5 minute read

Maximizing Your Free-to-Paid Conversion Rates in an Economic Downturn

Maximizing Your Free-to-Paid Conversion Rates in an Economic Downturn
Written by
Aaron Marco Arias
Published on
August 24, 2023

If you’re in the SaaS space, free-to-paid conversion is one of those metrics you should really be concerned with. They’re not a metric that indicates progress and opportunity (such as organic visitors), but one of your product’s most important KPIs.

But, is it possible to increase your free-to-paid conversions during times when most of your potential clients are downsizing? In this post, we’ll explore some interesting techniques you can leverage at a relatively low cost. 

However, before we get started, we should cover our bases. Let’s dive into what free-to-paid conversion rates are and share some benchmarks.

What Is Free-to-Paid Conversion Rate and How to Measure It

Free-to-paid conversion is a metric that shows what percentage of free accounts from a cohort convert into paying customers. A simple formula for measuring free-to-paid conversion is:

(Number of accounts that converted to a paid plan / Total number of accounts from that cohort) x 100 = Free-to-paid conversion rate

For instance, if you’ve got 20 accounts that converted from a 200-account cohort, your free-to-paid conversion rate is 10%.

At this point, it’s interesting to ask: Would the conversion rate from our example be considered good? 

What’s a Good Free-to-Paid Conversion Rate?

A table showing what's good and great conversion rates.

According to research by OpenView, what represents a good conversion rate will depend on your sales model. 

  • If you offer a free trial, a good conversion rate will be in the 8-12% range. A conversion rate between 15% and 25% is considered great.
  • For reverse trials, 7-11% is considered good. 14-21% is considered great.
  • For sales-assisted freemium products, 5-7% is good and 10-15% is great.
  • For self-serve freemium products, 3-5% is good and 6-8% is great.

It’s worth noting that freemium products have a far lower conversion rate than their counterparts because, while they attract a larger user pool, the average user isn’t ready to buy. And a percentage of users will just never convert because they’re not qualified.

Is It Possible to Increase Your Free-to-Paid Conversion Rate During an Economic Downturn?

As research by Cledara suggests, companies’ average SaaS spending has increased by 25% in the last 12 months. So in theory, yes: It is possible to increase your free-to-paid conversion rate, in spite of economic uncertainty.

But hard times require new strategies. With a focus on sustainable growth and responsible spending, companies have raised their expectations. For free accounts to convert, your product will have to prove that it can have a significant ROI. This isn’t just about full-featuredness, but also about how well the tool can integrate into relevant workflows. Consequently, your free users won’t just want a taste of your product’s best features. They’ll also want to assess whether their team is likely to adopt it. 

A note on customer retention

Retaining your existing customers is far more cost-effective than customer acquisition. Don’t shift your roadmap to chase trends in the hopes that they’ll attract new users. And don’t neglect retention-focused initiatives.

4 Strategies to Optimize Your Free Trial Offer for Higher Conversion Rates

Now that we’ve covered our bases, let’s dive into 4 strategies to optimize your free trials and increase your conversion rates. 

We recommend:

  • Minimizing risks by maximizing value
  • Developing and delivering support content
  • Adopting goals-driven onboarding
  • Experimenting with trial extension and discounts

Minimize risks by maximizing value

A couple of weeks ago, we conducted a UX design hackathon at an event by our friends at ToxiMedia. Most participants weren’t designers, so we had the experience of introducing basic UX concepts (such as dark patterns) to an audience who, until then, had only thought of themselves as users. 

Our participants had to work in couples to design a user flow for an imaginary freemium app. Here’s the problem statement:

“LogoChecker is an AI-powered tool that analyzes the logo of your choice according to a series of quality criteria. You just upload the logo, press a button, and you will have a quality score in X categories. And if you pay for a Premium plan, you will be able to download a report with actionable to improve the quality of your design. Design a flow of screens that allow the user to complete the task of auditing a logo.”

One of the most interesting discussions we had during the hackathon was how much value we should give away for free and how much value we should paywall. This tension can be synthesized as the sentence “You can [achieve X], but not [Y]”. For instance, “You can see how your logo scores on all categories, but you can’t see actionable tips to improve it.”

Needless to say, the “You can… but” logical progression has to be logical. And you have to keep your promise. It may be a great point to remember certain iconic illustration showing that a car’s MVP can be a skateboard, not a single wheel. Even if your features are reduced, you have to keep your basic promise. Solve the issue at a basic level - if the user wants the solution that will give them a real competitive edge, they’ll have to sign up for a paid plan.

A graph showing how to scale client satisfaction.

You don’t want your free users to become frustrated by a low-value, empty experience. Especially in a context where companies are penny-pinching, you want your free experience to add so much value that converting becomes low-risk and a no-brainer. But you don’t want to give away your best features for free. Understanding this tension and experimenting with it is essential. 

Of course, which specific strategies you should implement will depend on your monetization model. For example, Byword is a credit-based AI writing tool. Free users get 5 credits to evaluate whether they’re happy with the output quality. 

You can give users a limited test drive, even if you don’t have a credit system. For instance, some website builders allow free users to fully plan and design their website, but they’ll have to pay to get it live. This model is informally known as “free until you launch”.

Support content

Develop and deliver support content that can help your users to make the most out of your platform. You can structure this content as a series of emails, spread throughout your user’s trial period. That way, you’ll show them what your solution’s capable of while opening a direct line of communication.

Pro-tip: Don’t forget to include customer stories to inspire your users.

Goals-driven onboarding

Instead of inviting users to experience your platform task-by-task, structure your onboarding checklist around goals. One of the most common reasons why users don’t convert is that they fail to see value in your solution.  In fact, most users will churn before they’ve had their first success. Goals-oriented onboarding prevents that, by giving users a sense of accomplishment early on.

Experiment with trial extension and discounts

Depending on your monetization tactic, after your users’ free trial ends, they may completely lose their access to your tool, or just experience a downgraded version. This is just one of a few major factors that will determine your ideal trial extension.

Don’t be afraid to experiment and find a sweet spot where users have already gotten an initial win and are highly likely to convert. Encourage conversion, not just based on the trial’s timeline, but also based on user milestones. And, if possible, pepper in some limited-time offers. 

Maybe You’ve Just Found Your Organic Growth Partner

At Postdigitalist, we help B2B SaaS startups unlock growth levers and expand sustainably. Discover how to use content to maximize your free-to-paid conversion rate. Book a free consulting call today.

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