SaaS Average Conversion Rate From Free Trial — Benchmarks And How To Improve It
--
What is the average SaaS conversion rate from a free trial? Is my trial-to-paid-conversion rate good? How do I compare to other businesses?
If these questions are keeping you awake at night, you’ve come to the right place for answers!
The average conversion rate from your SaaS free trial has a big impact on your product’s growth and blindly following benchmarks is not the best way to focus your efforts.
In this article, we’ll go over some of the SaaS average conversion rates and what you can do to improve yours.
Table of Contents
- What is a free trial conversion rate?
- Why is a free trial conversion rate important for your SaaS business?
- How to correctly measure your free trial average SaaS conversion rate
- SaaS free trial conversion rate benchmarks
- What is the average conversion rate for SaaS free trials?
- How to improve your SaaS free trial-to-paid conversion rate
- Conclusion
TL;DR
- There are four main types of free trials: Opt-in and Opt-out Unlimited free trial and Limited free trial, ranging from 7 to 60 days depending on the product.
- Opt-in free trials only require an email and then users have to enter their credit card details to purchase the product before their free trial ends.
- An unlimited free trial gives users unlimited access to all the features
- Limited free trials only give the user access to a portion of the product’s features.
- Trial conversion rate is the number of trial-to-paid users divided by the number of trial users
- The average free trial conversion rate for opt-in trials is 25% while for opt-out it is 60%. The average free trial conversion rate for B2C is higher than B2B.
- To improve your free trial conversion rate use personalized introductions, interactive walkthroughs, and In-app surveys.
What is a free trial conversion rate?
A free trial is giving your users free access to your product for a limited time period. The purpose is to get them to experience the value of your product in the time you give them.
A free trial can range from 7–60 days. The more complex your product, the longer your free trial should be. However, you also need to have enough resources to keep everything running.
What is a free trial? What types of SaaS free trials are there?
There are many different types of free trials but here they can be first divided into two categories: those that require a credit card, and those that limit features.
Here’s a more detailed breakdown:
- Opt-in free trial — no credit card required, after the end of the trial the user needs to consciously extend it to purchase a plan [e.g. Userpilot]
- Opt-out free trial — requires a credit card before the trial starts, if the user doesn’t cancel by the end of the trial, they get automatically charged for the first month [e.g. Amazon prime]
- Unlimited free trial — the user has access to all the features
- Limited free trial — the user has limited access to features, e.g. the lowest plan, or a selected plan, or a specific number of key actions (e.g. keyword lookups — 100 per 24 hours in Mangool’s KW finder)
Which is better Opt-in or Opt-out?
Opt-in trials are most effective for generating a huge buzz about your product because it requires little to no commitment.
If during the free trial users reach the “Aha! Moment” and become activated, they will tend to stay longer and have the highest customer lifetime value.
You will, however, have to invest more in an onboarding experience to make someone realize your value and enter their credit card information. This will result in a lower average conversion rate than opt-out trials.
The challenge with opt-out trials is they result in fewer users. Nobody wants to enter their credit card details for something they know nothing about.
You will have to invest more in your marketing to get people to sign up, and their actual experience in the product better be amazing, or you risk tons of negative reviews.
Moral of the story: If you have a relatively new product and a sizeable amount of funding, then an opt-in trial is probably your best bet. If you have a well-established product and are looking to get to that next level of sustainable growth, test out an opt-out trial.
Which is better — an unlimited free trial or a limited free trial?
With the unlimited free trial, the user has access to all your features so they can choose the plan that best fits their needs. But there is a danger.
As with any free sample offer, the biggest challenge is that many people will try to game the system. Some might create multiple accounts with several emails to keep using your product for free and have no intention of purchasing a plan.
With a limited-feature free trial, you are only giving users access to a portion of your product so there isn’t much room for abuse. The problem is that you are limiting yourself to only a select market that would be interested in those features. It’s important to make sure you include access to key features that the user will need in order to experience some value.
If those features don’t wow the user, then you are limiting yourself even further.
What is a free trial conversion rate? How do you calculate it?
Your trial conversion rate is the percentage of trial users that became paid customers after their free trial.
To calculate your free trial rate, use this formula:
Trial conversion rate = Number of trial-to-paid users/ number of trial users.
For example, if your product has 500 trial users and 90 trial users convert to paying customers. In this case, your trial conversion rate would be:
500/90 * 10= 18%
Why is a free trial conversion rate important for your SaaS business?
This metric helps you determine if your product offers real value to your customers and if they would be willing to pay for it.
The higher your SaaS trial-to-paid conversion rate, the faster your growth, and the lower your customer acquisition cost.
Once you have a high SaaS free trial conversion rate and a low CAC: LTV ratio combined with a high retention rate, you will have an incredibly sticky product that no one will want to leave.
All that is left is to go ahead and double down on your acquisition!
Another reason why the free trial conversion rate is important is all the PQLs — Product Qualified Leads you get. Basically, all your active free trial users are considered PQLs and they are much easier to convert than Marketing Qualified Leads (MQLs).
This is because they have a more intimate experience with your product than someone who visits your website and reads your blog. But in order to convert them, you need to have a Product-Led Sales strategy. So if your free trial to paid conversion rate is low, it means you need to work on your product-led sales and user engagement strategy.
Finally, the trial conversion rate helps you determine the use cases/user personas for your product. When analyzing your trial conversion data, segment it using various user demographics, e.g., industry or location. This allows you to know which users convert from free to paid at the highest rates and their use cases (e.g. individual users vs. agency users).
How to correctly measure your free trial to conversion rate for SaaS
Although all it takes is some basic math to calculate your free trial conversion rate, you don’t want to generalize your entire user base.
You first need to segment your audience by persona, plan, company size, etc. — so you know not only the general average conversion rate but also how the conversion rate varies for specific segments.
Secondly, decide which segments are the most important for your business. Is it marketing managers in a medium-sized business? What are they trying to achieve?
With a product adoption tool like Userpilot, you can create custom welcome screens that ask all these relevant questions that will help with segmentation.
You can also segment your users based on the key actions they perform in-app via custom events or feature tags. This way you will be able to tell which actions relate the most to a user converting into a paying customer and nudge other segments into performing those actions through tooltips.
Just remember if you have both freemium and free trial, you cannot combine Freemium and Free Trial conversion rates and get a true picture of how Free Trials convert.
SaaS free trial conversion rate benchmarks
An industry benchmark is an ideal or average metric for an industry that companies should work to meet or surpass.
The interesting thing about the free trial conversion rate is that there are various benchmarks for the SaaS industry.
These come down to the type of free trial you are using, the complexity of your product, your audience (B2C vs. B2B), and how much you focus on onboarding.
- With an opt-in trial, Useproof reports an industry benchmark of 25% free trial to conversion rate.
- For opt-out trials, Klipfolio reports an average conversion rate of 60%.
- B2C companies have an industry average of 57%. For example, Netflix’s conversion rate is 93%, while Amazon Prime’s video is 73%.
- In the B2B company space, the industry average is between 14–25%. This is a bit lower than the B2C space because of the shorter trial periods and more complex products. For example, a complex billing software like Chargebee’s conversion rate is 15% while still making more than $76.8M ARR.
What is the average conversion rate for SaaS free trials?
Like we covered before, there is no single average conversion rate for SaaS free trials. You should use different benchmarks as a reference point and always strive to provide a better user experience that will increase your conversion rates over time.
If you still want some numbers, here they are:
- if you have a relatively new product in the B2B space, try aim for a rate between 15%-30%
- 15% is considered a good rate- 25% is the B2B industry average you should aim for, and a 30% conversion rate and above is excellent
- If you already have some time in the market and are using an opt-out free trial, you will want to shoot for an average conversion rate between 50–75%
How to improve your SaaS free trial-to-paid conversion rate
The best way to improve your free trial-to-paid conversion rate is using Product-Led Growth (PLG) strategies. This uses your product as the main engine of growth for your annual revenue.
It boils down to marketing a free trial to bring users into your product and providing them with engaging experiences so they see your solution as the best one to get their job done.
It is actually a bit harder than it sounds. If you have a conversion rate of 8%, that means 92% of prospects are not turning into customers. Why?
Many times it has to do with a poor onboarding experience such as:
- sign-up flow friction is high even when the product is not complicated to use
- overwhelming dashboard AKA: “Fear of a White Canvas”
- long and unengaging product tour
- you don’t have a clear activation point and can’t tell when users are engaged or disengaged.
- you don’t have a clear user journey that leads to conversion
Here are some ways to tackle these issues and how Userpilot can help you do it.
1. Personalized introductions/nail your user onboarding process
To ensure your product meets expectations from the moment they sign up, you should have a personalized welcome screen.
No, that doesn’t mean just putting the user’s name and welcome. A welcome screen is more than just an opportunity to say hi. It’s a place to segment users and gain information that informs the rest of the onboarding process.
At Userpilot, you can create welcome screens with micro-surveys to capture use cases and user-personas. Then you can segment new users based on their persona and provide the most relevant onboarding to help them get their job done.
2. Interactive walkthroughs
An interactive walkthrough helps your user navigate your product for the first time. It is the opposite of a product tour in that it follows a user’s journey rather than a comprehensive feature overview.
Usually, it appears as an overlay on the user interface and teaches your users the specific ways to start using your product to help them reach your activation point. You can only set up a successful onboarding process if you know what constitutes activation for each individual user segment.
Here is an example of a great onboarding from Rocketbots. Adding this interactive walkthrough to their product doubled Rocketbots’ activation rate from 15% to 30%!
3. Checklists
A checklist is another great way to incentivize your users to complete their onboarding and makes sure that they reach the activation point in their journey.
No onboarding process was perfected in the first iteration, so conduct regular A/B tests to improve as you go.
At Userpilot, you have a variety of tools at your disposal to help convert more users.
4. In-app surveys
Microsurveys are essential for collecting user feedback that give you the necessary insights into how you can improve your user experience, and influence directly your trial to paid conversion rates.
We have a full article on how to use this mighty in-app tool in various ways- go ahead and steal one of the 16 microsurvey templates for SaaS and use it in your app.
For an increasing trial to paid conversion rate, here is a great example of a microsurvey you can use. Being proactive and reaching out to users before the trial ends will give you time to act on the insights collected and help users make a purchase decision.
Focus the survey on common objections to upgrading — too expensive, need manager approval, still evaluating the product, etc.
Wrapping it up: Focus on improving your trial conversion rate
If you find that your free trial conversion rate isn’t meeting your industry standards, don’t lose hope.
Follow the four tactics discussed here, focus on improving your user onboarding, and results will start to show.
Want a code-free solution to user onboarding and to convert more users? Start experimenting with different product-led growth techniques today with Userpilot!
