As a SaaS business owner, you understand the importance of acquiring new customers with free trials and freemium models. However, turning those users into paying customers is a different challenge altogether. You need to provide a clear value proposition that justifies the cost of your service. With competition on marketing channels rising, keeping customer acquisition costs low is essential. That’s why focusing on customer retention strategies, such as encouraging customers to upgrade, is crucial to the long-term success of your business.
Upgrades lead to expansion revenue and indicate that your customers have fully integrated your tool into their daily business operations. So, how can you entice your freemium customers to upgrade to a paid plan? In this article, we will explore tried and tested conversion techniques- from providing personalized services to offering advanced features, to help you persuade your customers to take the leap to a paid plan.
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Why do customers usually not upgrade to a premium plan?
The decision to upgrade to a premium plan is critical for both customers and businesses. Understanding why customers upgrade or do not upgrade is vital for SaaS businesses to develop an effective marketing and pricing strategy. One of the primary factors for customers who have already signed up with a free plan is that they don’t see the value in upgrading. SaaS companies need to structure their pricing and tier strategy in such a way that each level delivers enough value to provide success to the customer but also holds back enough that there is an incentive for them to upgrade.
Another reason why customers don’t upgrade is that they are not being onboarded correctly. SaaS companies offering a “free plan” tend to attract a lot of people who sign up for anything free without any intention of upgrading. SaaS companies must be clear about their ideal customers and how they will attract those customers to sign up. They should avoid customers who are freebie seekers, as they will not upgrade anyway, and their churn rate is relatively high.
Natural inertia is another reason why customers do not upgrade. Some people are naturally conservative when faced with making any upgrades, and it’s easier for them to do nothing and leave things as they are. They might also need to be made aware of the benefits they will receive once they go premium. SaaS companies must do their best to communicate and demonstrate those upgraded features to their free customers.
How do you understand what customers value? There is no better way to do this than talking to them. Surveys, panels, beta users, or phone conversations can provide raw feedback that can help companies structure their tiers and pricing to match what their customers want.
Let’s take the example of one of the shining examples of startups that does ‘premium’ really well. Canva is a graphic design platform that started in 2012 as an easy editing tool for people who don’t know Adobe Photoshop. The company hit a $40 billion valuation in 2021 and boasts over 100 million users, with a significant minority paying to use it.
Canva brought many people to their platform using their feature-rich free plan, providing users with essential tools and limited templates for image editing. Users who want to upgrade are provided a paid subscription that unlocks more advanced features and a full selection of templates, images, and editing features. The paid plans are multi-tiered, catering to individuals, teams, organizations, and education institutions.
Canva employs several strategies to encourage its free users to upgrade to paid plans.
- Limitations on free plans: Canva imposes certain restrictions on its free plan, such as limiting the number of designs a user can save or upload and providing access to only a limited number of design elements. This encourages users who need to create more designs or have access to more features to upgrade to a paid plan.
- Targeted emails: Canva sends targeted emails to its free users with offers and promotions, including discounts and free trials of its paid plans. These emails are designed to entice users who may be on the fence about upgrading to a paid plan.
- In-app prompts: Canva prompts their free users to upgrade to a paid plan with in-app messages offering additional features or benefits only available with a paid plan. These messages are carefully crafted to appeal to specific user segments or users based on their behavior and usage patterns.
- Social proof: Canva leverages social proof to encourage its free users to upgrade to a paid plan. For example, it displays user testimonials and case studies on its website and social media channels, showcasing the success that others have had with Canva’s paid plans.
- Exclusive content: Canva provides exclusive content and features to its paid users, such as premium templates, stock photos, and graphics. These features are not available on the free plan, and can entice users to upgrade to a paid plan to access them.
11 Ways to to get your SaaS customers to pay for your service
Keeping in mind the example of Canva, here are 11 things you can do to get your SaaS customers to pay for your service:
- Keep the customer experience a high priority: Maintaining a high level of customer satisfaction is crucial for the success of any business. This involves providing a quality product or service, responsive customer support, and a positive user experience. By prioritizing the customer experience, companies can build loyalty and increase customer retention, leading to increased revenue.
- Focus on engagement: Engaging users is critical for driving revenue and building a loyal customer base. You can achieve this through various tactics, such as personalized messaging, gamification, or social sharing. Businesses can increase user retention and drive revenue by creating a sense of community and encouraging users to interact with each other and with the product.
- Examine your pricing – Pricing strategies can have a significant impact on revenue. Businesses should consider various pricing options, such as offering a free trial period, providing value-based upsells, or creating multiple product tiers to cater to different customer segments. Businesses can determine their product or service’s most effective pricing strategy by analyzing customer behavior and preferences.
- Hold back just enough: Businesses should be strategic about what features and benefits are included in their free version and what is held back for the paid version. Businesses can provide enough value in the free version to engage users but hold back certain features that incentivize users to upgrade.
- Nurture your free users: You should always notify and educate free users about the benefits of the paid plans to make them aware of what they are missing out on. This can be done through reminder emails, social media, influencer or in-app prompts.
- Craft a compelling offer: Companies can offer discounts or trials that lower the barrier for free users to convert. Adding a personal touch, such as a coupon code that is the user’s name, can also delight users and encourage them to upgrade. In certain platforms, charging a fee to remove intrusive advertisements can also be an effective strategy to increase revenue.
- Unlock paid features for a limited time: Allowing free users to experience the benefits of paid features can be an effective way to encourage them to upgrade to a paid plan. Companies can offer limited-time access or a limited usage of certain paid features to give free users a taste of what they are missing out on. However, they need to strike a balance between being generous enough for free users to experience all the benefits and not so much that they no longer have a reason to upgrade.
- Share positive stories and accounts from paying users: Companies can use social proof to establish trust and credibility with their free users by sharing positive stories and accounts from paying users. They can use the answers from paid user surveys as testimonials to convince free users to upgrade their plan.
- Create a sense of urgency: Creating a sense of urgency can be a powerful tool to motivate users to take action. This can be done through various tactics, such as limited-time offers or promotions, countdown timers, or highlighting the benefits of taking immediate action.
- Make it easy to upgrade: Simplicity and ease of use are key when it comes to upgrading users to a paid version of a product or service. Businesses should make the upgrade process as easy as possible, with clear instructions and a seamless transition from the free to the paid version.
- Follow-up: Once a customer upgrades, you should follow up before every payment cycle to remind them of your service’s value and to notify them to renew their plans in case auto-payment is not enabled.
