This post is by Jason Lemkin from SaaStr
Click here to view on the original site: Original Post
Be a bit wary about raw conversion of free-to-paid as an absolute metric. Driving it up will certain increase revenues in the short term. But perhaps not in the long term. In companies I’ve worked with or invested in, I’ve seen the numbers range from 2% to 30%+. That’s a huge range. And … 30% sounds better. But is it?
- Not if you want to maximize the number of folks exposed to your product. Few folks are trying and not buying. Are you sure that’s good?
- Not if you want to maximize the ability of your free users to spread the word. With fewer of them, you’ll have fewer ambassadors.
- Not if it deters folks from even trying in the first place. A variant of the first point. If the “choke” is so tight that 30% of folks convert to paid, it is likely scaring some folks away from trying the first place. E.g., forcing folks to enter a credit card before even trying is a classic trade-off here.
- It can let marketing off the hook for brand and awareness growth, so raw new user grow may slow. If you make conversion % a top goal for marketing, well then now marketing’s job is not as much to drive the raw number of top-of-the-funnel users. So that’s where they will focus. Not #1 on getting more folks just trying the product.