What is Conversion Rate?
Definition
The percentage of users who upgrade from a free plan or trial to a paid subscription.
Understanding Conversion Rate
Conversion rate measures how effectively a service turns free users into paying customers. For freemium SaaS products, typical conversion rates range from 2-5%. For free trial conversions, rates are higher at 15-30% because trial users have already shown purchase intent.
Factors affecting conversion include the value gap between free and paid tiers, trial length, onboarding quality, and pricing. High-performing products like Slack and Zoom achieved exceptional conversion rates by making their free tiers highly useful and creating natural upgrade triggers.
Related Terms
Freemium
A pricing model that offers basic features for free while charging for premium features, storage, or usage beyond free tier limits.
Free Trial
A limited-time period where users can access a subscription service at no cost before committing to a paid plan.
Customer Acquisition Cost
The total cost of sales and marketing efforts required to acquire a new paying subscriber, calculated as total acquisition spend divided by new customers gained.