Blog 90: Measure: Is our freemium or free trial strategy working?

In blog 89, we looked at three pricing models – Freemium, Free Trial, and Reverse Trial. Like everything else, they too need to be measured. In this blog, we will look at some metrics (to measure our freemium or free trial strategy):

1. Activation rate: Activation rate is defined by the number of people who complete an activation step (i.e., when they reach the aha moment or when they discover the value of the product) compared with the total number of people who signed up during that period. At LinkedIn the aha moment can be when a user shares a post.

Activation rate = [Customers who reach the aha moment / all customers who sign up] x 100.

How does this metric help: If not enough people reach the aha moment, we know it’s time to iterate the product. For example, updating the onboarding experience to achieve the desired results.

2. Time to activation: Time to activation metric is to understand how quickly free trial and freemium customers reach their aha moment.

How does this metric help: A short time to activation means that the product is able to attract customers. A long time to activation is usually not a good sign.

3. Total number of conversions: The total number of conversions track the absolute number of customers who convert from free to paid version.

How does this metric help: This metric reflects the ‘scale of impact’ of our freemium or free trial strategy. This is how it differs from the next metric i.e. free-to-paid conversion rate.

4. Free-to-paid conversion rate: Free-to-paid conversion rate measures the number of customers who upgrade to paid subscriptions.

Conversion rate = [Paid customers / free trial users] x 100.

How does this metric help: This metric assesses the effectiveness of the freemium or free trial strategy.

5. Freemium or free trial monthly recurring revenue (MRR): Freemium or free trial monthly recurring revenue is the money generated from customers who upgrade to a paid subscription. Refer blog 87 for more on MRR.

Freemium or free trial MRR = [Total MRR – Revenue from customers who didn’t go through the freemium or free trial experience].

How does this metric help: It shows the financial impact of the freemium or free trial strategy.

6. Average time to convert: Average time to convert measures the average duration from when customers start a free trial to when they upgrade to a paid plan.

Average time to convert = Total sum of individual conversion times / Number of converted customers.

How does this metric help: A short conversion time indicates that the product is valuable with an effective conversion strategy.

7. Funnel completion rate: Funnel completion rate tracks the percentage of users as they complete each journey stage. This journey typically spans from sign-up to upgrading to a paid plan.

Funnel completion rate = [Users at final stage/users at starting stage] x 100.

How does this metric help: We can analyse the stages that have the highest drop-off rates (and identify conversion roadblocks). A high funnel completion rate signifies a more efficient and effective conversion process.

8. Other metrics include Customer Acquisition Costs (CAC), Lifetime Value (LTV). Refer blog 34 and blog 55 for more on the two mentioned metrics.

9. Product-led sales metrics: Product-led sales is an approach that combines product-led growth (PLG) strategies with traditional sales efforts. It’s a combined approach that uses the product to attract and engage users, plus targeted sales actions for high-value accounts.

Refer blog 71 for more on how product-led and sales-led strategies differ?

The relevant metrics here include - requests to talk to sales, number of people who click in-product calls to action (CTAs) to talk to sales.

Measuring the freemium and free trial metrics is an important activity. This will help us understand if our pricing or monetisation model is working. Refer blog 88 for more on other pricing models (in addition to freemium and free trial).

Jump to blog 100 to refer to the overall product management mind map.

Source:

https://amplitude.com/blog/freemium-free-trial-metrics

I wish you the best for your journey. 😊