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In 2018, open video platform Vimeo released a report offering techniques for businesses to grow their customer base and prevent subscription churn. The report included insights from 1.3 billion consumer data points on Vimeo’s platform.
According to the data in the report, Vimeo boasts a 60% free trial conversion rate. That’s more than the industry-wide average for other over-the-top media service businesses such as HBO and Showtime.
The report further states that in the video industry, nearly one-third of customers convert from a free trial to a paid subscription.
Data indicates that only 1% of consumers are serial trial-ers who abuse free trial offers. Based on these statistics, Vimeo concludes that free trials are an effective way for subscription businesses to acquire new customers.
However, free trial conversion rates vary wildly across other industries and in the SaaS (Software as a Service) sector, with results that often differ from business to business.
For free trial customers who have signed up with a credit card, the conversion rate ranges from 30%-50%
For free trials that do not require customers to use a credit card in the signup process, the rate is as low as 2%, or up to 25%
Why do some free trial users convert to paid customers while others cancel the moment the trial period ends? Here are four reasons for low conversion rates, and some tips on how you can reduce churn.
1. Your SaaS free trial product isn’t meeting expectations
Consumers usually have options to consider when they’re shopping for a new subscription-based product, and most businesses offer a free trial before they have to buy.
In the SaaS industry for example, many product and service providers obtain 100% of their customers through conversions of free trials to paid subscribers.
With all these options, customers have ample opportunity to try before they buy. If they don’t choose your product once their free trial expires it could be because your offering isn’t up to snuff. To improve your conversion rate, use customer feedback to find out how your product is performing and use your new knowledge to work out the kinks.
There are a variety of ways to glean insight about your product’s strengths and weaknesses. For example, check in regularly with your current paying customers to see if there’s anything that needs improvement. You can also send out emails to users who haven’t converted to paid accounts once their trial ends.
Customer satisfaction service Nicereply uses its own software to evaluate their product. The business says free trial conversions have been improved as a result of the feedback.
At the end of a 14-day trial, customers receive a survey asking them to rate Nicereply on a scale of 1-10. Based on the rating they provide, Nicereply sends an email asking for further information. Those who favor the product are asked to write a review while those who leave a rating of 8 or below are asked how the product could be improved.
Another great way to gain customer feedback is to attach questionnaires to the opt-out process once a free trial ends. There’s much discussion about whether opt-in or opt-out free trials produce the best conversion rates, but either way, opt-out trials give you one last chance to engage with users before they disappear for good.
Asking users why they’re leaving gives you concrete information on what you need to improve.
2. Customers don’t understand what you have to offer
Another reason a customer might cancel after a free trial expires is that they don’t have a full understanding of the value of your product. If it is difficult to use, consumers might get frustrated and not take the time to fully explore what you have to offer.
This can be improved in a number of ways. Start each trial by sending a welcome email that clearly explains how to use your product. Include links to help users access additional assistance and resources if they require more information.
Some products require more user education than a standard “Frequently Asked Questions” page can deliver. In this case, businesses should provide free trial users with more extensive training or onboarding to ensure they understand and can take full advantage of all your product’s features.
Onboarding should be in-depth, but easy to understand and expedient. Additionally, you should make sure users can opt out of training when they find it’s not necessary.
Software business Storyboard That revised their onboarding process to include training so that new customers had a full understanding of the software and its capabilities. By making this change, they increased free trial conversions by 112%.
3. You aren’t customizing communications
Follow-up emails are an important component of conversion rate optimization. When done correctly, they serve as a way to keep users engaged throughout the length of their trial. But blanket marketing emails don’t work; the best way to truly reach customers is to send them customized communications.
Sales engagement software provider Groove was able to improve its free trial conversion rate by looking at customer behavior. Initially the business was sending each of its users the same email depending on what point they were at in their 14-day free trial.
Then, Groove began studying engagement—how often customers were logging in and using the software. Based on their behavior, the business began sending out targeted emails instead. As a result, conversions increased by 10% or more in most of Groove’s cohorts.
Another SaaS business, Sleeknote, took a similar approach to increasing free trial email engagement. They focused on three categories: active, partially active, and inactive users. By customizing their emails to appeal to each of these categories at various stages of the free trial, Sleeknote was able to increase engagement by 16.5%.
4. You’re charging too much
For some people, the cost of your product will always be too high. These aren’t the customers you should be worried about because they’re not likely to subscribe to your product in the long run. However, regularly evaluating your pricing is key to increasing your SaaS free trial conversion rates.
Look at the pricing of your competitors and, if you can, their subscriber numbers. If there are businesses offering a product similar to yours at a lower price, they’ll likely have more subscribers. Ultimately, a subscription-based business is only as valuable as the number of consistent users it maintains. No matter how good your product is, if you’re charging people too much they won’t pay.
Another way to use pricing to increase free trial conversions is to offer discounts once a trial expires.
You never want to discount your subscription price so severely that you barely break even, but rewarding users for becoming paid subscribers is a good way to lock in customers.
For example, offer new users a discount if they subscribe yearly instead of month to month. By signing them up for a longer term, you ensure a steady revenue stream.
Offering a discount is also a good way to get users to subscribe to a more expensive plan than they would have originally signed up for. For example, the photography marketplace 500px offers users a 15% discount on their plans on the last day of the free trial period.
Transitioning clients from free trial users to paying customers is often key to a successful subscription-based business. By fine-tuning the way you communicate with new users during the SaaS free trial period, you can ensure sustainable growth on a long term basis.
Quick FAQs about SaaS Free Trial
Q: What is the average free trial conversion rate in the SaaS industry?
The average free trial conversion rate in the SaaS industry can vary depending on the product and business. For free trial customers who have signed up with a credit card, the conversion rate ranges from 30%-50%. For free trials that do not require customers to use a credit card in the signup process, the rate is as low as 2%, or up to 25%. However, certain sources suggest aiming for a rate between 15%-30% for relatively new products in the B2B space.
Q: How effective are free trials in acquiring new customers?
According to statistics from Vimeo, free trials are an effective way for subscription businesses to acquire new customers. Nearly one-third of customers in the video industry convert from a free trial to a paid subscription. However, the effectiveness of free trials can vary across different industries.
Q: Why do some free trial users convert while others cancel at the end of the trial period?
Some of the reasons for low conversion rates include the product not meeting the user’s expectations, lack of understanding of the product’s value, lack of user engagement during the trial period, and pricing issues. To increase conversions, businesses can use customer feedback to improve their product, provide extensive onboarding, send customized follow-up emails, and evaluate their pricing strategy.
Q: How can businesses reduce churn and improve their free trial conversion rate?
Businesses can reduce churn and improve their free trial conversion rate by utilizing customer feedback to understand their product’s strengths and weaknesses, ensuring users fully understand the value and functionalities of the product, sending targeted and customized communications, and regularly evaluating their pricing strategy.
Q: How can businesses leverage customer feedback to improve their free trial conversion rate?
Businesses can leverage customer feedback by sending out surveys or questionnaires at the end of the trial period, asking users to rate their product or service and provide further information. This feedback can highlight areas of the product that need improvement, leading to a better user experience and potentially higher conversion rates.
Q: How can businesses enhance user understanding and engagement with their product during the free trial period?
Businesses can enhance user understanding and engagement with their product during the free trial period by sending a welcome email that clearly explains how to use the product, providing extensive onboarding or training, and sending targeted follow-up emails based on user behavior.
Q: How can pricing strategy affect free trial conversion rates?
The cost of a product can significantly affect its conversion rate. If a business charges too much for its product, potential customers may not be willing to pay for it, even if they find the product valuable. Offering discounts after a trial expires or for longer-term subscriptions can help increase conversion rates.
Q: What are some successful examples of businesses improving their free trial conversion rate?
Some examples of businesses that have successfully improved their free trial conversion rate include software business Storyboard That, which revised their onboarding process to include training and increased free trial conversions by 112%, and sales engagement software provider Groove, which improved its free trial conversion rate by sending out targeted emails based on customer behavior.
