Performance Metrics
Customer Acquistion Cost (CAC)
Customer Acquisition Cost (CAC)
Annual Contract Value (ACV)
Free to Paid Conversion Rate
Daily Active Users (DAU)
Monthly Active Users (MAU)
Churn Rate
Net Revenue Retention (NRR)
Usability Metrics
Time on Task
Task Completion Rate
Error Rate
Confidence Rating
Clarity of Task
Perceived Ease of Use
Sentiment Metrics
Net Promoter Score (NPS)
Customer Satisfaction (CSAT)

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Free to Paid Conversion Rate

Phase

Activation

TYPE of metric

Performance

Intro

Free to Paid Conversion Rate measures what percentage of your users are willing to pay for your product and service. This metric is used to understand:

Who is getting enough value from your product or service that they are willing to pay.
How the price for your product or service is perceived relative to the value created.
When does the cold-to-hot moment occur that drives users to upgrade and pay in order to continue and/or increase the value they receive from your product or service.

How it's calculated

(Paid Conversions Per Month / Free Tier Users Per Month) = Paid Conversion Rate

Take the total number of free tier users that converted to paid in a month and divide that by the total number of free tier users in the same month to get your paid conversion rate. For example if there’s 300 paid conversion from a total of 1000 free tier users, the conversion rate is 30% (excellent!).

When it's important

Here are a few common structures for a free-tier experience:

Freemium model: users get permanent access to a free version of the product or service. Premium capabilities are reserved for paying customers only.
Free trial model: users get access to all the features for a limited time frame. Once the time runs out, the user has to pay in order to continue using the product or service.
Opt-in Free trial: Users get access to every feature for 7 to 14 days (standard limited time frame). This model creates a sense of urgency for the product and user alike to experience the product value before the trial expires.
Opt-out Free trial: Users share payment information upfront, the paywall is beneficial for filtering down quality leads for the sales pipeline - more common in B2B SaaS products.
Reverse trial: Combines the best of free-trial and freemium model to provide users the full experience for a limited time. Once that time runs out, they are downgraded or convert to paying customers.

This metric is most important to understand when the aha moment happens and how effective your product is at converting the cold-to-hot moment into a sale.

How design and research can create impact

Design and research can create tremendous value to impact the paid conversion metric for both the business and users alike by understanding and improving the timing, price and experience of converting to a paid user. Some activities to consider are:

Reduce friction for users to convert from free to paid tiers. This isn’t just about improving the click funnel conversion but also understanding and reducing the cognitive load required to understand which pricing tier is right for them.
Provide a clear checklist of key actions the user must complete in order to experience product value. Users are more likely to remember incomplete activities and checklists tap into a psychological effect called endowed progress.
Provide in-app guidance and personalized live demos in the free tier. Enriching the first time user experience allows free users to be set up for success and drastically increase the likelihood of experiencing product value.
Create an actionable knowledge base that allows free users to get the answers they need to continue interacting with your tool.
Give free users a heads up when their trial experience is expiring. This helps to prime and guide both the users and the business alike to upgrade at the right time.
Use promotions to reengage users and encourage them to convert to paid users with a healthy sense of urgency.