What Is a Good Free-to-Paid Conversion Rate (With Data)

0:00All right. So we are going to talk about what a good free to paid conversion rate is. But first and foremost, Neil, what do we mean by free to paid conversion rate? Sure. So what I mean by a good free to paid conversion rate is when someone ends up buying your product or service or software, and they're signing up for a free version, and then how many of those people actually convert into a paid user or paying customer? Yep. This is written by a guy, his name's, it's hard to pronounce his last name. It's Lenny Rachitsky. Okay. So he's a product guy. He's got a great newsletter. A lot of people in tech subscribe to him.

0:36And he's got a lot of data to share. He actually interviews a lot of people working in tech. And so here is a table over here. And if you can't see it, we're going to read it out to you. So what is a good and great free to paid conversion rate? So you can be using freemium. So freemium is you might have a crippled version of the product and self-serve. And that means you can kind of activate it yourself and play around with it. I think HubSpot allows you to self-serve. And then you have freemium where it's sales assisted, where you might have to talk to a salesperson to get involved with the freemium.

1:05Or in some cases, some features might be locked away and you might need to talk to a salesperson. And then you have a free trial. We'll go with the free trial. I mean, that's pretty 14-day free trial, 30-day free trial, whatever. And then you enter in your credit card. Could be before or after, after you use it for a while. Reverse trial. Do you remember what a reverse trial is? reverse trial is i think you have to opt out to not be charged or something like that let's see i think we both so anyway i don't think neil and i know what a what a reverse trial is but we're gonna go with the one two and four over here so here's what it says in the table like i think a reverse trial is is you have to opt out or else you get charged i could be wrong i mean isn't that just like a free trial no a lot of free trials you don't put in your credit card all right well Well, anyway, so maybe I'm wrong.

1:52I don't know. Freemium self-serve, 3 % to 5%. That's good. Okay. Great would be 6 % to 8%. That's the first row. The second row, freemium sales assisted, 5 % to 7 % would be good. 10 % to 15 % would be great. And then reverse trial, good, would be 70%. A reverse trial puts customers in a freemium experience with a time-free trial access to paid capabilities which revert to a traditional freemium product after the free trial ends. So in essence, they're dropping you into the product. You're getting all the features, but it lets you know that you only have these features for like seven more days or 30 days.

2:28Oh, okay. Got it. I mean, it's like a little tweak. Okay. So reverse trial, 7 to 11 % for good, 14 to 21 % for great. And then free trial, 8 to 12 % for good. And then for great, 15 to 25%. Again, this is converting someone from free quote unquote to paid. No, look, if you can get conversion rates in this bound and they're taking quite a bit of data, those aren't bad conversion rates from what I've seen as well. So look, this group, okay, it actually talks about a group over here. Check this out. So a good conversion rate from freemium self-serve product includes Canva, Trello, and Typeform. And I think we've used at least one of these.

3:08And then for freemium product with a sales-assisted motion, that would be like Airtable, GitLab, and HubSpot. And then if you want products to offer a free trial, Shopify, Google, Workspace. And that's what those will kind of be the main ones to look at. So those would be the examples, the gold standard, if you're looking to imitate. Because what happens typically when people are building SaaS is, I don't know about... I think for Neil and I, we used to just look at other landing pages and say, what do you think about this landing page? What do you think about this one? And we go to our designers like, here, make a mishmash of this.

3:36And so that's what we'll be able to take away from this one. It's like, hey, who actually does a good job with conversion rates here? I would go to type in Lenny's newsletter, good conversion rate, and then you should be able to find it. Quick hack, adding PayPal as a payment option will usually give you a 16 to 18 % lift in your conversions. So, I can help you boost it up if your numbers are a little bit low. And you'll also find that pricing typically has the biggest impact on your conversion rates. If something's a dollar, but people are used to paying$100, you'll notice that your conversion rates skyrocket as well.

4:08So just keep in mind, you have to look at what people are paying from a market perspective, because if you undercut it and your conversions go through the roof, but then you're not making that much revenue, it doesn't really matter too much. Check this out over here. So conversion by customer size. So this is a bar graph and it shows for very small businesses, bottom quartile, 5%, median is 12 % conversion rate, and then top quartile is 25%. And then for SMB, 4 % for bottom quartile, 10 % for medium, and then 20 % for top quartile. And then finally for mid-market, 4 % bottom quartile, 8 % for median, and then 18 % for top quartile.

4:45So I would just take a look at this post. There's a lot in here. And this will give you a sense for if you are above, equal, or below benchmarks. And it's always helpful to do benchmarks. So hopefully you found this helpful. And by the way, this whole idea of free trial, it's not even just for SaaS. I see people doing it for info products and things like that. And also for products too, adding subscriptions and things like that. So obviously the numbers are a little different. This is for SaaS only. So anyway, benchmarking is a good thing. So that is it for today. Please don't forget to rate, resubscribe, five stars, please.

5:16And we'll see you tomorrow.