How Can SaaS Companies Boost Freemium Conversion Rate?
Published on March 4th, 2021
How often have you rejected a free service, like a free perfume spray at a shopping mall, or a test drive even though you know you can’t afford the car at all, or free juice tasting even though you were never gonna buy it in the first place? Never, right?
That’s the point!
Everyone loves free things and more often than not people are likely to get on board for any service that has the magic word “FREE” in it. It’s one thing to get a swarm of people to take up the free service or product and a whole other thing to make them pay for it.
Pushing free users down the sales funnel and moving them into paid service plans has long been a pain point for many SaaS companies. On average, the freemium conversion rate is about 2-3%. Sounds rough, right?
How about a freemium conversion of 27%? I’m not kidding at all. That’s the conversion rate of Spotify. While most of the freemium companies haven’t been able to make it single figures, how on earth is Spotify’s freemium app conversion rate so high? How can SaaS Startups achieve such a freemium conversion rate?
But before I start giving you tips on how you can increase the SaaSconversion rate, the first thing you need to keep in mind is making your SaaS users a pro in your product. You can go ahead and optimize your conversions later, but this one thing is crucial to increase your freemium conversion.
With that said here are some other tips and ideas that can help you increase your freemium conversion rate:
Let’s deep dive into each one!
Although it’s important that users feel comfortable using your product, you don’t wanna make them too comfortable, because that way they won’t opt for the paid version of your product at all.
If the free version satisfies all their needs, they won’t feel it necessary to upgrade to the paid version. You need to have a perfect balance between value and comfort – they use your product and like its features – Good!
They understand the necessity and want to upgrade and buy additional features – Great!
You need to give them enough value to stay with your product, but set limits due to which they will feel compelled and lured towards the next stage.
Consider the example of DropBox: Users can store files up to 2GB for free. This 2GB is a limit here which makes the usage somewhat uncomfortable as they need to delete older files to fit in the new ones. This, however, doesn’t make them flee. This annoys the users but doesn’t irritate them to a level where they’ll give up on your product and stop using it.
Thus, freemium models must be uncomfortable enough to motivate people to switch to a premium version. But you need to make sure that you provide your customers with enough value to keep them using the product.
Although we think that limiting free plans by quantity is better than limiting it by features, even if you’ve set a limit on the features, make sure you promote them inside your product. If you plan to limit features, you should position them such that the value they offer is way beyond any free plan.
Creating and sharing tutorials using both free and paid features can also help you make an impact on the minds of potential buyers.
On the other hand, if you’ve time-limited your SaaS product, that will create a sense of urgency within the user’s mind and to continue using the amazing features of your product, they would, without any hesitation sign up for the premium version giving them access for a longer duration of time.
This probably plays the most important role in the conversion of customers. Knowing your product strengths can help you develop a conversion strategy accordingly. The strengths of your product or business or USPs (Unique Selling Points) give you “the edge” against your competitors.
So to develop a proper strategy leveraging your USPs, you need to ask yourself the 2 basic questions:
“Chargebee offers a free sandbox where users can configure, setup, and even simulate their subscription billing process, but they need to go live to start collecting payments.” (Vikram Bhaskaran, Chargebee)
Once you know your key feature, you can decide on how to represent them during the free trials.
Not only for the free version, but you can also leverage this feature for the paid version as well. How?
By limiting access to that most loved and used feature.
Take the case of Spotify:
Spotify’s USP is that access to its immense library is very easy and that it is very well socially integrated. If you’re listening to songs on Spotify, your friends will notice it on Facebook. With this level of social integration, Spotify looks more like a musical social network, where you can easily pick up songs your friends listen to.
These features make Spotify easy-to-market as well since 75% of the total users are not paying so the Spotify ads will reach them. Also, they’ve got an easily expandable network, since you can link it with Facebook, which means that if you have linkable songs you have ads linked to those songs as well. Spotify has also created a media partnership with Facebook after the number of users quickly went up.
With free trials, the most important task is to figure out which functionality will add the most value for the customer, once you’ve figured that out you can set limitations accordingly.
Analyzing freemium user activities can help in curating personalized emails – but make them sound like a creepy message from an avid stalker. You wouldn’t want to scare your potential buyers. This is where heatmaps come in handy. You can attain much higher open and click-through rates for your product when you provide tailored support. A behaviorally triggered email has 152% higher open rates.
You also need to curate an effective email drip campaign with a series of educational and beneficial content. Allow your users to gradually move down the sales funnel instead of catching them off guard and asking them for a paid subscription right away.
Here’s a list of emails you can include in your drip campaign:
You can A/B test the length and frequency of emails. The only motive here is to engage your customers with your products as much as possible. Build a foundation of trust by delivering valuable content resources such as case studies and reviews highlighting the benefits of a paying customer.
No one would want to pay for a service they had been enjoying for free just a couple of days ago. That “cha-ching” sound is bad enough and if it’s followed by a hard-to-follow conversion process, it’s like adding agony to the existing user’s pain. Make the conversion process as seamless as you can.
A hard-to-follow conversion process like too many upgrades, making users re-enter their information over and over again, etc can annoy your customers which will eventually hamper your conversion rate.
Think from a buyer’s perspective. Ask yourself what inconveniences could deter you from signing on to a paid service. Hidden charges? Bad customer service? The payment form? Examine the entire process and look out for all the possible hurdles in the way of the up-gradation process. Once you’ve identified them, work towards their elimination or a solution to rectify them and you will be able to boost the freemium conversion rate for your SaaS within no time.
Actionable insights and learnings about building and scaling SaaS companies
At FirstPrinciples, we empower our people to express ideas that drive success. Our open and collaborative work culture motivates our people towards building their dream career.I’m Happy to join!