Why Upgrade? How to Convert More Free Users to Premium

In a recent Get Elastic post we looked at the business model of freemium, and 9 strategic mistakes to avoid.

Today we drill down into the challenge of converting free users to premium -- with tips to maximize your potential.

Note: this article focuses on freemium models with premium "upgrades," rather than free apps with add-on options that may be purchased to enhance user experience.

Stop selling free

Think it's easy to turn a free user to a paying customer once they get hooked on your product? Not necessarily. If your product offers free and paid versions, users who choose the free option off the bat are likely are not your target for premium anyway (remember, there's a difference between a free trial and a free version).

Your business plan may be to capture market share by building a large free user base and monetize 1-5%. But if you want to get paid, aim to sell your paid version upon sign up.

Too often, signing up paid users is an afterthought, evidenced in the design and navigation of websites. Premium product and pricing information is often shrouded behind a Pricing link or tab.

Another mistake is assuming a new visitor wants your free version. Zoho offers one call to action - "Sign Up Now!"

Clicking the juicy red button leads you to a sign up form for a free version.

It's an enclosed conversion funnel - navigation is removed. There is NO indication on this page that there is a premium version.

Your home page is critical. Make sure you present why your pro version is kick a$% somewhere on the home page.

Persona-lize your options

Before you design your landing pages and sign up funnels, make sure you've clearly defined your premium target market. Use marketing personas. Don't just throw up a bunch of columns with checkmarks! Understand how each persona will compare your prices, and ensure he/she can select the right option easily.

Present pricing tiers wisely

Businesses that provide more than simple free/paid options (such as a menu of subscription tiers) must optimize their presentation. The way you present pricing options (and even the order you present them) matters!

If you've seen Dan Ariely's TED talk, you may recall the portion where he explained the brilliance of the Economist's seemingly silly presentation of subscription offers:

http://www.youtube.com/watch?v=xOhb4LwAaJk

It appears to be an oversight that the print subscription and print-plus-web subscriptions are both the same price. But this presentation has the effect of making the print and web option look so much more attractive than just the web edition, no?

Ariely tested the offer with and without the second option. With the funny middle offer, 84% chose the "combo deal." Without, 68% chose the web-only edition, at a much lower price point.

Removing the option nobody wanted did not optimize the page.

In fact, the useless option served to help people make sense of the options presented, and help them make a decision.

But a magazine subscription is not the same as a freemium business. The pricing tiers correspond with differences in functionality or service levels. There's no point in copycatting this tactic if it doesn't map well to your business.

It's very common to highlight one option on a pricing table. Perhaps this is the most common option, or you want to position the middle priced option against a higher one so the middle looks more reasonable. Fair enough.

But the "highlight the middle" trick doesn't make sense for all freemium businesses, either!

If you present tiers based on business size or other categorical market segments, there is no need to highlight one option over the others. Small businesses are best to choose the cheapest option, medium the middle tier, and large the top tier. No psychotactics there.

The price-positioning trick only works when a user could reasonably choose between multiple options.

Another tactic is to use "badges" or other visual elements that make one tier stand out among the others. Again, this is not effective when options are segmented. In this case, it is irrelevant to services businesses.

For more pricing table tips, check out Bryan Eisenberg's entry designing effective pricing tables.

Converting the choir

Ideally, premium users are won at sign up. But there's still a chance to upgrade free users, if you do it right.

Stay hungry, stay foolish

A twist on Steve Jobs' famous saying, stay hungry for media attention. Get as much PR for your new releases and feature additions as possible. Keep your free users hearing about the wonders of using your premium version.

But stay foolish - don't build these new features based on what you think is sexy. Involve your free and premium customers in shaping your product's future through feedback and surveys. Don't waste your time building features your customers don't want to use (or pay for).

Bake carrots into your cake

If possible, bake conversion carrots into the free version. Show off premium features by making them accessible in navigation, but throw up an upgrade page when these carrots are clicked. This way you present your message when the user is in the right mindframe to care.

Target your home page

Cookie users to recognize returning, registered users, and present different home page messaging than you offer non-users. Romance new features, highlight companies-like-them that are using your service/app, show video tours and the top 'X' reasons to upgrade.

Oh yes, and always be testing your tactics to learn which are most effective.