Top 10 Metrics to Measure Freemium and Free Trial Performance

Uncover ten essential metrics to track freemium and free trial success.

Perspectives
March 5, 2024
Carmen DeCouto headshot
Carmen DeCouto
Manager, Monetization Growth Marketing
Abstract balance beam with money and piggy bank

You wouldn’t run a marketing campaign without tracking its performance. When offering a freemium or free trial version of your product, you’re turning your product into a new customer acquisition channel. So, it’s essential to understand how well that channel performs—which you can do easily by tracking the right metrics.

This guide outlines key metrics to track the success of your freemium and free trial efforts and advice to ensure you’re measuring what matters.

Key takeaways
  • Freemium and free trial models use software as a service (SaaS) products for demand generation, so tracking performance is crucial.
  • Monitor key metrics weekly, adjusting the frequency based on how quickly customers find value in your product.
  • If you’re running a product-led sales strategy, track “talk to sales” requests and product usage.
  • Focus on measuring what matters throughout the customer journey for a holistic view of product performance.

How often should I check my metrics?

How often you review metrics related to freemium and free trial efforts depends on how quickly customers experience product value. For example, frequent assessments make sense in business to consumer (B2C) scenarios where customers often experience value within days or hours.

On the other hand, a weekly check is a good starting point to effectively measure business to business (B2B) product metrics. At Amplitude, we review dashboards of sign-ups, activation rates, and other vital metrics weekly in our cross-functional growth team meeting. Product north star

A common mistake when measuring free trial and freemium plans is focusing only on revenue-oriented metrics—but revenue is a lagging indicator. A North Star metric is more indicative of what’s happening right now. It’ll help you understand your product’s current performance as a channel to expand your customer base.

The North Star metric aims to capture the most important indicator of a product’s success, focusing on its value to customers. For example, Amplitude’s product north star is Weekly Learning Users (WLUs)—the count of active Amplitude customers who have shared a learning consumed by at least two other people in the previous seven days.

Your North Star metric will help you understand whether your freemium program or free trial performs well. From there, you can investigate different factors that could affect its performance.

1. Activation rate

If people don’t successfully activate in your product, the rest of the metrics do not matter.

The activation rate is defined by the number of people who complete an activation event during a specific time period (usually reaching the aha moment) compared with the total number of people who signed up during that period. Your aha moment is when a customer first experiences the value of your product. At Amplitude, our aha moment is when a user saves or shares a chart.

Understanding how many people reach that moment is the best indicator of whether you'll hit your revenue targets. If not enough people reach your aha moment, it’s time to adjust your product. For example, you could update your onboarding experience to ensure it demonstrates value.

Formula

Activation rate = (Customers who reach the aha moment / all customers who sign up) x 100

Ampltiude’s funnel analysis chart enables you to calculate your activation rate by measuring the percentage of customers who reach your critical event. According to Amplitude’s benchmarking analysis, the average activation rate for day seven activation is 6.8% and varies across industries—it’s 5.1% in retail and 10% in manufacturing.

2. Time to activation

The time to activation metric, also known as the time to value, is essential to understanding how quickly free trial and freemium customers reach their aha moment. Quick activation reflects your product’s ability to captivate and retain customers. The longer it takes to activate customers, the more delayed loyalty and lifetime value become, potentially reducing your overall activation rate.

You can use Amplitude to track users’ steps from acquisition to activation, revealing the journey’s duration. This enables you to identify opportunities to streamline your product experience and improve time to activation. Consider what incentives you can add to the user experience to encourage faster activation.

3. Overall free-to-paid conversion rate

The free-to-paid conversion rate measures the number of customers who upgrade from free trials or plans to paid subscriptions. This metric directly assesses the effectiveness of your freemium or free trial strategy as a path to monetization.

To calculate your free trial or freemium conversion rate, divide the number of customers who convert to a paid plan by the total number of free tier users over a specific period. At Amplitude, we define it as the number of new paying customers compared to the number of active free accounts during a rolling 28-day window.

Formula

Conversion rate = (Paid customers / free trial users) x 100

You can track and analyze the conversion rate from free to paid users using funnel analysis in Amplitude. It’ll help you identify where customers drop off and understand what drives them to convert so you can make targeted improvements.

Need help increasing your free-to-paid trial conversion rate? Check out our free trial conversion guide.

4. Total number of conversions

The total number of conversions tracks the raw count of customers transitioning from your product’s free version to paid subscriptions. This straightforward metric reflects your freemium or trial model’s success in converting users into paying customers. While your conversion rate shows the efficiency of your demand generation, the total number of conversions gives you insight into the scale of your strategy’s impact. To calculate your total number of conversions, count the total number of customers upgrading to paid plans within a month. To assess trends and performance over time, compare this figure across multiple months.

5. Freemium or free trial monthly recurring revenue (MRR)

Freemium or free trial monthly recurring revenue tracks money generated from customers who upgrade from a free trial or plan to a paid subscription. It shows the financial impact of your freemium or free trial strategy on your company's revenue. To calculate freemium or free trial MRR, take your total MRR and subtract the revenue from customers who didn’t go through the freemium or free trial experience.

6. Time to convert

Time to convert measures the average duration from when customers start a free trial or subscription to when they upgrade to a paid plan. Shorter conversion times can indicate a highly compelling product or effective conversion strategy. In comparison, longer times may point to barriers in the conversion process or a naturally longer decision-making cycle.

First, add up the total time to conversion for all customers—how long it takes them to switch to paid after starting the freemium or free trial. Then, divide your total time to conversion by the number of users to get your average.

Formula

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

7. Funnel completion rate

Funnel completion rate quantifies the efficiency of your conversion process by tracking the percentage of users who complete a predefined journey within a conversion funnel. This journey typically spans from sign-up to upgrading to a paid plan. A higher funnel completion rate signifies a more efficient and effective conversion process.

Start by defining your funnel stages and identifying users’ most common pathways toward becoming paid customers. Then, to calculate your funnel completion rate, divide the number of users who reach the final stage of the funnel by the number of users at the starting stage.

Formula

Funnel completion rate = (Users at final stage/users at starting stage) x 100

Analyze which stages have the highest drop-off rates to identify potential barriers in the conversion process. Funnel analysis charts in Amplitude enable you to visualize and understand user behavior throughout the funnel—helping you pinpoint improvement areas within your conversion funnel.

8. Lifetime value

Lifetime value (LTV) measures the total revenue a company expects from a customer throughout their relationship. It’s particularly insightful when comparing customers who start with a freemium or free trial model to those who don’t.

At Amplitude, we’ve observed that customers who use our freemium product tend to have a higher LTV than those who start with a paid plan. The difference highlights the power of firsthand product engagement in building long-term customer value.

Customers who engage with our freemium model experience and deeply understand our product’s value. The hands-on interaction makes them more likely to see the product as a solution to their problems—making it more effective than relying solely on sales pitches or marketing content. Once these customers upgrade, they do so with a solid appreciation of the product’s worth.

9. Customer acquisition cost

Customer acquisition cost (CAC) quantifies the expenses incurred to acquire a new customer, including all marketing, advertising, and sales-related costs.

To calculate CAC, divide the total expenses associated with customer acquisition by the number of customers acquired during the same period.

Formula

CAC = Total acquisition costs / total acquired customers

Freemium and free trial models often involve a higher initial investment to build new functionality into the product. What sets these models apart is that CAC typically drops over time, unlike traditional paid ad campaigns that demand constant monitoring of costs and returns.

However, this doesn’t mean CAC becomes irrelevant. If freemium and free trial experiences fail to convert a substantial number of free users into paying customers, the cost of these channels needs reevaluation.

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 your product to attract and engage users, plus targeted sales actions for high-value accounts or more complex deals.

We still recommend measuring the other freemium and free trial metrics to ensure customers find value, but there are additional important metrics to track.

Requests to talk to sales

Track how many people click in-product calls to action (CTAs) to talk to sales. When someone raises their hand to speak to your sales team, they express readiness to upgrade or expand their product usage.

Feature or usage rates

Some customers don’t explicitly raise their hands or click a CTA but are still ready to talk to sales. You can create a model to identify those customers so your sales team can contact them proactively to upsell.

To build that model, analyze the past behavior of people in your free trial or freemium product who ultimately purchased the paid version. The model will depend on your organization, but it might look like customers who are:

  • Using basic features daily
  • Hitting paywalls as they're reaching data usage or seat limits
  • Trying out advanced features

Once you’ve defined your model, you’ll be able to identify the users close to reaching maximum value from your basic features or free plan so you can step in with sales efforts.

Learn to master monetization

Measuring the freemium and free trial metrics is an excellent first step in improving how your product makes money. However, freemium and free trial models are only two of many monetization tactics, and adopting the right strategy for your product and industry is important. Find the best way to generate revenue from your product by exploring our step-by-step playbook, Mastering Monetization Strategy.

About the Author
Carmen DeCouto headshot
Carmen DeCouto
Manager, Monetization Growth Marketing
Carmen DeCouto is the manager of monetization growth marketing at Amplitude. Prior to Amplitude, Carmen was a senior product marketing manager at Sisense.

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