Growth & Strategy
Personas
SaaS & Startup
Time to ROI
Medium-term (3-6 months)
Most SaaS companies are still building linear funnels when they should be creating engagement loops. I learned this the hard way while working with a B2B SaaS client who was drowning in signups but starving for paying customers.
Their metrics told a frustrating story: lots of new users daily, most using the product for exactly one day, then vanishing. Almost no conversions after the free trial. The marketing team was celebrating their "success" - popups, aggressive CTAs, and paid ads were driving signup numbers up. But I knew we were optimizing for the wrong thing.
That's when I discovered the power of engagement loops over traditional funnels. Instead of pushing users through a linear path, we created self-reinforcing cycles that kept users coming back, engaging deeper, and naturally converting to paid plans.
Here's what you'll learn from this real case study:
Why traditional SaaS funnels are fundamentally broken
The 3-layer engagement loop system I built that transformed our conversion rates
How to identify your product's natural engagement triggers
Specific metrics that proved engagement loops work better than funnels
The counterintuitive onboarding strategy that reduced churn by making signup harder
This isn't another theory piece - it's a step-by-step breakdown of what actually worked when we shifted from acquisition obsession to engagement optimization.
Industry Reality
What every SaaS founder has already heard
Walk into any SaaS conference or scroll through Product Hunt, and you'll hear the same gospel preached everywhere: "Optimize your funnel!" The industry has become obsessed with linear conversion paths that look clean in slide decks but ignore how people actually use software.
Here's what the conventional wisdom tells you:
Reduce friction at all costs - Make signup as easy as possible, remove barriers, get users in fast
Perfect your onboarding flow - Create a smooth, guided experience that shows value immediately
Track funnel metrics - Monitor signup → activation → trial → paid conversion rates
A/B test everything - Optimize each step of the funnel for maximum conversion
Focus on first-session value - Users must see immediate benefit or they'll churn
This approach exists because it's simple to understand and measure. Funnels give us clean attribution, clear bottlenecks, and linear optimization opportunities. Every growth team loves a funnel because it feels controllable.
But here's where it falls short: SaaS isn't e-commerce. You're not selling a one-time purchase where someone sees a product, evaluates it, and buys it. You're asking people to integrate your solution into their daily workflow, build habits around it, and trust you enough to stick around long enough to experience real value.
The funnel mindset treats users like they're passing through your system once. But successful SaaS is about creating ongoing relationships where usage drives more usage, value compounds over time, and users become advocates who bring in more users. That's exactly what referral programs and growth loops are designed to capture.
Consider me as your business complice.
7 years of freelance experience working with SaaS and Ecommerce brands.
When I started working with this B2B SaaS client, their problem was textbook: great product, terrible retention. They had built what felt like a solid acquisition machine - multiple channels, decent traffic, trial signups coming in daily. But something was fundamentally broken.
The client was a project management tool targeting small creative agencies. Think somewhere between Asana and Monday.com, but focused specifically on creative workflows. Their founder was convinced they had a conversion problem, but I suspected it was deeper than that.
My first move was diving into their analytics, and what I found was classic: tons of "direct" conversions with no clear attribution. But more concerning was the user behavior data. I noticed a critical pattern that the team had missed:
Cold users (from ads and SEO) typically used the service only on their first day, then abandoned it
Warm leads (from the founder's personal LinkedIn content) showed much stronger engagement patterns
Users who invited teammates within their first week had 5x higher retention
People who created their second project were 10x more likely to convert to paid
The traditional approach would have been to optimize the funnel - reduce friction, improve onboarding, A/B test the pricing page. Instead, I proposed something that made my client uncomfortable: What if we made signup harder?
We added credit card requirements upfront and lengthened the onboarding flow with qualifying questions. Essentially, we built a gate that only serious users would pass through. My client almost fired me when signups dropped significantly.
But something interesting happened. We finally had engaged users who actually used the product. More users converted to paid after the trial. The quality of our user base transformed completely, even though the quantity decreased.
This experience taught me that most SaaS companies optimize for the wrong metrics. They want maximum signups when they should want maximum engagement. They think linearly about conversion when they should think cyclically about value creation.
Here's my playbook
What I ended up doing and the results.
After analyzing the user behavior patterns, I realized we needed to stop thinking about funnels and start thinking about loops. Instead of pushing users through a linear path, we needed to create self-reinforcing cycles that encouraged deeper engagement at every step.
Here's the 3-layer engagement loop system I developed:
Layer 1: The Activation Loop
Instead of focusing on first-day value, we built a loop around progressive value discovery. New users weren't just shown features - they were guided through scenarios that would naturally lead to repeat usage:
Day 1: Create your first project (not just a demo project)
Day 3: Invite a teammate (because collaborative tools need collaboration)
Day 7: Set up your first client review workflow (the core value proposition)
Day 14: Create your second project (the retention inflection point)
Each step was designed to make the next step more valuable. The more projects you create, the more valuable the collaboration features become. The more teammates you invite, the more invested everyone becomes in the system.
Layer 2: The Habit Loop
We identified that successful users had specific usage patterns - they checked in on projects at consistent times, updated status regularly, and used the tool as part of their existing workflows. So we built loops to encourage these behaviors:
Smart notifications that arrived when users typically worked (not random intervals)
Weekly team summaries that required user input to generate
Project milestone celebrations that encouraged sharing and reflection
Integrated calendar sync that made the tool part of their existing routine
Layer 3: The Growth Loop
The most powerful layer was making user success naturally generate more users. Instead of bolting on a referral program, we made sharing integral to getting value:
Client review links automatically included team member invitations
Project templates could be shared with other agencies (with attribution)
Agency showcase feature let successful users demonstrate their work publicly
Collaborative features that broke down when teammates weren't using the tool
The key insight was making each loop feed into the others. Users who completed the activation loop were more likely to develop habits. Users with strong habits were more likely to invite others. Users who invited others were more likely to stick around and upgrade.
We also implemented what I call "intentional friction" - moments where we slowed users down to ensure they were getting real value before moving forward. This was counterintuitive but crucial for building engagement rather than just collecting signups.
Intentional Friction
Making signup harder actually improved our user quality and long-term conversion rates by filtering for serious users upfront.
Progressive Value
Each step in our activation loop made the next step more valuable, creating natural momentum toward deeper engagement.
Habit Formation
We identified successful user patterns and built loops to encourage these behaviors, making our tool part of their existing routine.
Viral Mechanics
Instead of adding referral programs later, we made sharing integral to getting value from the product itself.
The transformation was remarkable. Within three months of implementing the engagement loop system, we saw dramatic improvements across every metric that actually mattered:
User Quality Metrics:
Day 7 retention increased from 12% to 34%
Day 30 retention jumped from 3% to 18%
Users who completed our new activation sequence had 5x higher lifetime value
Average session length increased from 4 minutes to 23 minutes
Business Impact:
While total signups decreased by 40%, trial-to-paid conversion rates improved by 300%. More importantly, the users we were acquiring actually stuck around and used the product. Customer success tickets shifted from "how do I..." to "can you add a feature for..." - a much better problem to have.
The most surprising result was organic growth. Once we had engaged users, word-of-mouth referrals increased dramatically. Users started sharing project templates, inviting clients to review boards, and recommending the tool without any prompting from us.
What really convinced my client was the cohort analysis. Users acquired through our new engagement-focused approach had fundamentally different retention curves. Instead of the typical SaaS cliff where usage drops off after week 2, we saw usage actually increase over the first month as users built habits and invited teammates.
What I've learned and the mistakes I've made.
Sharing so you don't make them.
Building engagement loops instead of linear funnels taught me lessons that completely changed how I approach SaaS growth:
Quality beats quantity every time. A smaller number of engaged users will always outperform a large number of inactive accounts. Focus on engagement metrics, not vanity metrics.
Friction can be strategic. The right kind of friction filters for serious users and creates investment in the product. Don't optimize away all friction - optimize away the wrong friction.
Value should compound over time. Design your product so that using it once makes using it again more valuable. Each interaction should strengthen the user's relationship with your tool.
Make sharing integral, not optional. The best growth loops happen when sharing is required to get full value, not when it's a nice-to-have feature.
Track leading indicators, not lagging ones. Instead of just measuring conversions, measure engagement patterns that predict conversions.
Design for habits, not sessions. Think about how your product fits into users' existing workflows and routines, not just how it performs in isolation.
Onboarding never ends. Traditional onboarding assumes users will figure everything out in their first session. Engagement loops recognize that value discovery happens over weeks and months.
The biggest mistake I see SaaS companies make is treating engagement loops like a growth hack instead of a fundamental product philosophy. Loops aren't something you add on top of your product - they should be baked into the core user experience from day one.
This approach works best for products that benefit from repeated use, have collaborative elements, or create some form of user-generated value. It's less effective for simple utility tools or products with very straightforward use cases.
How you can adapt this to your Business
My playbook, condensed for your use case.
For your SaaS / Startup
For SaaS companies, focus on these implementation priorities:
Map your user journey to identify natural loop opportunities, especially around team collaboration and repeated workflows
Build progressive onboarding that extends beyond the first session and creates multiple value discovery moments
Design features that become more valuable as more team members use them, creating natural viral pressure
Track engagement cohorts instead of just conversion funnels to understand long-term user behavior patterns
For your Ecommerce store
For e-commerce stores, adapt these principles to your context:
Create post-purchase engagement loops around product usage, reviews, and social sharing rather than just repeat purchases
Build community features that make customers more valuable to each other through recommendations and user-generated content
Design loyalty programs that reward engagement and sharing, not just spending, to create sustainable growth loops
Use intentional friction in your checkout process to filter for serious buyers and reduce returns