Freemiums have gained a strong foothold in the online subscription space because of their ability to attract large numbers of new users. Depending on the specifics of a company, a freemium model can help drive revenue and grow profit faster than paid-only or trial models. For customer management products alone, 32% of companies now offer freemiums. Additionally, apps that use a freemium model now account for 92% of the revenue earned through the Apple AppStore, up from around 50% in 2012. This is a clear indication of the popularity and effectiveness of freemiums for many online businesses.
But with an average of only 1-3% of free users eventually upgrading to premium plans in successful freemium models, there is clearly a huge challenge in getting people to pay for something they may be accustomed to getting for free. Here are four ways you can get closer to getting enough of your free users to convert into paying customers.
Super-users get the most value out of your product and are, therefore, the most likely to upgrade to a paid plan. To create super-users, you need a service that provides consistent value and is easy to get started with. With interest always highest immediately after sign-up, make sure that users start using right away with instant access and a welcome email. Make the sign up process as streamlined and easy as possible.
For both your free and paid users, you need to keep them engaged to avoid them from becoming inactive and churning. Regular emails about additions to your service or tips on how to get even more value can be particularly helpful in getting your users to keep signing into your service.
However, there is a balance between engaging and bombarding customers with emails. It can be tempting to send more emails because each can get a few more precious conversions. But too many emails can actually harm your longer term growth if users start ignoring emails from you or if they unsubscribe altogether. Watch your open and click-through rates to see what your optimal send frequency might be with your users.
To convert your free users to paid subscribers, you need to create a seamless migration strategy to make it easy to upgrade. Establish clear reasons to get your paid service (i.e. what extra value they are getting) and then make it as easy and fast as possible to upgrade. Give effective calls-to-action and remove any unnecessary obstacles (like extra form fields) that may prevent someone from clicking on the buy button.
Instead of assuming users will make the leap from free to premium, give tiered pricing options so that users can choose what level of your service best meets their needs. By doing so, you can appeal to a wider audience, increasing your chances at successful conversion. Consider Evernote’s pricing tiers: Free, Plus, Premium and Premium Business. The company prominently displays these options on its website, making it clear what customers can receive from each package so they can easily decide and make the leap to a premium experience. With these tiered options, Evernote has been able to achieve an very healthy conversion rate of 3.7%.
Offering an ongoing free - yet limited - version of your product gives you the opportunity to have customers fall in love with your product and, ultimately, purchase a subscription for a more robust feature set. But to get to that point, you need to focus on value, choice, a seamless upgrade path and customer needs and wants. Once you have tackled these critical challenges, you’ll be able to move more of your free users into paying customers. And when the time does come that your customers make the switch, you'll want to make sure that your recurring payment processing is as frictionless as possible. Discover how we can help!