Trial to paid conversion rate - an introduction
Do customers see value in your SaaS product or service? Offering free access, for a limited time period, allows your customers to see if your product offers them value before signing up to the paid version. The higher the conversion rate, the more customers gained value during that trial period.
The ultimate goal of a free trial subscription is to convert the free user into a paying customer.
What is trial to paid conversion rate?
Conversion rate is the percentage of users that become paying customers for a product or service during or following a free trial period. It’s important to include users that convert into customers after the free trial period too. The longer the sales cycle, the longer the duration between trial start date and conversion. The conversion rate for historic months will change as customers from that trial period become paid customers over time.
Why is trial to paid conversion rate important?
The higher the conversion rate, the more likely free trial users will become customers and pay for a subscription after their free trial period ends.
Your conversion rate can highlight both competitive advantage and potential points of failure across both your product and your customer onboarding, such as:
Conversion rate and customer value
- Product solution to customer pain points.
- UX and customer journey.
Conversion rate, marketing and segmentation
- Tracking success of campaigns, events and quality of leads.
- Segmenting leads into discrete sales funnels to optimise conversion.
- Targeting the right customer and quality of leads.
Conversion rate and benchmarking
- Tracking conversion rate against industry standards.
- Making comparisons to prior periods and across various cohorts to continually optimise.
What does trial to paid conversion rate look like?
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How do you calculate trial to paid conversion rate?
The trial to paid conversion rate is determined over a specific period and can also be calculated for a specific cohort e.g. marketing campaign or geography. It’s important to capture conversions from the cohort, even after the free trial period has finished.
The formula to calculate trial to paid conversion rate is:
Trial to paid conversion rate = no. of cohort conversions/ no. of trial users within the period x 100%
Trial to paid conversion rate worked example
If a company has 100 free trials in June, and 7 of these users convert into active paying customers in June and 5 of them convert into active paying customers in July, trial to paid conversion rate would be 12.0%, calculated like this:
Trial to paid conversion rate = (7 + 5) customers / 100 free trials x 100% = 12.0%
If a further 2 trial users (from June) became customers in August, then this would change the conversion rate like this:
Trial to paid conversion rate = (7 + 5 + 2) customers / 100 free trials x 100% = 14.0%
Conclusion
Measuring, monitoring and understanding your trial to paid conversion rate provides a better understanding into the success of campaigns, sales efforts and product ease of use, or whether you need to improve your customer success/onboarding process. A higher conversion rate indicates a greater proportion of customers get value from your product during the trial period.
