Understanding Your Sales Funnel Conversion Rate (and How to Use It)
Your sales funnel may be up and running, but how well is it converting?
Tracking your sales funnel conversion rate is essential to evaluating the health of your funnel and stopping leaks before they become major issues.
So, what is a sales funnel conversion rate? Which conversion points should you be tracking, and which sales KPIs will help you monitor your funnel performance? And most importantly, how can you improve your sales funnel conversion rate?
Let’s find out.
What is a Sales Funnel Conversion Rate?
Typically, we measure a closed-won opportunity as a conversion, and it is important to track the conversion rate for total sales.
But here’s a fun fact: the conversions you track can be anything you want.
For example, you can track conversions of:
- Website visitors that turn into new leads
- Subscription signups
- Inbound form completions
- Marketing content downloads
Tracking different types of conversions across your sales funnel will help you see a better picture of which specific pieces of your process are working best to convert customers.
Sales Funnel Conversion Rate Formula
Let’s talk about exactly how to calculate your sales funnel conversion rate.
First, you’ll need to choose a time period. Whether you’re looking at your sales funnel conversion rate weekly, monthly, or quarterly, you’ll need to make sure all the data you use comes from the same time period.
Next, you’ll need these two numbers: The number of leads that entered your funnel, and the number of leads that converted
This is the sales funnel calculation for conversions:
Conversion Rate (CR) = (Total Conversions (TC) / Total Leads that Entered the Funnel (TL)) x 100
Let’s walk through it step-by-step with a sample calculation:
Step 1: Find the total number of leads (TL) that entered the sales funnel in a specific period of time. Let’s say in the month of June, you had 50 new leads enter the sales funnel.
Step 2: Find the number of converted leads (TC), and divide that by the number of total leads. If 10 of the leads that entered your funnel in June converted to customers, you’ll divide 10 by 50, which is 0.2.
Step 3: Multiply the number by 100 to turn it into a percentage. In this case, that comes to 20%, meaning that your sales funnel conversion rate is 20%.
Using this same formula, you can also calculate different kinds of conversion events. For example, what if you want to know the percentage of new leads that attended a product demo during the sales process?
Let’s say during June, you completed 15 product demos with new leads that entered the funnel. Using the same number of total leads (TL), you’d calculate the conversion rate as 15 divided by 50, which is 0.3. When multiplied by 100, you get a conversion rate of 30% for your product demos.
As leads travel through the sales funnel, there are multiple conversion points they’ll go through. Using the same metric of total entries to the funnel, you can calculate the conversion rates for each of these steps.
What is an Average Sales Funnel Conversion Rate?
The simple (and hard to swallow) answer is: it varies.
Mainly, the sales funnel conversion rate benchmark you should aim for is based on your industry and what you sell.
For example, one study from May 2022 found that average eCommerce conversion rates ranged from 0.6% to 5.5% depending on the industry.
For SaaS businesses, conversion rates have been found to stand a bit higher, hovering around the 7% mark.
In general, an average sales funnel conversion rate should be somewhere between 3% and 7%, but the exact number will depend on what you sell, who you sell it to, and how you sell it.
If you want to set your own conversion rate benchmarks, Capterra has a great article outlining 5 key steps:
- Define your competition in your unique niche
- Identify which metrics you want to measure, and apply those same metrics to your own company
- Collect free information available online, or invest in an industry analyst report or B2B data provider
- Look at the data and identify differences, plus why those differences exist
- Adapt your strategy
Is There a Perfect Sales Funnel Conversion Rate?
Simply put, no.
Conversion rates vary by industry, acquisition channel, type of sale, customer profile, and so much more.
For example, look at this data from Marketo about conversion rates by acquisition channel:
Referral is obviously the highest converting channel, but does that mean you should drop outbound sales, paid marketing, and everything else to go all-in on referrals? Obviously not, since that could seriously harm your business.
Remember to look at more than just conversion rates: think about the lifetime customer value (LTV), average revenue, and other key sales metrics.
Taking conversion rates as part of the bigger picture will help you set reasonable goals and optimize your sales funnel for the smoothest path to purchase.
Sales Funnel Conversion Rate Benchmarks for 5 Points of Conversion
The world is your oyster, and what you’re tracking as a conversion is completely up to you.
We’re going to talk about 5 points of conversion in your sales funnel, and how they all affect your overall success as a business.
1. Total Sales
Even if you’re using different methods and conversion points for your sales, it’s important to track the total number of conversions that come through your sales funnel. This gives you a good internal benchmark to see your average conversion rates.
Later, you can split your total sales conversion rate by:
- Lead source
- Individual product sales
- Type of sale (self-service, via sales team, eCommerce, in-person)
- Type of customer (SMB, enterprise, different industries)
Having that baseline will help you determine which kind of sales, customers, or marketing efforts result in the highest conversion rates.
What is an Average Total Sales Conversion Rate?
An across-the-board average conversion rate will likely stand between 4% and 8%, but will vary greatly depending on your industry and customers.
2. Visitor-to-Lead Conversion Rate
When a visitor arrives at your website, how often do they become a lead? That’s what this metric will tell you.
Tracking the visitor-to-lead conversion rate will help you see where you can optimize the early stages of your sales funnel. For example, can more website visitors be captured with a form? Are you including social proof in your signup process? These factors and more can help you increase the number of website visitors that convert to leads.
What is an Average Lead-to-Visitor Conversion Rate?
A study by Unbounce found that landing pages have an average conversion rate of 4.02%, but this varied widely between industries. The lowest converting industry they found was higher education at 2.6%, and the highest converting industry was vocational studies and job training, at 6.1%.
Another study of SaaS businesses found that visitor-to-lead conversions stood at 7%, counting a lead as someone that signs up for a free trial.
3. Free Trial Conversions
There are 3 basic versions of the free trial conversion for SaaS companies:
- Freemium conversions: When you offer a completely free plan for your product and try to convert customers to a paid plan
- Opt-out free trials: A limited-time free plan that requires a credit card to get started, and customers must opt out at the end to avoid being charged
- Opt-in free trials: A trial plan that doesn’t require a credit card, and customers can choose to purchase at the end of their trial period
Each of these has its own nuances, and you’ll need to measure your success for each one individually, not combined.
Which one is best? That depends on you, your business, your customers, and how you encourage the conversion during your free trial or freemium experience. Look at competitors in your space, and check how their conversion rates (and revenue) are affected by the type of free trial they offer.
What is an Average Free Trial Conversion Rate?
According to several online studies, here are the averages:
Freemium conversion rates tend to be the lowest, hovering between 3% to 6%.
At the other end of the spectrum, opt-out free trials can hit up to 50% or 60% conversion rates, since you’ve already got their credit card info.
Hanging happily in the middle is the opt-in free trial conversion rate, typically ranging from 10% to 25%.
All this said, there are always outliers.
- In 2014, Slack converted 30% of its freemium users, the hardest sector to convert.
- Customer.io only converted 6% of its opt-in free trials, but they’re still killing it as a business.
The point? Don’t get too distracted by the averages. If you can, get an analyst report of these metrics for your particular niche, and aim for those benchmarks.
And either way, simply keep working to get a higher conversion rate by optimizing your free trials to convert better.
4. Qualification Conversion Rate
Also known as MQL to SQL conversion rate, these are the leads that make it into your sales funnel and get past the qualification stage.
If this number is too low, your marketing efforts may be pulling in leads that aren’t ideal for your product or service. On the other hand, if this number is very high but your sales conversion rate is still low, your reps may be letting unqualified leads slip through the funnel.
What is an Average MQL to SQL Conversion Rate?
According to data from Klipfolio, a good MQL to SQL conversion rate is 13% on average but could go up to 31% if your marketing and sales efforts are very well aligned.
5. Repeat Purchases or Upsells
How many times have you said yes to the questions: “Do you want fries with that?”
Upsells are a great way to increase the average order value of your sales and generate higher revenue while providing great products or services for your customers.
By tracking your upsell or repeat purchase conversion rate, you’ll be able to answer questions like:
- Are we offering the right product as an upsell?
- How well are we encouraging our past customers to purchase new products?
What is an Average Upsell Conversion Rate?
The ‘average’ here is a huge range, mainly because upsells and repeat purchases are promoted in a wide variety of ways, with extremely varied results. While most studies seem to show a conversion rate in the low single digits, some Shopify sellers using upsells in the checkout process are seeing conversion rates of up to 10%.
Essential Sales Funnel KPIs to Track
Certain sales funnel metrics are key to calculating your conversion rate correctly. Let’s talk about those, and also how you can use them to level up your conversion rate tracking.
1. Entry Points
This is the starting point of your sales funnel, where previously random people become known to your company.
The question is: how do they get there?
Your business may have one single point of entry to the sales funnel, such as an inbound form on your website. Or, you may have multiple places where leads can enter your funnel, such as cold outreach, trial signups, gated marketing content, webinars, paid marketing, and more.
To easily calculate your sales funnel conversion rate, simply add all these entry points together in your calculations.
But I’m guessing you’re ready to step it up a notch.
To pick out the highest converting entry points in your sales funnel, separate each of the points of entry you’ve identified, then calculate your sales funnel conversion rate by how they entered the funnel and compare them.
One more step to make this ultra-valuable: compare the sales funnel conversion rate with the LTV of customers from each entry point. That will tell you, not only which pieces of your strategy are converting best, but also which are most valuable.
2. Average time to conversion
This is the amount of time it takes for a new lead to become a paying customer. Also known as sales cycle length or average time to win, this metric makes a big difference when calculating your sales funnel conversion rate.
For example, let’s say you have a 30% conversion rate. That’s great! But if your sales cycle lasts 2 years, you’re not going to be able to grow your business.
Look at your sales cycle through a critical lens. Is there a way for you to shorten that cycle? Are you simply delaying to ask for a deal? Or is there a more serious issue with your sales process?
When you know your sales cycle length, you’ll also be better able to calculate your conversion rate, since you’ll need to take that length of time into account when gathering data.
3. Total Revenue Growth
Your conversion rate may go up or down, but it won’t necessarily be linked to the total revenue your business is generating.
That’s why it’s important to track your total revenue growth month-over-month.
For example, let’s say your sales funnel conversion rate decreased 10% in May, but your revenue increased by 15% month-over-month. This is a signal to check the deals that closed during that time period. Were there any outlying deals that were larger than normal? What made those bigger deals happen? Or, did you have an increase in the total number of leads and deals closed? If so, where did that increase come from?
Looking at the data and asking these questions can help you see what’s really working, and double down on that.
4. Sales Velocity
Another metric that’s closely related to your conversion rate is sales velocity, or the amount of money passing through the funnel every day based on how fast leads go through your sales pipeline.
To calculate this, take the number of deals in your pipeline. Multiply that number by your average deal size, then divide it by your average sales cycle length.
Or, just check your sales velocity in the Opportunity Funnel Report in Close:
This metric gives you a pulse on the health of your sales funnel and can be an early warning sign when something is about to go wrong.
5 Online Sales Funnel Calculators You Can Use
Want to quickly check your sales funnel conversion rate? Use one of these online sales funnel calculators to get started:
- Sales Funnel Calculator from Easy Calculation: A quick and simple calculator to get a quick conversion rate.
- Sales Funnel Calculator from Jonathan Hopkins: This calculator is great if you’re using Facebook ads and converting those to customers on your website.
- Sales Funnel ROI Calculator from ClickFunnels: This calculator helps you see how much money you’ll be getting from your sales funnel, based on your current conversion rate and the price of each unit sold.
- Sales Conversion Rate Calculator from SAP BW Consulting: An easy conversion rate calculator, with some information on how to calculate it.
- Online Marketing Conversion Calculator from Omni Calculator: This calculator totals conversions from impressions, visits, and leads, plus lets you calculate the costs and the ROI of your efforts.
6 ways to improve your sales funnel conversion rate
Now you’ve got a number clear in your head: you know exactly what your sales funnel conversion rate is currently, and what it should be in the future.
Now, how do you bridge the gap between those numbers?
Here are six proven methods you can use to optimize your funnel and increase that conversion rate.
1. Use Ideal Customer Profiles To Make Sure Your Funnel Matches the Customer Journey
Creating and maintaining your ideal customer profiles is an essential part of any business. But when it comes to your sales funnel, the key aspect to look for is how your ideal customer goes through the journey of becoming a customer.
Can you adapt your process to match their needs? Can you give them more opportunities to buy when they want, or convert on their terms?
In some cases, you may create more than one ICP for your business, especially if you serve very different types of customers. For example, a SaaS business that sells to both SMBs and enterprise customers should create a separate funnel and pipeline for those different types of buyers. Then, you can adapt your sales process and offering to the type of customer you’re addressing.
This same principle also applies to repeat purchases or upsells. Ask yourself: which products is this buyer persona more likely to purchase?
For an eCommerce clothing store, this could mean sending emails to their female customers that feature women’s clothing. For a SaaS business, it could mean personalizing their follow-ups with new SMB customers to offer professional services that these customers tend to need.
2. Use A/B Testing
Split tests allow you to attach real data to the ideas you have. You can test and adapt each step of your sales funnel, from early awareness to a completed sale.
For example, if you’re trying to optimize your inbound conversion rate, A/B your landing pages and CTAs.
Or, if you’re trying to increase the conversion rate of your free trials, test different ways to encourage the conversion throughout the trial period.
Your sales funnel is like a puzzle, and only when all the correct pieces are in place can it flow smoothly. So, test those pieces to make sure you’re getting the best results possible.
3. Simplify the Purchase Process
New technologies and methods can help your customers purchase even easier than ever. The question is: are you using them?
For example, how many steps does your SaaS signup process have? Now ask yourself: how many steps does it really need?
If your main competitors have a simple 3-step process for signup but your process includes 6 steps, you need to seriously consider simplifying that process.
4. Create CTAs With a Singular Purpose
Whether it’s on a landing page, with a form, or in a sales email, your CTAs need to be clear, succinct, and value-driven.
For example, if your sales team is sending emails that end with an ambiguous, “Let me know when we can meet,” your conversion rate will suffer.
Instead, make your CTAs actionable. In the example above, you might use SavvyCal to include your team’s calendar link easily within an email or directly inside a landing page. (And with the SavvyCal + Close integration, any new meetings that are booked will automatically update the information in your favorite CRM.)
In short, choose a specific, singular purpose for each landing page, email, or message that customers see. Then, make it easy for them to execute that next step.
5. Give people reasons to trust you
Why should a prospect that's never done business with you trust you? Because you understand their challenges and objectives, and your solution can help them. But you can’t just tell them that: you have to show them.
One excellent way to do this is to include social proof at key moments in your sales funnel. Check out how Customer.io does this with their signup flow:
When you’re about to take the first step to sign up for a free trial, you have a few of their best customers listed on the side, plus a pretty stellar testimonial from a respected CEO.
Here’s how you can do the same:
- Identify key points in your sales funnel where leads may need that extra push (such as landing pages, signup pages, cold emails, etc)
- Pick a few relevant testimonials that highlight the value of your product or service
- Add those testimonials in a nice, visually appealing way
You can also work to get more reviews on sites like G2 or Capterra by offering your current customers an incentive to give a review.
6. Improve your free trial onboarding process
For SaaS businesses, something that can have a huge impact on free trial conversions is the activation rate of free trial users.
The question is: how many of your free trial signups are actually using your product?
If you have low activation rates, you’ll have low conversion rates at the end of those free trials. So, what can you do to optimize the journey from free trial to paying customer?
Here are some ideas:
- Use in-app messaging to guide new users through some basic steps of using your product
- Create a series of welcome emails that encourage users to try different activities in the product
- Retarget expired trials with an offer to extend the trial period
- Host a regular ‘getting started’ webinar
Wondering how to host a 'getting started' webinar? Check out the Close for newbies series.
Get Your Sales Funnel Conversion Rates To Skyrocket
You can aim for the moon, but you need enough fuel to keep you going.
When you optimize your sales funnel conversion rates and adjust your process to meet your customers where they are, you can be sure you’ll see better quota attainment, happier customers, and ultimately higher revenue.
The best way to tie all this together? Use a CRM that works with your team to smooth out the sales funnel and help it flow better.
See what Close CRM can do for your sales team and business.