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 invented Customer Success. I focus primarily on Customer Engagement. Learn more about me here.