How to increase free-to-paid conversion rates on your app

If you’re in the world of consumer apps, you know that getting users to move from free to paid is a key milestone. It’s not just about boosting your revenue—it's about making sure your users get the most out of what you offer. But how do you make that transition as smooth as possible?

We’re here to break it down for you.  Let’s take a closer look at how you can enhance your in-app experiences to make sure your users find enough value in your app to want to stick around and pay for more.

What is Free-to-Paid Conversion & Why You Should Care About It

Free-to-paid conversion is the percentage of users who start with a free version of your app and eventually move to a paid subscription or purchase. This metric is crucial because it reflects how well you’re convincing users of the value of your app. A higher conversion rate means more users see the benefits and are willing to pay for premium features, which directly impacts your revenue and user satisfaction.

How to Measure Free-to-Paid Conversion

Measuring your free-to-paid conversion rate accurately is essential for understanding the effectiveness of your monetization strategies. There are several ways to measure this conversion:

1. Account Level: This approach looks at the percentage of individual accounts that convert from free to paid within a set period (say N months), such as six months.

Account level conversion rate = (Number of account upgraded to paid in N months/ Total number of free accounts created in N months) X 100

For apps with multiple users per account (common in edtech and fintech), this method provides a clear picture of how well you’re converting entire teams or families, not just individual users.

2. Cohort Level: By tracking conversion rates across different cohorts of users—such as those who signed up in a specific month—you can identify trends and assess the impact of changes to your app.

Cohort conversion rate = (Number of cohort users converted to paid/ Total number of users in the cohort) X 100

This is particularly useful for apps that are continually evolving, as it allows you to see if newer users are converting at a higher rate than earlier cohorts.

3. Time Bound: Setting a time-bound window, like six months, ensures that you’re measuring conversion rates consistently.

Time-bound conversion rate = (Number of free users converted to paid in the time period/ Total number of free users during the time period) X 100

This approach is crucial for free trial models, where the conversion window is often limited and time-sensitive.

Factors Affecting Free-to-Paid Conversion

Several factors can influence your free-to-paid conversion rates, and understanding these can help you optimize your app for better performance.

1. Value Perception: How well users perceive the value of the paid features.‍

2. User Experience: The ease of transitioning from free to paid

You can use tools like Ploltine to build and publish in-app conversion flows with zero coding, saving your developers time that can be better spent on other aspects of the product.

3. Pricing Strategy: How the pricing aligns with user expectations and perceived value.‍

4. Trial Duration: The length and terms of the free trial or freemium access.

So, What is a Good Free-to-Paid Conversion Rate?

Determining what constitutes a “good” free-to-paid conversion rate can be challenging, as it varies widely depending on the industry, product type, and business model. However, here are some general benchmarks by Lenny Rachitsky that can help guide your expectations:

1. ‍Freemium Self-Serve Products: Apps in the fintech, gaming, and media sectors often fall into this category, where users start with a free version and upgrade to paid features.
2. Freemium with Sales-Assistance: This model is more common in fintech and edtech apps, where the decision to upgrade often involves more consideration and potentially a higher price point.
3. Free Trial Products: Particularly effective in e-commerce, health, and media apps, where users are often ready to commit after experiencing the full value of the app.
4. Reverse Trial Products: Users initially access the full feature set of the app, typically through a paid version, and after a set period, they are downgraded to a free version with limited features.

Strategies to Increase Free-to-Paid Conversion Rates on Your App

To increase your free-to-paid conversion rates, you’ll need to tailor your strategies based on whether your app follows a freemium or free trial model, as well as the specific industry you’re targeting.

1. Freemium Model

Engage and Educate: Provide free introductory content or features that lead to the benefits of premium upgrades.

Duolingo offers free basic language tools and a "super" plan for additional features like challenges, offline access and advanced tracking.

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Leverage Social Proof: Showcase testimonials and user success stories to highlight the value of the premium features.

Clash of Clans uses leaderboards and exclusive in-game items to encourage upgrades.

Offer Time-Limited Incentives: Provide exclusive offers or benefits to users who upgrade within a specific period.

To drive conversions, Zomato often runs limited-time promotions where new users can purchase Zomato Gold with significant discounts for a limited period.

2. Free Trial Model

Maximize Value During the Trial: Ensure users experience the full benefits of the app with personalized features and proactive support.

Calm allows users to experience guided meditations and sleep stories during the trial.

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Follow Up with Targeted Messaging: Send reminders about the value experienced and offer special discounts to convert users.

Spotify sends reminders about the ability to listen to music offline, and without adswith premium. It also offers discounts for subscribing post-trial.

3. Pay-Per-Use Model

Showcase Value with Usage Metrics: Highlight how often users benefit from specific features by tracking and displaying usage stats.

RescueTime helps users track their time spent on various activities and applications. It offers a free version with basic time tracking and reporting features, but its premium version provides advanced analytics, productivity reports, and detailed insights.

Offer Usage-Based Incentives: Provide discounts or bonuses tied to user activity to encourage more frequent use and higher-tier plans.

Strava often runs promotions where users who reach certain milestones, such as completing a specific number of activities or accumulating a set number of miles, receive discounts on their subscription

4. Paywall (One-Time Purchase) Model

Demonstrate Immediate Value: Offer a free trial with basic features and prompt users to purchase advanced features.

Facetune offers basic editing tools for free but requires a one-time purchase for access to advanced features and additional editing options.

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Create a Sense of Urgency: Use limited-time offers or show value of the paid version at a crucial time to encourage quick decisions.

Splitwise leverages a sense of urgency by prompting users to upgrade to the Pro version when they attempt to add another expense and have reached their free limit.

Industry Specific Strategies

While the strategies above can be broadly applied, there are nuances in how they should be implemented depending on the industry:

1. Fintech: Focus on security, compliance, and personalized financial insights. Highlight the added value of premium features like advanced analytics or personalized financial advice.

2. Edtech: Emphasize the quality and breadth of educational content. Offer certifications or exclusive access to premium learning materials as incentives.

3. Health and Wellness: Stress the importance of continued access to health tracking, personalized recommendations, and advanced features that promote long-term health and wellness.

4. E-Commerce: Highlight exclusive discounts, faster shipping, or premium customer service as reasons to upgrade. Use personalized product recommendations to increase the perceived value of the premium plan.

5. Gaming: Leverage in-game rewards, exclusive content, and enhanced gameplay features to encourage users to go from free to paid..

6. Media: Focus on the value of premium content, such as ad-free experiences, exclusive access to new releases, or higher quality streaming.

FAQ

Q: What is free-to-paid conversion?

A: It’s the percentage of users who start with a free version of your app and later subscribe or purchase a premium version.

Q: What is considered a good conversion rate?

A: For freemium apps, 3%-5% is good; 6%-8% is great. For free trials, 8%-12% is good; 15%-25% is great.

Q: How should I measure conversion rates?

A: Measure at the account level, cohort level, and within a specific timeframe to get a comprehensive view.

Q: What factors affect conversion rates?

A: User experience, value proposition, pricing strategy, and in-app triggers all play a role.

Q: How can I increase conversion rates for different models?

A: Use strategies tailored to your industry and model—like offering exclusive features for freemium users or emphasizing premium benefits for free trials.