Increase SaaS User Conversions from Freemium to Paid Plans

Prepare to be surprised: there is no binary answer to the multi-million dollar question “which is better for SaaS – freemium or free trial?”. How so? The short answer is: it depends on the nature of your service and on your user-base. While it is up to you to decide which is more suitable for your needs, we can present you with the facts and offer you some hard earned insights on how to optimize your free-to-paid conversion rates.

 

Conversion from SaaS Freemium is a link in the chain of a successful onboarding and adoption process and. There is no single neat trick to get free users to randomly decide to start paying. So we decided to put conversion in the right context, in this full guide and help you pave the entire process:

Is Freemium Right for Your Product?

First and foremost, ask yourself that. A Freemium SaaS plan will work only with a simple service. Signing up for a free service is something most people don’t consider too much. Most average SaaS users “try out” 1-3 services or applications a week. Whatever doesn’t stick immediately – will be lost in the great black hole where confirmation emails go to die. Lengthy onboarding processes are more suitable for other free/paying models.

 

The consensus is that conversion rates for Freemium services are around 2-3%. That’s not a lot. If you are a B2C service, you will need to establish a huge free-user-base until you can convert those 2-3 out of each 100 users. Ben Chestnut from Mailchimp is even stricter: he claims the ratio is 10:1. Ben presents a fascinating user-dependency cycle: the free users bring the paying users who, in turn, are the ones who make it possible for the business to keep going and attract free users and so forth. Beautiful, no? This also means that you, as an SMB or startup, will need to hold on for a very long time and raise all sorts of funds and investments before this business model can stand on its own legs.

 

If you provide B2B service, you may be a bit more fortunate: business owners are less reluctant to spend money on services and applications than individual users. Here are a few questions you should ask yourself in order to determine whether your service should be Freemium. If you have decided to go ahead with Freemium, read ahead. If you’re having second thoughts, you may want to read our guide to SaaS Free Trials conversion to paid plans.

freemium-or-free-trial

How do we Engage Users with the Freemium Model?

There are a few ways you could go about defining a main strategy. The most common ones are the ones used by Evernote and Dropbox: provide a service that becomes indispensable, forcing your users to upgrade their account from free to Premium, so as not to lose their storage space/ data. Some users may do that grudgingly and others may be happy with the service and upgrade wholeheartedly, but in these cases, moving to a paid plan isn’t done entirely by choice. Or rather, a choice made with the belated understanding that switching service and moving the data involves a very high price (in terms of comfort, if not money).

 

What is the elegant way to go about this? Balance the free-paid plans so that the free plan is enough for base users and the paid plan is where they will want to expand and grow into, when they have been around long enough and naturally evolve into power users. Remember, you’re aiming for truckloads of users. You need a pretty snazzy service to snag them in the first place.

 

The idea is to earn your users loyalty, not bully them into staying. You do that by providing stellar customer service and by being upfront and frank about the upgrade options. LinkedIn is a terrific example of such a service: a layman and even a high-powered professional can enjoy the platform’s many services and opt to pay only if you want a specific set of helpful tools.

It’s All About Stellar Customer Service

Customer service is perhaps the single most important expression of care and concern a software service can express toward its users. Your CEO can be as personal and as endearing as she likes in your monthly newsletter, but nothing says “I care” like prompt response to a complaint or seeing through a technical issue. Customer service is your main differentiator, it is how you keep all those free users engaged and happy so that they may grow to be happy paying power users.

 

stellar-customer-service

Provide Clear Pricing

Transparency is critical for gaining users’ trust, as early as the user’s first visit to your website. A visit to your pricing page is part of potential users’ initial decision whether to so much as like your service, as affordability is part of an acknowledgement process: if a service is affordable, the user can decide whether to form a basic attachment to it.

 

But the pricing page plays a double role in this 15-second impression tour – it also tells the visitor whether the SaaS provider is being straightforward and frank about an issue as sensitive as pricing. Today’s online users are smart, sophisticated and skeptic. If your pricing isn’t transparent, you may be flagged as evasive and untrustworthy.

The Big Shocker: Changes are Allowed

Good news: your users are well aware that you are a budding business or a startup. Even better news: they like you anyway, or even because of that. As such, they will be tolerant toward changes in your interface, pricing model, features and pretty much anything – so long as you implement them gradually and make sure to over-communicate them in advance. There’s a well-known cautionary tale about doughnuts and how the Red Cross earned a 60 year-long grudge from soldiers and veterans. Learning from others’ mistakes is always less painful.

 

Increase User Conversions to Paid Plan

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Noa is Iridize's Head of Content. With a background in digital strategy planning and database management, Noa translates Iridize's vision, stories and data into words. Digital learning and user experience are a particular passion of hers.