No matter what kind of online business you run, it’s important to monitor and optimize your conversion rate.
Without a high converting site or product, you can drive all the traffic you want to your business, and still fail to see the growth you desire. In this article, we will give you tips on how to measure and improve the conversion rate for a SaaS company. But first…
What exactly is a conversion rate?
The most basic definition of conversion rate is the number of conversions divided by the total number of visitors.
The actual definition will differ depending on your business, where you track conversions, and your goals. If you run a marketplace, you might track the percentage of traffic that ends up signing up for a service. Think Nerdwallet trying to get people to sign up for credit cards.
Alternatively, an e-commerce site should be laser-focused on the percentage of visitors who make a purchase. Supreme would love you to sign up for their mailing list, but they ultimately want to sell you a trendy hat.
For SaaS companies, the conversion rate can refer to a few things, but usually, it refers to the percentage of trialing users who become paying customers. When someone signs up for a Proof free trial, we aim to blow them away with our service so that when the trial ends it’s a no brainer for them to become a paying customer.
3 common types of SaaS free trials
SaaS companies generally have three main avenues that they set up their trials. There are pros and cons to each depending on your business model, customer profile, and product. Here’s the low down on each one:
In the freemium model, you can essentially do a free trial for life. Meaning, you can always have some version of the service for free, but advanced features will cost you money. This is a great way to get the maximum amount of signups, but there’s no guarantee you’ll ever make money.
Slack, Spotify, and Dropbox are all multi-billion dollar companies that use the freemium acquisition model. (Bonus fun fact — Fortnite earned more than any video game in history last year using a freemium model.)
Usually, this business model is funded by investors sacrificing short-term payout for market domination of a certain niche.
In the most famous freemium example, Dropbox allows any user to sign up for an account with 2GB of storage. Then based on your needs, they hope to up-sell you to a Pro or Business account sometime during your customer lifecycle.
Free trial (no credit card required)
Some companies like to qualify their users a bit more than with the freemium model by requiring users to sign up before they can use the service.
But because they don’t require a credit card, trial-ers have less skin in the game and are less likely to become paying customers. The advantage is that the number of signups generally is higher than a credit card required signup due to less friction.
Drift is a SaaS company that successfully uses this style of model.
During the signup flow, they emphasize No credit card required, as that can be a major objection from consumers when evaluating and purchasing software products.
Free trial (credit card required)
With this type of signup flow, you still get to ‘try before you buy’ but you have to enter your credit card information.
If you want a committed user who can be automatically charged at the end of their trial, you’ll use this model. Most SaaS businesses choose this option, including us.
During the signup flow, there are several points where we emphasize objections that trialing users may have. We emphasize that they can “self-cancel at any time” and reassure users that their “card will not be charged until the end of your 14-day trial.”
This model works well as long as you’re transparent and provide avenues for your customers to easily cancel during their trial. Not requiring a credit card might decrease the number of trials you get, but it can dramatically increase your SaaS trial conversion rate.
During our interview with Nathan Berry of ConvertKit, a SaaS business that does $1.2 MM in ARR, he discussed an experiment when he switched their signup flow from credit card required to no credit card required, and then back again. The change made a significant impact on his business.
What is the average conversion rate for a SaaS?
While what constitutes a ‘good’ SaaS conversion rate differs on a case by case basis (for instance paid conversion rates might differ from organic conversion rates), we can look at the available data to get some benchmarks.
For freemium offerings, you’ll see ranges from 4% (Dropbox) to 30% (Slack), and for free trials that don’t require credit cards, 8-10% conversion is typical.
For free trials that require a credit card, the numbers are all over the map, but 66% of SaaS companies report conversion rates of 25%. If you take the average of 8 publicly available estimates from SaaS experts, you get a 26% conversion rate for this type of trial. While not perfect, we think a 25% conversion rate is a good heuristic for a free to paid trial with a credit card required.
(If you’re curious — our calculation considers numbers provided by Customer.io’s Colin Nederkoorn, Justuno’s Erik Christiansen, Get App’s Christophe Primault, 3 Minute Optimizer’s Scotty Liem Truong, Salesforce, SEOMoz’s Rand Fishkin, GoToMeeting’s John Greathouse, and Lincoln Murphy).
How can you improve your SaaS conversion rate?
If you’re converting at a lower rate than you want, do not fear. There are ways to improve. And even if your SaaS conversion rate is already good, you should still try to make it better.
Does LeBron James stop trying to improve just because he already shoots a high percentage? Heck no!
If you are converting at the SaaS industry average of 25% — you are letting three out of every four customers who are committed to trying your software walk out the door! While that might be great for SaaS, take a lesson from nearly every other business model and try to increase that number.
Would a department store be happy if 3 out of every 4 customers visited without buying an item — probably not…
And by boosting your trial conversion rate up, it will have a huge impact on your business, even more so than getting more users on your site. Many companies that think they have a traffic problem when in actuality, they have a conversion problem.
Here are how the top performing SaaS companies are optimizing their conversion rates:
Target the right visitors
If you don’t have the audience you want, your SaaS conversion rate will suffer. Those with higher free to paid trial conversion rates optimize their incoming organic traffic, paid traffic, and referral traffic in order to have highly interested visitors on site. Create quality content, use smart ads, and build up your social presence in order to make sure you have an awesome top of funnel traffic.
Then, use your Google Analytics or Amplitude dashboard (or really any data tool) to monitor the behavior of your on-site traffic.
Ask a few questions:
- Are people staying on for a long time?
- Clicking multiple links?
- Watching your videos?
This will let you know whether you are attracting and retaining the right users.
Personalize the free trial
You can combine past data with your on-site data in order to serve custom offers throughout the signup process. If you already know that a user is a VP of Sales at an enterprise company, you can show them different options than if you are dealing with the owner of a mom and pop shop in the Midwest.
It’s important to collect information during the signup process so that you can tailor your service to them. This gives you great data to enrich your leads and gives the user the sense that you care about their unique needs.
Wistia does a nice job of finding out a user’s goals up front during their free trial signup process. Their page is warm, inviting, and simple to understand. These five goals allow the visitor to learn about Wistia’s capabilities and allow Wistia to personalize the funnel for each visitor.
If a visitor selects Selling video services at my agency, they likely receive a signup process, email drips, and retargeting ads that are uniquely personalized to their wants and needs as an agency owner.
Similarly, Appcues recognizes the power of personalization.
After signup, trialers are asked in a low-pressure way to reveal more about their preferences. Appcues will then use this information to provide a trial experience that is more customized and thus more likely to convert.
Be sure to note, the customization experience should not stop with the signup process.
Once you know a little bit about your user, you can customize everything from content to flows to CTA’s. Immediately after signing up for Drift, they gently push you to customize the design of your chatbot as well as the messaging. It feels so seamless and easy that you’d feel silly not taking these next steps.
They integrate their product into the signup flow so well that by the time you finish walking through signup, you’re itching to get started. You’ve also invested a significant amount of time setting up your Drift messenger that it’s harder to churn and forget about the brand.
Educate the user
Not all your signups will be from people who fully understand your product.
You want to make sure you hold a visitor’s hand every step of the way by offering onboarding videos, tutorials, and help articles. This will encourage them to use the product, and it’s those who actually engage with the product during the trials that have the highest chance of converting.
As an example, every Proof free trialer is presented with the tools and tips to help them succeed, including in-depth, easy to grasp demos.
We also provide a Quick Start Checklist in the dashboard of your Proof account to give an overview of the steps that are necessary to launch a campaign.
Test everything, track everything
You can never rest on your laurels in the world of B2B SaaS. It’s important to always track, iterate, and try new things.
The best growth marketers know this to be the case, so they are always tracking and testing. They use things like a/b tests and customer feedback in order to optimize the free trial, and they keep close tabs on who is dropping off during the trial, where they are dropping off in high numbers, and why they might be leaving.
A key area of focus should be tracking the actions that most of your converted users have in common. (These have been termed common conversion activities.)
For instance, if almost all of the people who started in the free trial and ended up as paid subscribers read the same blog post, that is key information that you can build a plan around.
In SaaS trials as in everything else — knowledge is power.
SaaS is all about first impressions
SaaS companies that have high conversion rates will grow, while those that don’t will stagnate. And in SaaS, fast growth is the key to success. If you want to dominate your market, you need to do everything in your power to set your free trialers up for success so that when the trial period ends they don’t just start paying you, but they can’t imagine life without you.
You’ve usually got one shot to convince a trialer to become a customer, so be intentional.