Description
This is a SaaS metric that tracks the percentage of a business' users/customers that convert to a paid account after they have signed up for a free account.
Example
Free to paid conversion rate = the number of free users who converted during a period / number of total free users in the period. For instance, if Vareto has 200 trial users in a month and 40 out of these convert to a paid account, the free trial conversion rate for a month is 20%.
Why it matters
This is an important metric for product-led businesses since it estimates the quality of signup. This further helps the company reflect on whether or not users are valuing its product or service enough to pay for it. With this metric, a company can understand the type of audience to focus on and predict its customer acquisition cost. The higher the free-to-paid conversion rate, the lower the customer acquisition cost (CAC).