Average Free Trial Conversion Rates… and why they don’t matter

I get asked what the average Free Trial conversion rate is or “what’s a good conversion rate” all the time.

But since I’m not an analyst or researcher I don’t have industry-wide data, but even if I did, well… you’ll see.

Softletter (the SaaS University folks) on the other hand collects and publishes this type of information, so we’ll look at their stuff.

A brief disclaimer: I don’t like this kind of survey data because it lumps all SaaS & Web App vendors together and – other than a shared business architecture – they offer different types of products with different use cases that serve different industries, verticals, niches, and markets that all behave very differently from one another… but, this is what we have to work with so it’ll have to do for now.

What Softletter published indicates that 66% of SaaS vendors report Free Trial conversion rates of 25% or less.

That means that for most SaaS vendors – 66% of them – at least 75 out of every 100 sign-ups they get for their Free Trial DO NOT BECOME CUSTOMERS.

75% of the time, it fails every time.

Even more interesting – or frightening – is that 41% of SaaS vendors reported <10% conversions to Softletter!

So let me once again point out the obvious… for 41% of SaaS vendors, >90% of the people that sign-up for their Free Trials DO NOT CONVERT TO PAYING CUSTOMERS.

In real numbers, for 41% of the SaaS vendors Softletter talked to, 90 out of every 100 free trial sign-ups does not result in a paying customer.

And this < 10% number is closer to the reality that I’ve seen when folks first contact me to help them improve their Free Trials.

And frankly… that sucks. (Ugh… language)

I’m sorry, but all of these numbers suck… even the 25% conversion rate.

But the thing I hate about “averages” or data like this is it might make someone with a 26% conversion rate think “WOW! We’re doing great!”

I literally had someone tell me the other day “we have a 29% conversion rate so we must be doing good…” to which I said nothing and simply shed a solitary tear.

Like it or not, when average numbers are put out by industry experts, analysts, researchers or pundits… people make those numbers their goal.

They shoot for the average.

They plan and strategize around the average numbers they put in their spreadsheets!

Now when someone tells me 29% is a good conversion rate for a SaaS Free Trial – and if I’m not rendered speechless – I gently remind them that they’re still losing 71% of their sign-ups.

Yes, at a 29% conversion rate – what someone might consider good – for every 100 sign-ups you get, 71 will be squeezed out of your sales process.

71 out of 100.

To me, that represents wasted ad spend, marketing costs, support and infrastructure resources, and lost potential revenue.

Yeah, you know what?  Forget the costs; this is money left on the table!

So 71% of your Free Trial sign-ups opting not to give you their money when you had their attention in the ONLY PART of the sales process you have any real control over is a FAILURE, even if you are doing better then everyone else.

Unfortunately, Softletter published the data in their newsletter and don’t have the archives available to the public so I can’t link directly to it. Maybe you can find it on their site somewhere.

Softletter also noted that 15% of the SaaS vendors reported 70% or better conversion rates, which sounds great on the surface.

But then they followed that up by saying these are what most people would refer to as “enterprise” sales cycles and “a great deal of personal interaction takes place and in many cases a trial program is not launched unless a great deal of pre-sales qualification has taken place.”

One of the goals of a Free Trial strategy should be to reduce the amount of human interaction required to make a sale, even if there is a customer-side requirement for a “higher-touch” sales process, which – by the way – is often just a customer perception requirement.

You can do things within the Free Trial process to streamline and create a more scalable (read: leverage through proper Free Trial strategy) sales process as a whole.

But to do that – whether with a low-touch, self-service, e-commerce-based sales model or high-touch, human-centric sales model – you really need to understand the true nature of a Free Trial, the four phases – Attention, Engagement, Investment, and Conversion, and know how to create and execute a strategy around your Free Trial.

About Lincoln Murphy

I am a partner in, and leading the Growth practice at, Winning by Design™. I wrote the Customer Success book which you can buy at Amazon. Be sure to join my mailing list - I send awesome stuff to the list every week or so. Also, connect with me on LinkedIn or follow me on Twitter.

Comments

  1. Thanks for this write up Lincoln.

    When we look at broad conversion ratios, I would assume some of the variances may depend on how much information is required to sign up for a free trial. For example, there are a number of sites that require very little, if any, prospect information (i.e., just an email). Others required name, phone, email, address, and some other information. These are two approaches to pre-qualification. I would expect the former will allow the casual less-than-curious person to take a peak, many of which may not be a fit for long term use. They wouldn’t buy regardless. In the second model, these “non-prospects” would steer away and not even become a statistic in the conversion ratios. It would be very interesting to hear you opinion and experience on the data capture sign up approaches. Thanks.

  2. The way I look at it, pre-qualification should start long before the sign-up process.

    How you position your product, the sales copy you use, the imagery and social proof, and even what you do to engage with your prospects before they sign-up (webinars, whitepapers, etc.) will all help in the pre-qualification / self-selecting process.

    I really can’t see how asking for a phone number or title on a sign-up form qualifies or disqualifies a prospect… it adds data points, but qualification based simply on the existence of that information is a stretch.

    On the other hand, there is a massive body of evidence from years of testing by e-commerce and Internet Marketing industries that indicates asking for too much information on a form will reduce the number of people that fill out the form or in this case, sign-up.

    So I always ask for the bare minimum (will vary from vendor to vendor) on the first sign-up form and rely on a strong Free Trial strategy backed-up by psychological factors – such as the rules of Commitment and Consistency put forth by Cialdini in his book Influence – to complete the prospect profile in the post-signup & in-app engagement process.

    The rule basically says that people are much more willing to give you information after they’ve made a small commitment than up-front.

    You’re getting them to provide information not so you can sell or pitch them but to improve their in-app experience and help them complete the evaluation of the product in a timely and efficient manner.

    But this requires a completely different approach to Free Trials than most SaaS & Web App vendors take, which is why – IMHO – the Free Trial Dominator program is so awesome.

    – Lincoln

  3. at our company we use the walkme.com service, it is a perfect tool to create interactive walk-throughs, it did magic in terms of converting free users to paying customers…

  4. Henry Benamram says:

    Thanks for your very interesting content.
    I saw some dioscussion about asking for CC or not during the Free Trial process. I didn’t see any discussion about the phone number ?
    I’m just wondering how reaching high conversion rates when it’s difficult to have more than 60% of opening rate in the e-mails with (Free Trial) customers ?

    Henry

  5. Nice post. I dove into the topic of automated free trial nurturing techniques in the following blog post and thought it might dovetail nicely with your theories: http://wp.me/p2EfeJ-hL

Trackbacks

  1. […] John Solomon over from Charge Bee did a good job of crunching the numbers from two different studies, one from SaaS business Totango and the other one Softletter from SaaS University. […]

  2. […] like 66% of SaaS vendors have a conversion rate from free to paid of less than […]

  3. […] Less than 25% of your free-trial users are going to convert into paying customers. […]

  4. […] get some form of this question a lot and I’ve answered it several times over the […]

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