10 Proven Free to Paid Conversion Strategies for SaaS Companies
Everyone loves free stuff. Some people have gone to absurd lengths to maximize freebies — like the guy who created 365 Starbucks accounts to get a free “birthday” drink each day (if you’re wondering, yes, that’s fraud), or the TikToker who makes full meals out of Costco samples.
On the more normal side of the spectrum, most consumers are excited to sign up for a free trial… while many have no intention of keeping the service past the free trial end date. The question is, how can you convert free trial users into paying customers?
Free trials are great for consumers. For SaaS firms, not so much. Each customer acquisition comes at a cost and if your free-to-paid conversion rate is too low, those trial customers can end up nibbling away at your bottom line.
I’ll cover the best free-to-paid conversion strategies for SaaS companies to implement. Like everything at The CFO Club, this guide is intended for SaaS firm executives — but there’s plenty of insight here for sales and marketing staff, as well.
Types of Free Customers
Depending on the business model of your firm, you may have one or more types of free (non-paying) customers. Each category differs a bit, both in terms of expected free to paid conversion rates, as well as the potential average revenue per user (ARPU) among that user segment.
The main categories of free customers and types of free trials are explained below.
Freemium
The freemium SaaS model offers users unlimited use of a free tier of service, which typically has a more limited feature set than the standard plan. Users can then upgrade to a paid version to gain access to paid features and higher-tier plans.
Free-to-paid conversion rates for freemium customers tend to be lower than for other types of free customers. Data suggests that for B2B firms, conversion rates tend to be in the 3-10% range, and it can be even lower for B2C products, with some sources suggesting conversion rates as low as 2.6%.
Lower conversion rates on these products are logical: Customers are getting an unlimited period of free use, albeit with limited features, though many users will be perfectly content with the free tier long-term. For instance, Spotify has around 515 million active users, but only 210 million paid customers.
Of course, some freemium products allow firms to still generate revenue from non-paying subscribers, through advertisements, affiliate partnerships, or email marketing.
Opt-in Free Trial
Opt-in free trial models allow users to test out the service for a limited period of time, without entering payment details. They can then opt-in to a paid plan by following email prompts to add payment information once the trial expires.
Opt-in free trial customers have had an 18.2% conversion rate, on average.
Opt-out Free Trial
Opt-out free trial models are the “traditional” free trial process, where a user signs up for a limited period of time for free, but are required to enter payment details from the jump. If they don’t opt out by the end of the trial period, they will be charged the monthly subscription fee.
Opt-out free trial customers had a 48.8% conversion rate but ensure your customer support teams are adequately prepared to handle refund requests from disgruntled users that didn’t realize they were going to be charged.
Reverse Trial
The reverse trial strategy gives new signups full access to premium features for a limited time, then asks them to either continue paying for the premium plan or downgrade to a free plan.
Reverse trials are less commonly used so data is sparse, but reverse trial customers may have conversion rates in the 25% range.
Free Trial Conversion Rate Benchmarks
Free-to-paid conversion rates vary based on industry, target audience, growth stage, and other factors. Nonetheless, we can look at industry benchmarks to get a rough idea of where conversion rates should fall.
The best dataset available comes from FirstPageSage, which analyzed data from 86 SaaS firms. The dataset was B2B-biased, with 71% of polled firms B2B and 29% B2C.
SaaS Free Trial to Paid Conversion Rates by Traffic Source + Trial Type
| Trial Type | Traffic Source + Conversion Rate Benchmark |
|---|---|
| Opt-in free trial to paid | Organic: 18.2% Paid: 17.4% |
| Opt-out free trial to paid | Organic: 48.8%Paid: 51% |
| Unlimited free tier to paid (freemium) | Organic: 2.6% Paid: 2.8% |
SaaS Free Trial Conversion Rates by Industry
| Industry | Trial (All Types) to Paid Conversion Rate |
|---|---|
| Advertising/AdTech | 24.3% |
| Agriculture/AgTech | 21.5% |
| Communications | 23.4% |
| CRM | 29% |
| Cybersecurity | 21.9% |
| Education/EdTech | 24.8% |
| Enterprise | 18.6% |
| ERP | 23.7% |
| Environmental/CleanTech | 22.9% |
| Financial/FinTech | 19.4% |
| Healthcare/MedTech | 21.5% |
| HR | 22.7% |
| Internet of Things/IoT | 25.2% |
| Legal/LegalTech | 23.1% |
| Real Estate/PropTech | 22.7% |
| Regulatory Compliance/RegTech | 23.6% |
Building an Ironclad Free-to-Paid Conversion Strategy
Improving paid conversions for free trial or freemium can drive revenue growth, decrease net customer acquisition costs, and increase customer lifetime value. Below, find the best free-to-paid conversion strategy techniques to implement for your products.
Track and Analyze Behavior Among Free Users
Firms can benefit from utilizing SaaS cohort analysis to examine metrics from different user groups, including free users as their own cohort.
User behavior data is the first thing to consider. Are new users on a free trial engaging with the software past the initial sign-up day? How many hours are they interacting with your tools, on average? Are there particular features that they are or aren’t using?
Compile data on your free users as their own segment, then compare usage stats to your general population data for paid users. This can help you identify key differences between these customer segments, which can inform your future marketing and retention strategies.
Consider the Acquisition Source
Together with marketing, drill down into your customer acquisition data to segment out free trial members from paid members. Where are free customers coming from? Are there sources that are driving large sign-up numbers, but poor paid conversion rates? Are paid users from certain channels displaying higher customer churn rates?
Pay close attention to any paid traffic channels that are driving poor conversion rates. Data from FirstPageSage, shown above, indicates that for many SaaS firms, free-to-paid conversion rates are similar for both organic and paid traffic. The difference, of course, is that those paid channels have much higher acquisition costs.
If sources are driving low-quality leads with poor conversion rates, be sure to run campaign-specific metrics to determine if that particular traffic source is worth keeping on board.
Retire Your Opt-in Free Trial Offers
Opt-in trials, which don’t require upfront payment data, tend to have much lower paid conversion rates compared to opt-out trials where credit card data is collected from the start (18.2% to 48.8%, respectively).
Yes, opt-out offers can potentially convert visitors to free users at a higher rate but requiring payment information serves as an initial verification process for users. Many of the no-commitment sign-ups may have no intention to ever pay for the product, and some may even be bots or malicious actors.
As always, split-testing and acquisition analytics is needed to determine the feasibility of this approach for your specific firm. But as a blanket statement, it’s safe to say that opt-out offers simply don’t convert as well as opt-in trials.
Prioritize the Most Qualified Leads
Some free trial users will be much more valuable target customers than others. By segmenting and identifying the most qualified leads among your existing free users, you can dedicate resources to the users most likely to convert and drive value.
You can identify these leads based on their customer engagement score, usage patterns, company data, demographics, or any other factors your team deems relevant.
From there, prioritize the conversion of these leads into paid members. Automated onboarding emails (ideally with user customization) are a good starting point. You could also experiment with discounting (see below), or even manually sending personalized emails to these users outlining features, asking for feedback, or offering assistance with exploring your product.
Offer Limited-Time Initial Discounts
From boardrooms to kitchen tables, cost is often top of mind when customers decide whether or not to cancel a free trial. To capture more paid users, consider experimenting with discounts after a user has signed up for a trial.
A great time to do this is when you send out a reminder about the end of the free trial. For instance, an email reminding the user that their trial expires in 48 hours — along with an exclusive discount code to save X% on their first X months. Create urgency by limiting the lifespan of the promo code to 24 hours or less.
Discounting is of course a fine line. You don’t want to give the impression that your product is frequently discounted (and therefore not “worth” the sticker price). You might consider offering a discount on an annual plan rather than monthly, or other more advanced SaaS pricing strategies.
Ruthlessly Evaluate Your Onboarding Experience
A poor onboarding process can be a key driver of customer churn, both for paid users and free trial accounts. To improve free-to-paid conversion rates, it’s time to re-evaluate your user experience with a fine-toothed comb.
You can approach this in very technical ways, using digital experience intelligence tools like Fullstory or Smartlook, or in very non-technical ways, like The User Is My Mom or The User Is Drunk.
Whatever the approach, make sure your onboarding experience — both in-app and through your email series — is user-friendly and intent-aligned.
Offer a Free Trial Extension
Offering to extend the free trial period for certain users can ultimately drive better conversions. It’s best to do this in a targeted fashion, based on user characteristics that your team deems worthy of additional courting.
For instance, you could identify accounts with a high potential LTV, based on the size of their company, survey answers, or other data you might have on the account. Or, you could target free trial users who spent X+ hours engaging with your tools but didn’t explore all the features available to them.
From there, there are two potential approaches:
A) Automatically extend targeted users’ free trials, sending out an email or app notification towards the end of the trial period with details. Or,
B) Provide an opportunity for users to request a free trial extension by filling out a form or emailing support.
For customers with a high potential LTV, you could even consider sending out a personalized email or offering a one-on-one strategy call.
In any case, the idea is to give the relevant users more time to explore your product. Make sure your messaging is on-point and that you’re highlighting the features most likely to convert.
Inspire Through Customer Case Studies
A key goal of conversion optimization should be to help users visualize what their professional life could look like when fully utilizing your product.
A great way to do this is to post detailed customer stories and/or data-heavy case studies from your most satisfied customers. Asana, HubSpot, and Mailchimp are examples of firms that do a great job with customer success stories and social proof marketing tactics.
These case studies are often published as blog posts and can primarily be thought of as inbound marketing assets. But these case studies can also be utilized to drive free to paid conversions by sending out email prompts during the trial period.
If you can, try to gather case studies from several different industries, market segments, company sizes, etc., and then customize marketing messages with the most relevant case studies and use cases for that user base.
Use Automated Chat Prompts for Free Trial Users
Free trial users who are unsure if they will keep the product or not will often have questions about your product — but they’re unlikely to actually email the sales team to ask. Firms can address common questions through FAQs and the like, but that requires users to navigate to those pages (while potentially navigating away from pages with direct CTAs).
Consider using automated and interactive chat prompts that are customized for free trial users. For instance, if a free trial user accesses your pricing page for greater than 20 seconds, a chatbot prompt saying something along the lines of “Have any questions about our pricing?” could help to improve conversion rates.
Experiment With Free Trial Duration
Each SaaS product has a different learning curve and target audience — and these variables influence the ideal free trial duration. 7 days may be plenty of time to explore a consumer app like Spotify or Strava — but these apps have a low learning curve and a relatively limited feature set.
For B2B SaaS tools and more complex offerings in general, longer trial periods may be advisable. Even with excellent onboarding workflows, some tools are simply more difficult to learn. If customers are willing to put in the effort, a longer trial period can help by:
- Letting them fully explore the app, and
- Allowing them to create sticky habits and workflows with your tool’s features
You should be aiming to create an experience so compelling that customers would be distraught if you took the product away. Make your company a painkiller, not a vitamin.
Optimize Free to Paid Conversion to Drive Revenue Growth
Much focus is given to inbound conversion rates and attracting potential customers. But remarketing to free trial signups can be like picking low-hanging fruit. These are customers that are already interested in your product, and whose information you’ve already captured. Dedicating resources to optimizing conversion rates for free trial users can be a powerful boost to subscriber growth figures, without requiring much marketing spend.
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