Managing User Acquisition Costs for B2C SaaS
A case study on using analytics, funnel insights, and A/B testing to achieve predictable growth.
Three months into campaigns for paid acquisition to accelerate user growth, the leadership team noticed these trends:
- High Cost per Acquisition (CPA): $85/user, above the target of $40
- Low Conversion Rate: Only 2% of visitors who clicked on ads signed up for free trials
- Sluggish User Growth: One 1,200 new users/month, below the target of 3,000.
As a product manager, we are tasked to investigate the acquisition funnel and identifying strategies to optimize cost efficiency and growth predictability.
Problem
The issue was that a lot is being spent in paid ads, but the result is very few user sign ups. The marketing dollars were not converting efficiently.
The campaigns and users come through various channels, and the lack of visibility into channel performance prevents the team from optimizing conversions. There may be campaigns or certain geographies that were underperforming.
Approach
Tracking performance in real time would help to :
- Identify high-performing channels and optimize spend by reallocating budget
- Test and improve acquisition touchpoints (ie. ads, landing pages, sign-up flows)
1. Attribution Analytics
Use Google Analytics and Segment to track UTM-tagged campaigns and source. Without attribution, we would only know the total sign-ups but not which campaigns were working.
Attribution shows the efficiency of each channel.
Visitor-to-Sign-up Conversion Rate (CVR) = number of sign ups / number of visitors
Currently, only 2% of visitors signed up for trials.
Looking at the CVRs by channel, let’s say we are seeing :
Facebook Ads has the lowest conversion rate of 2% and highest cost per user acquisition. This is not as efficient as Google Ads with 6% user sign-up rate at just half the cost of user acquisition and organic search with 8% CVR at zero cost.
💡We should drop Facebook Ads campaigns and reallocate the budget into Google Ads and SEO investment.
2. Funnel Analysis
We can track the funnel at each step by finding the percentage of users progressing versus dropping off. This helps identify where users encounter obstacles or lose interest. From here, we can take action to increase overall CVR.
Tracking users at each stage exposes where users dropped off most heavily.
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In this case, the biggest leak was at the landing page stage with a bounce rate of ~80%. This means that more than half the users that see the landing page did not sign up.
The problem was the landing page. It needs to be optimised.
💡Running A/B tests on landing page copy would help identify which versions would increase CVR. Use bounce rate to measure relative effectiveness.
For example, Version A: Generic headline “Manage your Business Finances” vs Version B: Benefit-driven copy “Send invoices in 2 clicks”. Version B is like to improve CVR.
If a percentage of users are on mobile, make the page mobile-optimised.
3. Cohort Acquisition Tracking
Cohort analysis reveals trends in user behaviours that may be masked by aggregate statistics.
Grouping new users into cohorts based on acquisition channel, geography, and device type to track their sign-up rates would give insights into potential poor performance for particular user groups.
APAC mobile users convert at just 1.2% where most users did not complete the sign-up. This is in comparison to U.S mobile users with conversion rate of 8% that follow through the sign-up page.
The landing page for APAC mobile users could be optimised and customised for the market to increase CVR.
💡Conduct user feedback to determine what is causing the drop off for APAC mobile users.
Some of the feedback for not completing sign up could be :
- Too many required fields
- Form is not optimised for smaller devices or slower connections
💡Design a lighter, APAC-specific sign-up flow with fewer required fields and a mobile-first layout
This could look like:
- Having fewer required fields for APAC mobile users. Eg. Original form requires Name, Email, Phone, Company, Country, Password, Confirm Password. For APAC mobile users, have just 3 mandatory fields: Name, Email, Password. Additional fields can be collected later within the app or make them optional.
- Create a mobile-first layout. Eg. Instead of a multi-column desktop design, have a single-column stacked design with larger tap targets. Eg. Enable auto-fill for email or phone. Eg. Optimise for lower bandwidth (ie. lighter images)
- Localised touchpoints. eg. Auto-detect region for pre-filled “Country”.
4. Paid vs. Organic Breakdown
Determining the ROI for Paid vs Organic would help with budget allocation.
Acquisition effectiveness extends beyond user volume to consider cost efficiency.
Paid acquisition entails customer acquisition costs (CAC), while organic acquisition leverages zero-cost channels such as referrals, content marketing, and SEO.
Facebook Ads are costly and have the lowest monthly retention of just 30% compared to Google Ads (50%) and Organic Search (65%). The budget used for Facebook ads might be better serving SEO and content marketing strategies instead since Organic Search had the highest retention in the first month.
💡Invest more heavily in SEO content marketing to complement Google Ads, reducing dependency on paid social.
Summary
Not all traffic is created equal.
Attribution analysis showed where money was being wasted. Funnel insights highlight where users were dropping off and showed opportunities to optimize copy to increase conversion rates. Cohort acquisition tracking also helps uncover hidden leaks and opportunities to tailor experience for user groups to improve conversion rates. Recognising ROI for paid vs organic traffic helps optimise overall cost of customer acquisition.
