize the funnel.

Customizing the Funnel For Freemium SaaS Products

Adopted the Top, middle, and bottom-of-funnel stages for a freemium product.
Adopted the Top, middle, and bottom-of-funnel stages for a freemium product.

I've sketched a funnel that breaks down the journey of a customer using a freemium product into three parts: 

  • the top, 

  • middle, and 

  • bottom of the funnel.

These steps are also called ToFu, MoFu, and BoFu.

Top Of The Funnel

At the top of the funnel, the goal is to get people to know about your product. This means using content marketing, paid advertisements, or influencers. I've looked at each of these strategies in case studies, which I'll share below.

Top of the funnel metrics include:

  • Number of views of video content, blogs, or ads

  • Conversion rates for ads or landing pages

  • SEO keywords coverage

  • Number of website visitors

  • Number of sign-ups

I used these metrics for this case study: How We Boosted Organic Traffic By 140% For Distill. This funnel also helped me recommend App Store Optimization (ASO) principles for Chrome extensions here: 16 Research-Backed Tips To Boost The Adoption Of Your Chrome Extension.

Middle Of The Funnel

The middle of the funnel is about customers trying out your product's free version. Here, you want to ensure they're happy with what they're using. You need to give them a memorable experience. At the same time, you must promote your product. This helps them see the added benefits of switching to the paid version.

Middle-of-the-funnel metrics include:

  • User activation metrics, e.g., the number of users who use your product 10 times within the first 15 days of sign-up.

  • Metrics that suggest the likelihood of upgrade, e.g., users crossing usage limits.

  • Number of users navigating to the pricing or upgrade page.

  • Number of users upgrading to premium plans.

I use a mix of ToFu and BoFu tools at this step.

Bottom Of The Funnel

Once a customer has purchased, the focus shifts to keeping them around. Your objective is to ensure they continue to see the value in your product and choose to stay with it.

Bottom of the funnel metrics include:

  • Number of upgrades to a higher pricing plan.

  • User engagement, e.g., using the product every week or every month (DAUs, MAUs)

  • User satisfaction, e.g., number of support tickets per customer.

  • User churn or retention, e.g. number of users who do not stop or continue their recurring payments.

I’ve used Looker, Tableau, Heap, Microsoft Clarity, and Metabase here.

Ending Thoughts

Understand the proper framework to apply to your product. What are the stages in the customer’s journey? When do we make money?

Then choose the proper funnel or metrics. Or, use a Customer Journey Map. Read more here: Methods to Map Customer Journeys For Any Product Using 3 Product Management Examples.

"You cannot improve what you cannot measure." 

If you have any questions, get in touch.



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