There are various sales funnels you can implement to receive revenue in the SaaS industry. The most popular methods usually involve a free trial period or a freemium plan for your software.
Whichever you decide to choose will work tremendously and share the same goal, converting free users into paid subscribers. But how do you convince a prospect to pay for a service they currently have for free?
It can seem challenging, but the conversion rates could be substantial when applying the correct research methods, strategy, and execution plan. Therefore, let’s discuss how to approach this business strategy and convert free subscribers into paid.
Converting customers from a free to paid subscription can be difficult, especially when you haven’t created a customer research framework. A critical fundamental to this business structure is comprehensively understanding your ideal customer persona. From having this knowledge, you can apply strategies that impact the target audience effectively, such as:
For all SaaS businesses, discovering potential friction points throughout the sales funnel is mandatory. It’s an “area” of a customer’s journey that experiences poor engagement or retention rates, making consumers uncertain about the service. In this circumstance, it’s a visual story of your customer’s interactions with your product.
Businesses that follow a free trial or freemium plan will encounter friction points during the converting stages for various reasons, but it’s compulsory to locate them. Having a solidified understanding of when your customers are discouraged from the upgrade will allow you to prompt and create promotional content more suited to their needs.
For example - the freemium model from Grammarly. Users can experience what Grammarly has to offer on a reduced scale. However, when using the free version of the grammar tool, it’ll suggest how many additional problems are established on their paid version.
By having this, users feel more urged to purchase Grammarly premium because it’ll improve their writing. Creating this “the grass is greener on the other side” mentality shows much more emotional attachment with the transition between free and paid.
Imagine the impact of this strategy on someone who’s not confident in their English skills.
Many SaaS owners understand the importance of creating email sequences, yet only a few perform this correctly. Currently, many sequences are triggered based on time. With this, every free trial or freemium user will receive an email based on how long they’ve been registered.
However, the significant problem with this is that there are many active and inactive users with these business models. Every customer that uses your software will engage in their own way and progress through the sales funnel at their pace.
Therefore, the email marketing sequences shouldn’t be triggered by time. Instead, it should become active when users perform an action. To visualize this further, let’s provide two examples of customers:
• Customer one – Has only registered a profile with your SaaS product
• Customer two – Has created a profile, completed the onboarding process, and is now utilizing the free version of the platform
By linking back to the customer journey concept, we can understand that one user is more engaged than the other. Because of this, the marketing tactics used to convert these customers to a paid subscription will be different, and the below example from Smartsheet demonstrates this perfectly:
As you can see, the above images refer to customer one because customer two has already completed these tasks.
In this example, they’re using two psychological techniques to re-engage customer one: the feeling of completion and urgency. Because the onboarding process has been halted at the “Sign up” step, they must be encouraged to use your software and develop an understanding of how they can utilize the platform. Afterward, it then hints at the urgency of when this needs to be completed (when the trial ends).
However, if the same email was sent on a time-triggering sequence to both customers one and two, it wouldn’t be effective to each user. Therefore, a different approach will need to be taken for customer two. Because they’ve already gone through the onboarding process, offering a limited discount might showcase better results.
To conclude the above, the last consideration you need to think about is testing. All customers respond differently to promotional content because of their personalities and engagement levels. Therefore, it’s best to develop multiple strategies established around these areas and A/B test them against each other to optimize for a high conversion rate.
Your first strategy is unlikely to be your best. Without comparing and testing data, it’s challenging to decipher what’s working for a particular customer. However, while developing these methods, you should try all freemium business models to discover what provides the most positive reaction from your users, which are:
1. Traditional Freemium – Free forever, but only offers limited features
2. Land & Expand – Start small and gradually increase their services
3. Free trial – Full usage of a SaaS product for a limited time
4. Freeware 2.0 – Completely free to use product that can enhance other subscription services a business offers
Start by testing these, gather data, and then select the best freemium model. Once you’ve discovered this, you can break down the optimization process further. For instance, let’s say Freeware 2.0 showed the best results for converting free to paid customers. Great, now develop a better understanding of when to trigger the transition, how it’s presented, and so forth.
Those who don’t implement this are why successful businesses initially stop growing—inadequate testing for marketing purposes, new target audiences, and innovative ideas result in a downwards slope to failure. Therefore, consider the above, test to gather data, and use this information to develop unbreakable strategies.
After reading the above, you should have a broader idea of considering when to convert clients from free to paid subscriptions. To better visualize the working methods, we will discuss the three most popular strategies that have been utilized in recent years.
The online video communication industry boomed during the pandemic. However, well-known, globalized brands were abundant in this industry already. So, how did Zoom become a new industry leader? Well, by implementing the correct marketing tactics to transition users from free to paid plans.
Zoom used a freemium-based model that allowed users to utilize the video communication tool for one-to-one calls. But, when calling in groups (two or more people), users were only given a limited time before they needed to upgrade.
This was successful because Zoom understood the value of its software and the customer’s journey. Typically, before users create groups with video communication tools, they test the product. Throughout this testing period, they normally have one-to-one calls with a friend, colleague, teacher, etc., to get a “feel” of the product.
However, using the software for this purpose is included within the freemium model. Therefore, when they conduct group calls, a timer will countdown. When users reach the remaining ten minutes, a pop-up prompt will appear requesting them to upgrade; otherwise, the group call will end.
The likelihood of a group call being a meeting, class, or another important gathering is high. Therefore, group leaders would feel more inclined to purchase their paid version to continue the call.
In addition, Ubersuggest also considers the customer’s persona and journey in their free to paid converting strategy. It’s a powerful SEO tool that offers users the chance to experience premium features for a limited time through their freemium plan. The reason this works well for Ubersuggest is that they understand the significance of their tools: It’s comprehensive, well-presented, and easy to use.
Because of this, Ubersuggest went with the “try before you buy” method while making restrictions in the right places. Users can understand how the platform can improve their websites’ SEO, research, and more, all for free. However, they’ve included a limit of daily searches, which drives people to consider converting to the paid option.
After all, if Ubersuggest is offering valuable information that can improve your website, marketing, and online growth, only being able to search three times a day isn’t enough to make a real difference. Therefore, understanding their customer persona and journey, Ubersuggest can help users with their SEO projects but restrict them in the right places.
Let’s be honest here; the only users that convert from free to paid are the ones that are engaged with your software. ProdPad understands this, and that’s why they’ve developed an onboarding technique that’s designed to encourage customers to operate within their platform.
Their hybrid free to paid conversion technique bases itself around a free trial system. Users who want to extend their trial need to perform a specific task that offers one primary benefit: engagement.
By doing this, there’s an array of data that a SaaS owner can obtain: How engaged the customer is, the likelihood of them converting, and which marketing content should be showcased to them that’ll offer the best results.
The above shows a small selection of working strategies for SaaS products. However, the method you opt-in for will depend on your customer persona and industry. By having a solidified understanding of this, you can develop much more advantageous procedures that’ll be highly converting.
After reading the above, you should have a broader understanding of converting free users to paid. There are many different strategies you can opt-in for regarding this topic.
However, you’ll only truly find excellent results by performing adequate research (customer and industry), testing different strategies, and optimizing content continuously. By doing this, you’ll eventually compile enough data to successfully create a transition plan for multiple customer personas that are fine-tuned to their needs.
So, what are you waiting for? Gather data, begin testing, and create unbreakable free to paid conversion strategies.