The path to high converting customers
Metric Stack 16: Trial Conversion Rate and more!
Do you agree that conversion is the most important stage of the sales funnel? Well, that might be an exaggeration because conversion does not guarantee retention. However, it’s often the first concrete step towards a mutually beneficial relationship with your customers.
Welcome to week 16 of Metric Stack Newsletter. I’m Priyaanka Arora, your personal metric assistant and content researcher & writer at Klipfolio. This week, let’s dig deep into SaaS conversion rates!
What is Trial Conversion Rate?
Trial Conversion Rate measures the percentage of users that convert from a free trial account to a paid account. Free trials give your users a taste of what they are to experience if they pay for your product or services. Here’s the formula:
Trial Conversion Rate = Trial-to-Paid Users / Trial Users
Now, keep in mind the reasoning behind why many SaaS companies offer free trials or freemium. The idea is that you have faith in your product. You’re certain users will gain true value from your product if only they experience its features.
If you’re a long-time reader of Metric Stack Newsletter, you’ve seen me talk about product-led growth being a great strategy to reduce ever-growing CAC and we’ve looked at metrics such as Natural Rate of Growth that can help you track just how successful you are in executing this strategy. Freemium and trials let your product speak for itself and effectively sell itself.
What’s a good trial conversion rate benchmark?
The standard, opt-in free trial converts 25% of trial users into paying customers. This means that your free trial requires customers to explicitly agree to continue using your product beyond the trial period, rather than being auto-billed, for example.
InnerTrends’ benchmark research gives us this interesting funnel with the conclusion being that the end conversion rate is about 0.40% for opt-in free trials.
Are freemium and free trials the key to high conversion rates?
I must admit this question is slightly misleading. Obviously, just having a freemium or free trial product doesn’t guarantee high conversion from trial or freemium to paying customers. Rather, ask yourself if this is the right approach for your business.
Much of this decision has to do with your industry and target audience. If you’re a B2B reporting tool, consider the fact that your product is disruptive and you’re trying to replace traditional reporting methods such as spreadsheets with your solution. In this scenario, freemium is your best bet because it allows your customers to get used to and form a habit of using your product instead of their existing solution.
However, beware: freemium tends to bring more top-of-the-funnel customers that may never convert to paying customers. In fact, based on benchmarks, the highest converting model is the opt-in free trial, due to its ability to attract customers with at least some intent of making a purchase.
Steering our conversation back to high converting customers, say you decide to offer a free trial. What can you do to achieve that 25% trial conversion rate? Here are a few steps you can take:
Provide an excellent on-boarding experience. First impressions last much longer than you think. On a related note:
Do not underestimate the power of dedicated and helpful customer service. You’d be surprised what customers are willing to work through given the support they need.
Keep your customers in the loop. Product improvements, learning resources, exciting updates - they’re for the end users after all. Let them know.
Continuously improve your product, making sure to listen to your customers’ feedback. In the long run, you’ll appear almost to predict customer needs before they happen.
Most important: stay tuned for Klipfolio’s super amazing upcoming podcast to learn directly from SaaS industry experts!
Coming soon: the Metric Stack Podcast
If you love the Metric Stack newsletter, you’ll love the Metric Stack podcast! Coming this fall to your favourite podcast app, Klipfolio co-founder and CEO Allan Wille and co-host Lauren Thibodeau will talk to founders, leaders, marketers, and more to uncover how they succeed with data. Whether you’re struggling with data, hesitant to take the leap or you’re a seasoned expert with years of experience, you’ll hear stories from people like you who have used data to grow and scale their business.
Stay tuned for the next edition of Metric Stack Newsletter to get the latest scoop on all things metrics! Send feedback, comments, questions here: parora@klipfolio.com