The definitive guide to SaaS funnels

Funnels, as an actionable subject, are rarely discussed in depth publicly.

A quick Google search for "marketing funnel" or "SaaS marketing funnel" reveals that even the highest-ranking blog posts on the topic often only scratch the surface. Most merely define frameworks like AIDA (Awareness, Interest, Decision, Action) or AARRR (Acquisition, Activation, Retention, Referral, Revenue) and end up being mediocre copies of one another.

For early-stage founders and marketers trying to figure out ways to grow their businesses, these blog posts often fall short. They focus too much on theoretical concepts, diverting time and attention without offering actionable insights.

This lack of publicly available, actionable content on designing SaaS marketing funnels inspired me to write this guide.

What is a funnel?

Here’s my simplest and most actionable definition of a funnel: A funnel is a series of messages and actions designed to educate, motivate, and guide prospects toward becoming customers.

It provides direction for all your marketing activities and ties them to your goals.

You can also define a funnel as the customers' journey from a prospect to a customer but I prefer the above definition more as it helps me stay actionable.

Viewing a funnel as a series of messages and actions shows how positioning, messaging, customer behavior, marketing psychology, UX/UI, and analytics work together to create a highly efficient, lean machine that drives results and maximizes performance.

Having a funnel in place ensures your marketing efforts are guided by clear questions: How do you improve its efficiency and performance?

With that, here’s what I’ll cover in this post:

1. SaaS Funnel 101
2. The critical role of affinity and awareness level
3. Designing your first funnel
4. The funnel math: gateway to profitability
5. The mighty underground email funnels
6. Three secrets of funnel Messaging
7. Tech Stack
8. Performance Optimization

SaaS Funnel 101

Let me bring you up to speed with some quick-start funnel essentials.

First up: the key difference between general and SaaS funnels.

Funnels for businesses like e-commerce and information products typically have one primary goal: to drive a purchase. That’s why you see Facebook ads featuring product carousels with a "Buy" button.

You see the ad,

like the product,

click "Buy Now,"

land on the product page,

complete your payment,

and the transaction is done.

The transactional nature of these businesses means you can achieve profitable unit economics and drive growth by optimizing the funnel to keep expenses lower than gross margins.

While you can nurture first-time customers for future purchases, profitability comes directly from the very first transaction.

Here's a simple visualization of such a funnel:

A simple marketing funnel

In contrast, most SaaS businesses don’t profit from the first transaction; instead, they rely on lifetime value.

To drive SaaS growth, you need to not only acquire users but also retain them long enough to achieve profitable unit economics.

Here’s a simple visualization of a SaaS funnel:

A SaaS funnel

With a funnel in place, you have a defined path to grow your business. The only questions you need to answer are how to improve the funnel's performance, and your marketing revolves around finding those answers.

For example, if we expand the acquisition funnel, you’ll realize it begins with defining a target market and promoting your business to that audience. When people land on your website, the goal is to convert them. Conversion can take many forms, such as booking a demo, signing up for a free trial, or registering for a webinar. Improving this funnel's performance means improving the performance of its individual stages, which provides a clear and well-defined scope for your marketing efforts.

Marketing scope

The second essential is defining key metrics. When improving the performance of each funnel stage, there’s a risk of viewing stages in isolation. For example, you might focus on increasing traffic without considering its relevance to your business or prioritize demo bookings and signups without evaluating their conversion likelihood or profitability. This often occurs when separate teams handle lead generation and deal closures, with misaligned KPIs that don’t support a shared ultimate goal. While this isn’t truly an early-stage issue, falling into the siloed approach can waste resources without improving the metrics that truly matter.

Set a goal that directly aligns with your business growth. For example, instead of focusing solely on increasing call bookings, aim to close more deals. A single metric can highlight gaps and guides prioritization. If your call skills need improvement, focus there. If prospects are not a good fit or are unlikely to convert, refine other stages of the funnel accordingly.

While it’s essential to evaluate individual stages, having a unified metric helps identify bottlenecks and allocate resources effectively. In my experience, this is often a challenge in the early stages, as your team’s skills, marketing assets, and systems may still need refinement. These gaps can stall growth, so it’s crucial to focus on those key areas first. As you move from early to growth stages, you can then optimize other areas as needed.

So, it's good to monitor stage-wise metrics like average session time and traffic, but prioritize your most important metrics and improve others in relation to them.

The critical role of affinity and awareness

Different people respond differently to the same landing page.

A visitor's behavior on your landing page is heavily influenced by two factors: their awareness (of both their problem and your solution) and their affinity (built through prior content, recommendations, or interactions with your brand).

Someone familiar with your content and brand will approach your landing page differently than a first-time visitor from a Google search. While the former might focus on specific details like product features, integrations, and pricing, the latter may first need to establish your credibility and legitimacy.

Beyond affinity, awareness levels also shape visitor behavior. A prospect who clearly understands their problem and knows your product's capabilities needs different information than someone who's just beginning to explore possible solutions.

To simplify further: visitors from your social media, webinars, and email lists need different information than those discovering you through search engines or AI tools like Perplexity and ChatGPT. The same applies to visitors referred by affiliates and channel partners.

It means you need to meet visitors where they are with tailored messages, sequences, and marketing assets—and thus, different funnels—for varying levels of prospects' affinity and awareness.

Let’s look at an example:

Suppose your business, ABC SaaS, offers a healthcare CRM solution, and a hospital is seeking a CRM for their needs. They’ve outgrown their spreadsheet-based system and now require a dedicated SaaS solution. At this stage, they’re educating themselves about options, searching for terms like "best healthcare CRM" or "how to choose a CRM for hospitals."

Now, imagine you’re running two PPC ads:

1. A branded ad for “ABC SaaS Healthcare CRM” that directs prospects to their homepage
2. A blog post titled “7 top Healthcare CRMs in 2024”

In this case, the blog post is more likely to attract their attention because it aligns with their awareness level. For this prospect segment, your landing page is actually the blog post. In that post, you can offer a free resource—such as a spreadsheet cost calculator comparing top CRMs—to guide them further down the funnel.

However, for a different hospital that has shortlisted three CRMs, including yours, for final consideration and a demo, your homepage or pricing page becomes more useful.

Imagine someone with purchasing power and a desire to grow sales but completely unfamiliar with CRMs. You spend money to bring them to your homepage, which details your product's benefits over competitors. Will they convert, or will your efforts be wasted?

So, you create different funnels for different categories of prospects based on their affinity and level of awareness, often referred to in marketing as search intent.

Similarly, the lifecycle engagement requires different funnels for inactive users, active users, and paid subscribers.

With that, it's time to design your first funnel.

Designing your first funnel

Here's a simple, bare-bones funnel for acquiring new customers:

1. Define the target market.
2. Identify the ways to connect with the market.
3. Inform them about your business.
4. Motivate them to visit a landing page for more details.
5. Nudge them on the landing page to take action.

Using this bare-bones funnel, let’s create an acquisition funnel for ABC SaaS, the early-stage company offering a CRM solution for hospitals we discussed earlier.

Step 1: Target Market

To sell their CRM to these hospitals, let’s say they want to target C-suite executives—CEO, COO, CIO, and CMO.

Step 2: Ways to connect

The company decides to cold email C-suite leaders. They discover that these executives often delegate vendor research to junior staff who compile reports with top options. To increase their chances of success, the company complements their outreach with Google PPC ads, meeting these researchers in their information-gathering journey.

Step 3: Message & CTAs

The company creates two separate email sequences: one targeting the heads of IT departments (CIOs) at hospitals and another aimed at Directors of Patient Services.

For half of their prospect list, they target CIOs, and for the other half, they target Directors of Patient Services.

For CIOs, they design a landing page featuring a case study that highlights the CRM's functional capabilities, ease of migration, and seamless integration.

For Directors of Patient Services, they create a webinar embedded in a landing page, showcasing improved patient volume management, streamlined inter-departmental coordination, and effortless compliance.

Both landing pages include a "Book a Demo" call-to-action.

For PPC ads, they create a blog post to help researchers prepare their "top vendors" presentation. The blog, titled "Top Modern Alternatives to [Industry Leader] for Hospitals in 2024," discusses seven competitors while strategically positioning ABC's product as the best option. The post also features a lead magnet with the message: "Download our survey findings on the challenges hospitals face with various CRMs." This captures work emails and enrolls leads into a five-day email sequence designed to support them in their research.

Step 4: Performance optimization

Based on its past experience, the company is expecting about 20% no-shows for the demos and about 25% close rate. To improve both of these, they decides to target C-suite who book demos with LinkedIn ads. Everyone who book a demo, they find their LinkedIn profile and then add them to their LinkedIn ad custom audience. They see these ads that engage and motivate them using testimonials, and educational content. Once a deal is close, they stop seeing these ads.

Here's how the funnel looks:

B2B SaaS funnel example

Now, how would you modify this funnel if the company adopts a PLG motion, allowing visitors to sign up for a free plan instead of booking a demo?

First, since users can now experience the product directly without waiting days for a demo, you can leverage the product experience for closing deals instead of case studies and webinars and thus move ahead with a greater control.

Second, you will attract users instead of buyers, requiring a shift toward the PQL/PQA route to close deals. It also allows you to tap into new markets, such as smaller concierge clinics, private practice doctors, and chiropractors.

Third, you’ll need to create more marketing assets to capture the interest of people at different stages of their journey. Since you are no longer interacting with them directly and don’t get to learn about their problems, you need to pre-empt this with a wider variety of content.

Fourth, you can probably do better with Meta ads than LinkedIn ads.

Lastly, since you won’t have direct interaction with users before they start using your product, make sure you have processes in place to qualify and segment them. This will help ensure a positive product experience and set the stage for high engagement. For example, take a look at how Wynter effectively segments their two user personas from the start.

Wynter Registration Flow: User segmentation

You can design a funnel in many different ways based on your business's needs, strengths, and shortcomings—there is no fixed design.

Here are more ideas to help it all come together:

1. Funnels help you sell to those who are ready to buy at the moment. Trying to sell to someone who isn’t looking to buy is almost futile. However, you can stay connected with potential customers through channels like email sequences, Discord communities, newsletters, and social media. This helps keep your business top of mind and positions it as a trustworthy partner they can turn to when they need a solution like yours in the future.
2. What follows from the first point is that you should build an acquisition funnel for hot demand and product engagement funnels for active users. Over time, you can optimize these funnel to cater to warm demand.
3. Attract traffic, educate, entice, and convert.
4. Lead magnets work, and paid lead magnets work even better. You can also upsell a SaaS subscription by offering a limited-time discount alongside your lead magnet.
5. SEO works—it worked 10 years ago, works today, and will continue to work in the near future. With LLM products like Perplexity linking to websites in their responses, new opportunities have emerged. In my experience, ranking on Google plays a role in being suggested by Perplexity.
6. Great content is the cornerstone of online business growth. You can use it in many ways, from supporting paid ads and cold campaigns to repurposing for social media and more.
7. Video content is thriving and works well for both B2B and B2C. A quick way to leverage it is to find high-performing content in your domain and replicate it.
8. For pre-PMF B2C SaaS, a community- or cause-first approach is highly effective in driving product engagement.
9. Funnels are largely about understanding human behavior, influence, and the art of persuasion.
10. Many people on the web sell one-size-fits-all funnels. It’s strange to offer a single solution for all businesses, yet it’s so prevalent that few question it. My advice? Don’t fall for the allure of pre-made funnels. Instead, design one tailored to your ICP, their behavioral insights, and your strengths in creating marketing assets. Sure, explore different funnels for inspiration—but let your unique strategy lead the way.
11. The top-performing funnels aggressively eliminate distractions. They don't provide users with options to wander off—no navigation links, no links to blog posts for further reading, and minimal footer links. You either make a decision or leave.

The funnel math: gateway to profitability

The fundamental equation of profitability is simple: cost < earnings. It’s a no-brainer.

The same principle applies to funnel performance: the cost of acquiring a customer must be less than the revenue they generate.

In SaaS, it's common to use customer lifetime value (LTV) as the revenue figure for profitability calculations.

However, a prudent early-stage founder will account for cash flow and use a payback period of a few months when making funnel calculations, for the reasons discussed here.

Let’s say a customer pays $299 per month for your product subscription and based on your business data, the payback period is seven months.

This means the total revenue over that time is: $399 x 7 = $2,793.

After accounting for CapEx and operating expenses, if you determine that you can spend a maximum of $1000 to acquire a customer, this becomes the upper limit for your funnel’s cost.

Does it mean you can spend $1000 to acquire a new customer?

Not exactly.

It’s the maximum cost you can afford to acquire and, more importantly, retain a customer for six months.

You'll allocate part of it to acquire the customer and the rest to retain them.

The acquisition funnel costs include content creation, PPC and social media ads, as well as expenses for people and tools.

The lifecycle funnel costs for retaining customers include service costs, training expenses, discounts, and other related expenses.

This brings us to the question of how to allocate that $1000 to maximize the chances of the customer staying with the company for six months or longer.

There are no easy answers, but here's a guiding principle I've learned from my experience: Spend more on the more engaged prospects/customers.

This means:

Investing more in those who have signed up and created an account, rather than those who visit the site and leave.

Allocate more resources to users who actively use the product daily, as opposed to those who sign up but never return.

Prioritize spending on customers who have been loyal, paying subscribers with an annual subscription for three years, even if they choose not to renew, over those with a monthly subscription.

For example, start by creating content that can be widely used, resulting in a low cost per prospect. As prospects show more commitment—by downloading lead magnets or, even better, booking a demo—you can invest more by targeting them with social media ads. Once they become customers, offer them two months free with an annual subscription compared to a monthly plan. And when monthly subscribers don’t renew after three months, offer them a 40% discount to encourage them to stay.

Now, to complete the funnel math you will have to use stage wise volume and conversion rate data.

For now, we can work with assumptions.

Let’s say your website attracts 20,000 visitors per month, or about 650 visitors per day, to the webinar landing page.

Around 25% of these visitors watch at least 80% of the webinar, which equals 5,000 people per month.

If 3% of these webinar watchers book a demo, that’s about 150 people.

In the early stages, as you’re still mastering demo calls, let's say your close rate is around 16%, resulting in 24 new customers per month.

If your cost to acquire each customer is $400, you need to work backward through the funnel. By accounting for these conversion rates, you can determine how much you can spend at each stage.

And if you want to acquire 48 customers instead of 24, you know how much budget you need.

Before moving to the next section, let me once again caution you against optimizing any one funnel stage without considering its effect on your key metrics. For example, if you increase traffic from 20,000 to 40,000 but see only a minimal increase in new customers, say from 24 to 28, then you’re likely wasting resources attracting bad-fit traffic. I have seen this scenario play out multiple times: well-meaning founders hire paid ad agencies and spend significant money on driving traffic, only to realize that those visitors have no genuine interest in the product. Even if some of them sign up, they never use it, leaving the product like an abandoned ghost town. Takes a lot of work to pull them out of such a mess.

The mighty underground email funnels

It's time to delve into the evergreen realm of email funnels, which have been driving revenue for all types of businesses since the dawn of internet commerce.

There's something about emails—they aren't as aggressive as phone calls, as intrusive as SMS, or as easily ignored as social media DMs.

There's no urgency to read emails, but they get read nonetheless.

They feel like a private space, yet you can still track activity in the background.

People love getting emails—even privacy-conscious folks who go out of their way to set up separate accounts just for that.

Emails are great, but drip sequences are emails on steroids—helping with the launch, validation, and growth of your business.

And they're not easy to reverse-engineer because they are based on user behavior, so you never know about the emails you didn't receive.

So, how does our ABC Healthcare CRM SaaS can use them for growth?

Let's say they create a webinar titled 'Free Webinar: Improve the Profitability of Small Clinics with Telehealth and AI' and promote it to clinics and private practice doctors. Many of these doctors are likely to have experience with telehealth services, while others must be aware of it but haven't tried it. The webinar combines a familiar topic with profitability and the trending topic of AI, making it appealing to the right audience and likely to attract a significant number of attendees.

During the webinar, you introduce the topic of CRM—something doctors might not immediately connect with. However, their desire to manage their telehealth practice effectively will capture their attention and motivate them to sign up for your free email course on managing a telehealth practice without stress. This creates an opportunity to gradually educate them about CRM and its benefits over a five-day period. At the end of the course, you can offer them a subscription to your product.

Those who purchase the subscription are added to a new drip sequence to help them set up the product, train their administrative staff, and start using it daily. For those who don’t buy, you send a few follow-up emails to assess their interest. Depending on their responses, they are added to another drip sequence. The marketing goes on.

This is, of course, just one example; the possibilities are endless.

Three secrets of funnel Messaging

Great messaging is the signal that cuts through the noise and drives action. Magic happens when prospects relate to your message.

But unknown to many, there is more to funnel messaging than just crafty copywriting.

#1 Sequence

The message used to grab attention and drive traffic to the landing page is very different from the message in the blog post that dives deep into the problem and solution. Traffic-driving messages in cold emails, LinkedIn posts, and Meta ads target different areas of the brain and emotions than conversion-focused messages or nurturing messages. Mix up the sequence, and no amount of copywriting can deliver results.

#2 Audience-message fit

Some people respond to reason and hard-hitting facts, while others respond to emotions like fear, potential loss, or the possibility of winning, and some are influenced by many other different approaches. To be effective, you need to discover the triggers for each group and incorporate them into your messaging

#3 Awareness Stage

Your message needs to meet prospects where they are in their awareness journey. Do they recognize the problem they’re facing? Are they aware of all the possible solutions? Do they understand the unique strengths of your product? Do they have objections related to your product? No matter where they are in their journey, your message must meet them at that exact point. Any mismatch, and they’ll scroll past your message in a fraction of a second.

Get these elements right, and then use expert copywriting to perfect your messages at each stage of the funnel.

Tech Stack

In my experience, early-stage businesses don’t need fancy software to build their funnels. It’s only at the growth stage, when you’re handling high-volume traffic and running high-tempo tests, that managing funnels becomes challenging, making state-of-the-art software the better choice.

Here’s a quick list of everything you need:

1. Landing Page Builder: You can create these pages using simple HTML, CSS, and JavaScript or use platforms like WordPress or Webflow.
2. Web Analytics and Session Recordings
3. Conversion Tracking: Track which buttons and links are clicked and map the prospect’s journey.
4. CRM
5. Automations: Use email sequences and autoresponders to nurture leads effectively. You can also leverage tools like Zapier to create custom workflows, such as creating new CRM records, enriching user profiles, or updating custom audiences for social media ads.

When it comes to analytics and attribution, one painful lesson I’ve learned over the years is this: online analytics and attribution are broken. No matter which tool you use—whether it’s the tried-and-tested Google Analytics or the latest cutting-edge platform—you’ll often encounter significant discrepancies in their data, enough to make reconciliation feel hopeless.

One way to address this is by capturing qualitative insights. For instance, you can add a field to your lead generation forms asking visitors, "How did you hear about us?" This practice has been around for a long time, and those who recall the web of the 2000s will likely remember seeing such fields.

A word of caution: During the early stage, you don't need complicated funnel platforms or MarTech tools. Avoid them.

Performance Optimization

To optimize funnel performance, focus on improving conversions at each stage while ensuring the key metrics are progressing. This brings you into the realm of conversion rate optimization (CRO), where on-site conversion is prioritized.

Since you have full control over on-site conversion (unlike the performance of your content on other platforms or paid ads), improving it leads to better overall performance across all your marketing campaigns.

CRO turns traffic into customers, but before diving into it, make sure you have a statistically significant traffic volume.

Before I wrap up, here’s one thing to keep in mind about funnel optimization: it takes user interaction, analytics data, session recordings, iterations, patience, and time.