How to Convert Free Users to Paid in SaaS: The Ultimate Guide

January 19, 2024
Pricing Models
Plenty of SaaS companies launch their product into the world praying for more users, both paid and unpaid, with some kind of free offering. But attracting users to sign up to use your product for free is only the beginning of the journey — the ultimate goal is to convert at least some of these free users into paying customers.If you're struggling with this challenge, you're not alone – this is easier said than done. But there are many obvious and non-obvious things you can do to improve conversion, which we'll talk about here.

What does conversion represent for free users?
Conversion is a nuanced topic, and doesn't mean the same thing for every content. For this case, let's consider conversion as what it actually is: Customers seeing value in what your products does for them, and starting or continuing to pay for receiving that value (or more of it) beyond the scope of what your free plan or free trial is offering to them.

WAIT: Should you offer a free component at all?

It's a popular choice among both B2B and D2C/B2C companies to offer some or all of their SaaS products at no cost. Most obviously, the benefit here is that free trial conversion rates can be a big source of new customers, both in terms of showing a large user base in general as well as showing positive revenue growth. Plus, because these are existing customers that you're upgrading to paid versions, the customer acquisition cost (CAC) is typically lower, the sales funnel is a lot shorter, and churn rate is typically lower, too. In addition, another baked-in benefit is that with a high volume of non-paying users, customer churn overall is typically not as high (because people are less likely to cancel something that's free), and you can leverage this base for user feedback as you learn what aspects of your product are most useful.

However, offering a free trial or other free version is not always the best idea, and it really depends on your specific product, how it works, what it offers customers, and more. So, be sure you're actually a good candidate for it before you start giving away your product for free.

2: Choose the Right "Free" Model

There are several variations of SaaS free trials, each with its own unique benefits and challenges. The model you choose can really impact both your conversion rates and overall business growth, so it's not a decision you want to take lightly.

Let's look at the most popular SaaS free trial models, with some actual examples of companies that have successfully implemented them.
Free Tier / Freemium Model
In this model, users get permanent access to a free version of your SaaS product. Sometimes freemium users on these free tiers have limited access or restrictions to encourage upgrades.
Effectiveness: The average conversion rate for freemium models usually is between 2 and 5%.
When to use it: If your product benefits from having a network effect, or larger base of permanent users.
Example: Slack uses freemium models because the sheer volume of its popularity and wide user base is part of what makes it so effective. Much of its strength comes from the fact that so many people use it, so they have an incentive to let a lot of people use it for free.
Free Trials
A free trial gives your users access to a specific tier of your your product for a specific number of days. A 14 day or 30 day free trial is most common in SaaS. There are a couple different variations of the free trial model: those that require you to pay up front, and those that don't. They all boast a good conversion rate, but which one you choose will depend on your free trial strategy and what you're aiming to achieve.
Opt-in Free Trial:
This model provides users with full access to your SaaS product for a limited time without requiring credit card information.
Effectiveness: Conversion benchmarks for opt-in trials is about 25%.
When to use it: For companies in highly competitive industries or those offering innovative solutions where users need to experience the value proposition before committing.
Example: HubSpot's prospective users can try the platform's full set of features for 14 days without providing credit card details, allowing them to evaluate the product's value and suitability for their needs before deciding to purchase.
Opt-out Free Trial:
The opposite of Opt-in, users must provide their credit card information to access the product, and usually the card will automatically be charged once the free trial period ends to begin an official billing cycle. Note, this can really hurt your customer experience -- while your free trial conversion rates might look great on paper, a lot of those customers get annoyed that they were charged without really knowing or agreeing to it, and some amount will cancel because of this bad experience, so while initial free trial conversion rate is high, churn rate might also increase.
Effectiveness: Opt-out trials on average enjoy a higher conversion rate of 60%. (But keep in mind the CX caveat above.)
When to use it: Established SaaS companies or feature-rich products with a clear advantage over the competition.
Example: For Adobe Creative Cloud, users must provide their credit card information to access a 7-day trial, which grants them access to the complete software package with a suite of products. If they don't cancel before the trial period ends, users are automatically enrolled in a paid subscription and their payment method is charged.
Hybrid Free Trial:
This model combines the characteristics of the above models and offers users complete feature access for a specified period. Once the trial period ends, users can either upgrade to paid plans or continue using the freemium version of the product. While the free trial conversion rate may not be quite as aggressive, you can still enjoy a good conversion rate overall, and you avoid some of the CX pitfalls of opt-out trials.
Example: Prospective Evernote users can access the full set of features in the Evernote Premium plan for 30 days without providing credit card information. After the trial period ends, they can choose to upgrade to a paid plan or continue with the freemium version, giving the user control and not prompting a backlash of angry customer service emails.

Communicate Your Value Proposition

The first step in converting free users to paid users is to ensure that your SaaS product is a good fit for this customer base -- essentially, that it offers clear, compelling value that resonates with your target audience. Yes, it seems painfully obvious, but you'd be amazed to see how many founders worry about free to paid conversion without looking at whether or not their value proposition is well understood by their customers.
So before you do anything else, make sure to highlight the key benefits, features, and differentiators that set your product apart from the competition that justifies them to upgrade, and focus on where and how you communicate this. From your marketing and ads, to your free trial signup page, to your transactional emails and follow-on messaging, they should all help make the case.

Improve Onboarding and User Experience

What does onboarding and UX have to do with conversion? It may not be obvious, but they influence conversion a lot, since they help users achieve early success and establish a positive perception of your product. In other words, they help users to understand the value that your product provides to them - and this is crucial for their willingness to pay for your product.
For free trial customers time is of the essence; you have a limited number of days to convince your users to or freemium users.

Here are several tips and best practices to enhance the onboarding process and overall user experience:
Develop a Step-by-Step Onboarding Guide
You don't want your prospective customers suffering from a steep learning curve. Clear and concise onboarding guides or tutorials can help your users become familiar with your product's essential features and functionalities in a short time frame. To best convey to a broad variety of customers, we recommend using a combination of text, images, and videos to provide a comprehensive and easy-to-follow guide. Interactive walkthroughs or product tours are also a great way to do this.
Offer Contextual Tooltips and Help
Providing timely and contextual assistance within your product can help users understand specific features or navigate complex tasks without disrupting their workflow. Make sure to include tooltips or help icons that users can access whenever they need assistance or clarification mid-process. In addition, offering a searchable help desk, documentation portal or product knowledge base can further support users as they need it.
Personalize the User Experience
By tailoring the user experience based on individual preferences, roles, or use cases, you can make your product more relevant and valuable to your users, helping make the case to them to upgrade. For example, maybe you let your users choose their preferred language, set up specific integrations, or customize the interface to match their unique requirements. All of these little gestures can help users understand what your product can do for them and make a real connection with it, which can definitely boost your free trial conversions.
Monitor and Optimize Onboarding Performance
Regularly review and analyze user data such as product adoption to identify any bottlenecks or pain points in your customer journey. Use this information to make improvements and optimize the overall product experience. You can also collect user feedback through surveys or interviews to gain insights and identify areas for improvement.
Provide Proactive Customer Support
Even though they're not paying (yet), free trial customers shouldn't be left to fend for themselves. Ensure that a responsive and accessible customer success team is available to support your new users through their entire process. Offer various channels, such as email, live chat, phone, or video calls, to provide users with the assistance they need when they need it. You might also consider providing a dedicated onboarding specialist or customer success manager for higher-value customers to ensure a smooth and successful transition to your product.

Need some inspiration? Here are a couple of our favorite companies with great CX/UX and support.
Mailchimp offers a comprehensive onboarding process for new users. They provide guided product tours, video tutorials, and a plethora of resources to help users understand the platform's features and capabilities. Their user interface is intuitive and easy to navigate, making the overall experience enjoyable for users of all skill levels.
Asana has an interactive onboarding experience and interactive product demos that guides new users through its features and functionalities. Users can complete a series of tasks in a demo project to learn how to use Asana effectively and achieve early success. Asana also provides in-app help and tooltips to assist users in understanding specific features or overcoming challenges.

Implement a Data-Driven Conversion Strategy

Monitoring user behavior, engagement, and feedback during the free trial period is essential to identify potential customers most likely to convert. By gathering insights into how free trial users interact with your SaaS product, you can tailor your marketing, sales, and customer success efforts the most promising leads effectively.

Leverage Email Marketing, Social Proof, and In-App Notifications

Effectively engaging with free trial users through specific communication channels can greatly influence their decision to upgrade to a paid subscription. Here are several tips and best practices for lev
Develop a Drip Email Campaign
A well-designed email campaign can educate and nurture your free trial users throughout their trial period. These email sequences can introduce users to your product's features and benefits, share best practices and use cases, and provide helpful resources. Gradually increasing the value of the information shared and highlighting premium features can create a sense of urgency and persuade users to upgrade before their trial ends.
Personalize Communication
Tailor your emails and in-app messages to address users' needs and preferences based on their behavior, usage patterns, and profile information. Personalized communication can help establish a connection with your users and demonstrate your commitment to helping them succeed with your product.
Use In-App Notifications
In-app notifications are an effective way to deliver targeted messages to users while they're actively engaging with your product. Some users find them annoying, so be careful. But if you are careful with your product experience, they can be of great help. They can be used to remind users of the benefits of upgrading, offer time-sensitive promotions or discounts, or provide tips on how to get the most out of your product features.
Showcase Success Stories and Testimonials
Sharing success stories, case studies, and testimonials from satisfied customers can provide social proof of your product's value and effectiveness. This social proof can help reassure free trial users that your product is worth the investment and can deliver the results they are seeking. Display these stories on your website, within your product, or in your marketing materials to create a sense of trust and credibility.
Encourage User Reviews and Ratings
Positive reviews and ratings on popular review sites like G2 can significantly influence the decision-making process of potential customers. Encourage your satisfied users to leave customer feedback and share their experiences with your product, further enhancing the social proof of your product's value for your target market.
Engage Users on Social Media
Actively engaging with your target audience on social media platforms can help you build trust, credibility, and community around your product. Share valuable content, product updates, and interact with your users to maintain an ongoing connection that can ultimately influence their decision to upgrade.

Some examples of SaaS companies that effectively leverage email marketing, social proof, and in-app notifications include:
The graphic design platform, Canva, sends personalized emails to its free users, highlighting premium features and benefits. They also showcase user testimonials, case studies, and influencer endorsements to build credibility and trust in their product.
The writing assistant tool, Grammarly, effectively uses in-app notifications and email reminders to encourage free trial users to upgrade to their premium plan. They also showcase user testimonials and reviews on their website to provide social proof of the tool's effectiveness and value.
Making the upgrade process as simple and frictionless as possible is crucial to convert free users to paid customers. Here are some tips and best practices to improve and enhance this process:
Clear and Transparent Pricing Plans
Ensure that your pricing plans are easy to understand and transparent. Clearly outline the features, benefits, and costs associated with each plan to give users the confidence to make an informed decision. Avoid using jargon or hidden fees that may confuse or deter potential customers. Displaying a comparison table or chart on your pricing page can help users quickly identify the ideal plan for their needs.
Seamless Upgrade Workflow
Optimize and streamline the upgrade workflow to minimize the number of steps required for users to upgrade their subscription. Ideally, users should be able to upgrade to a paid plan with just a few clicks. Make the upgrade option easily accessible within your product's interface, so users don't need to search for it.
Offer Multiple Payment Options
Providing users with multiple payment options, such as credit cards, debit cards, PayPal, and other online payment methods, can cater to their preferences and comfort levels, making the payment process more convenient and secure.
Proactively Address Common Concerns
Anticipate and address any uncertainties or concerns users may have about upgrading to a paid plan. This can include providing a comprehensive FAQ section on your website or offering a responsive live chat or to answer questions promptly.
Easy Downgrade and Plan Switching
Offering flexibility in terms of downgrading to a free plan or switching between paid plans can make users feel more comfortable and in control of their subscription decisions. Implement a hassle-free process for users to make these changes if and when they need to. This flexibility can make them more likely to take the leap and upgrade and improve your user retention.

Here are some examples of SaaS companies that have successfully simplified their upgrade process and provided flexibility:
As a cloud storage service, Dropbox offers a simple upgrade path for users who require more storage space on their free account. The pricing page clearly displays the available plans, features, and pricing information. The upgrade process can be completed in just a few clicks, and users can choose between monthly or annual billing to suit their preferences.
Trello, a project management tool, provides a seamless upgrade experience within its app. Users can easily compare the features of the free and paid plans side by side and upgrade in just a few clicks. They can also switch between Trello's paid plans (Business Class and Enterprise) without any hassle, offering flexibility as their team or organizational needs evolve.

Final Thoughts

Getting to a high free trial conversion rate isn't easy for any SaaS business. It requires understanding user needs, effective communication, seamless onboarding, and continuous monitoring of user behavior and engagement — all elements that typically go overlooked when you're first launching your SaaS free trial to the masses and just praying for the best.
Just getting free trial signups may be enough for you, especially if you're just trying to prove out your business model or build a customer base. Freemium might help you avoid customer churn and high customer acquisition cost, but may not result in the highest conversion rates.
At the end of the day, you should align your free trial strategy to the outcomes that are highest priority for your SaaS startup.
Want to implement free trials or freemium plans in conjunction with your existing pricing? Find out more here.
← Blog