Conversion

Maturity Level:
Starting out
Goal:
Free user upgrades to a paid plan
Triggered by:
Product-qualified lead (PQL)
KPIs:
Free-to-paid conversion rate, new paying users
Typically owned by:
Sales, Sales Assist
Pitfalls:
Typical success rates are under 15%
Scroll down for more
Begin quote

When new users sign up for Confluent Cloud, Confluent’s managed service for Apache Kafka, they come in with a really wide range of experience with the database and the skills needed to use it. Some users have been working with the open source version of Kafka for years while others are seeing it for the very first time.

In addition to our team of inbound SDRs, we also have a “Cloud SDR” function who is primarily trying to remove technical friction for our users by answering questions and directing them to helpful resources like our self-guided training programs.

Additionally, when a new potential customer comes in through our cloud product and may not have significant internal expertise built up yet, we include professional services early in our conversations so we can get the customer to be successful as quickly as possible. Rather than optimizing for ARR, we’re making an upfront investment in the customer because we know the revenue will follow.

End quote
Laura Jaeckle, Director of Commercial Sales
Laura Jaeckle, Director of Commercial Sales

Conversion: What is it?

Probably one of the most talked-about motions in the product-led growth world, the conversion motion involves turning users of a free version of a product into paid users.

Free tiers can take several different forms—from the time-tested free trial to a fullly-fledged “freemium” model—and are often one of the earlier tactics B2B companies deploy as they begin the transformation to be more product-led. As a result, the conversion motion is often the first sales motion a PLG Transformer must define and execute.

There are many ways marketing, growth, product, and sales teams can drive free-to-paid conversion. In this guide, we'll focus on the role sales plays in this process.

When a free, self-service user is flagged for sales to help convert to paid, this is typically called a "product-qualified lead" or PQL.

Almost without exception, directing prospects to a free version of a product will outperform other non-product CTAs (like gated content, events, and demos). For a PLG Transformer making the switch from these other offers to a product-led CTA, this instantly drives up inbound lead volume.

Revenue teams are immediately tasked with developing a mechanism for aligning new sign ups with the appropriate follow up. For example, new sign ups from companies on a target account list are triaged into a high-touch follow up sequence whereas those from smaller companies (or associated with personal email addresses) may be bucketed into automated marketing-driven cadences.

How does it work?

Deciding which new users should get what type of follow up is one of the first steps in establishing what is commonly referred to as, “product-qualified leads" or PQLs.

Based on a combination of who the person is (their job title, seniority, etc.), where they work (industry, employee count, etc.) and what they have (or have not) done in the product will determine what degree of human involvement is needed.

It can be helpful to think of the profile of the user (who they are and where they work) separately from what they've done in the product. Comparing the combination of where each user lands on the profile fit scale and on the usage scale, you can start to identify which cohorts are the best prospects for sales. Typically, you want to prioritize users with stronger profile fits who have demonstrated low to moderate product usage.

Profile and engagement can be modeled in a variety of ways from simple point-based lead scoring to complex machine learning algorithms.

When first starting out, it's acceptable to "PQL" users with both the strongest fit and the deepest usage. Over time, you should expect that these users will likely convert on their own and any sales intervention will needlessly drive up acquisition costs.

However, identifying which free-tier users are most likely to convert is just the start.

From there, revenue teams must determine the different ways sellers can improve the chances that a given user will convert to a paid plan. Critically, the value that sellers provide in the conversion motion must be clear so that users will forego the self-service experience and instead choose to work 1:1 with the seller.

Examples of value sellers can provide at this stage include:

  • Offering lightweight technical guidance that is tailored to the user’s specific goals.
  • Walking the user through customized demos of paid-tier functionality.
  • Curating the most relevant content and resources across documentation, help centers,and marketing collateral.
  • Answering complex or customer-specific questions not covered by self-service resources.
  • Sharing firsthand anecdotes and insights into how other companies have solved problems or overcome challenges the prospect is likely to be facing.

Things to look out for

Sellers used to operating in a more traditional sales-led environment may be most comfortable driving conversion by “gating” resources or features that a free user may not otherwise have access to. For example, offering to temporarily increase usage limits or suggesting a conversation with a technical expert like a solutions architect can be enough of an incentive for a free user to engage with sales. However, these tactics are often not scalable long term and position sellers as gatekeepers rather than value-adding overlays.

Best-in-class benchmarks for free-to-paid conversion rates among B2B SaaS companies are between 5 and 17%1. This means only a small subset of free users ever go on to generate revenue. If pursuing a sales-led conversion motion, beware of devoting too much time to low propensity users through overly-generous PQL rules.

1 2022 Product Benchmarks, OpenView Venture Partners.

Read about other product-led sales motions
Maturity Level:
Starting out
Triggered by:
Product-qualified lead (PQL)
Goal:
Free user upgrades to a paid plan
Typically owned by:
Sales, Sales Assist
KPIs:
Free-to-paid conversion rate, new paying users
Pitfalls:
Typical success rates are under 15%