How to Convert Freemium Users Into Premium Customers

“Help, our freemium users aren’t converting!”

So, you’re a SAAS startup with a terrific concept and you maybe even have a fair few users signed up for a free trial or freemium subscription. However, these freemium users aren’t converting into paying customers and you’re not sure why. What the heck?

Generally, there are three reasons why this be happening:

1. Lack of value
2. Poor usability
3. Stressful onboarding

In this article, I’ll dive into these issues, discuss what exactly we can do to fix them, and as a result, convert those freemium users (and all future users) into paying customers.

1. Create More Value

When a free trial (or freemium) users don’t convert, this is very confusing for SAAS companies. After all, at some moment in time, the user was interested, right? Otherwise, they wouldn’t have signed up? One reason for this comes down to the lack of value.

There are three things that we can do to improve value.

1. Lower the costs
2. Make it more useful
3. Lower the freemium leniency

Lowering the Costs

It could be that the product is fine, but the cost is high.

One way to find out if this is true is to gradually lower the price until we find that sweet spot where users begin to convert from free to paid. The same can be done in reverse, raising the price until the rate of new customers starts to decline.

This is how we find out our product’s current value.

Although, it’s worth remembering that some products won’t be financially sustainable no matter how useful they are, and it’s best to discover this early. This doesn’t necessarily mean game over, but it does mean that the product needs to be more useful.

Can it be more useful? If the answer is yes, then keep reading.

Creating Usefulness

If lowering the price tag means that the business won’t be financially sustainable, then it’s time to either call it a day before more time, money, and resources are wasted, or time to wear our extrovert hat and conduct user tests with our users. In short, we want to find out the answers to these two questions:

1. What would make this product better?
2. How much would users pay for it if we made this change?

But, there’s a catch. When asked outright, users rarely know what they want, which is why it’s so important to observe and record the user’s words, thoughts, and feelings — basically, everything that they do and say. This will not only tell us what needs to change, but stark user reactions to major pain points will indicate which changes users are willing to pay for.

Reducing Freemium Leniency

Freemium leniency may be the reason why users aren’t converting. Put simply, some users don’t convert because they don’t need to — the freemium option already solves their needs!

Although nobody likes to say “okay, enough is enough” for fear of upsetting the customers that already exist, we also need to consider the fact that the freemium functionality is extremely valuable to users, so reducing the leniency may be the solution.

Again, user testing is crucial here.

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In summary, the trick is to discover the product’s value and align the pricing with this perceived value, and in the event that the product becomes financially unsustainable because of this, utilize research (i.e. user testing with low-fidelity prototypes) to discover fresh ways to make it more useful.

Otherwise, we run the risk of the product ending up in freemium hell, much like Wunderlist which eventually had to be sold for scraps to Microsoft, who are now using it to build their own app with the help of the existing Wunderlist team. Why Wunderlist didn’t thrive can only be speculated. It was astonishingly useful, but its premium features were useless even at a mega low cost, yet the freemium features were exceptionally lenient!

2. Improve Usability

Sometimes, a lack of free-to-paid conversions comes down to suboptimal usability, causing users to leave in frustration, or else, make do with the freemium offering until something else comes along. Better usability can turn this around quickly.

Usability is a measurement of how efficiently users are able to complete their objective using the product, broken down by:

1. How well users are able to navigate
2. How well users are able to absorb information

Following well-known usability heuristics is a terrific way to rapidly eliminate the most obvious usability flaws, and when combined with A/B testing, we can even use reliable data to validate these usability-related heuristics and confirm that they’re working.

However, it takes usability testing to validate (or even discover) some of the more complex usability improvements.

Let’s take a look at some of the most useful usability tests, how they help to improve usability, and how they’re conducted:

Card Sorting

Let’s assume that the product’s functionality is regarded as useful, but for some reason it’s causing frustration due to confusing navigation. Reasons may include incorrectly labeled navigation items, navigation (or certain navigation elements) not being visible enough, general cognitive overload, and so on.

Formative card sorting lets users categorically label and arrange these navigation items in a way that aligns with their own mental model, whereas summative card sorting is a follow-up exercise where the nav items are already labeled.

We can use then these insights to design a better sitemap, a sort of tree-like representation of our navigational hierarchy.

Tree Testing

Tree testing is used to measure the effectiveness of the sitemap. Our job here is to ask questions like “Where would you navigate to find [x]”, measure their task time, and then try to improve this task time by making small changes to the sitemap.

Functional Salience Testing

Functional salience testing requires users to choose three functions that they deem important. This offers vital insight into how we might design (or alter) the layout to suit the user’s needs. For example, the most important functions might be difficult to find, and a functional salience test would reveal this. So where card sorting and tree testing tells us “what”, functional salience testing tells us “where” and “why”.

Performance Testing

Performance testing is a little different today than it was a few years ago. Tools like Maze and Useberry allow us to take a more data-driven approach to measuring how well users are able to complete tasks, grading apps and websites depending on how quickly users complete their tasks and how many mistakes they make.

In my personal design practice, I leverage a variety of usability tests to dig deeper into what’s really frustrating users, and also to reveal what can be done to alleviate these frustrations. Then I address these flaws and conduct more usability tests to confirm that they’re working before working with my clients’ engineering teams to implement the updates.

3. Improve the Onboarding Experience

As you likely already know (being a user yourself), people who are exposed to a great variety of software products are becoming increasingly impatient and fickle; they often make decisions spontaneously.

This includes a decision to abandon a product, even during a free trial, if that product seems too complicated or doesn’t solve the problem well enough. This is especially true upon initial discovery of the product, since the user hasn’t really invested too much of their time (yet), and has no qualms over abandoning a product that doesn’t show much promise or asks too much of the user without really delivering any value in return.

However, what is considered not-promising? Generally, not-promising is an early setback or a purposeful delay in letting the user complete their objective. These are some of the hardest issues to diagnose due to how quickly users tend to give up and never return. The solution is the same as the above, usability testing with willing participants. Let’s take a quick look.

Walkthroughs and Tutorials

Handholding is extremely effective in helping users tread through unfamiliar territory, relieving them of their anxiety about using a new app or website until they become confident enough to venture out by themselves. Visual walkthroughs are an excellent way to accomplish this, and letting users acquire a little momentum by helping them accomplish something cool early on can exponentially boost their motivation to keep engaging.

More wins = more engagement = more conversions.

Asking For Payment Details

Asking for the credit card info — this is a tricky one. On one hand, asking for card details stops freemium users from freeloading by way of creating multiple accounts, but on the other hand, it can be a major turn-off considering the product has not demonstrated its value.

Inviting Teammates

With enterprise products especially, it’s a huge win to be able to onboard teammates early to test its usefulness with the team. As an added benefit, it’s hard for users to abandon a product when some team members have come to rely on it.

Conclusion

Converting freemium users into paying customers is not an uphill battle. In fact, psychologically speaking, people love to buy things. A sense of acquisition releases feel-good hormones in our brain, however, a bad purchase (or the fear of a bad purchase) can set off just as many negative cognitive biases. Most notably, buyer's remorse.

This is why freemium plans and free trials are such a great idea, but on the other hand, this approach only works if the freemium model solves a tricky problem at a fair price while relieving anxiety about handing over money for the product.