4. Revenue  >  Set The Right Product Limitations

Set the right product limitations to reduce SaaS churn

Offering limited features to free users is a smart technique to motivate users to switch to a premium plan. Carefully selecting and setting the right limitations will significantly improve free trial to paid conversions and will reduce churn.

●●● FUNCTIONALITY

Mailchimp

MailChimp smartly put limits on free users. Their core feature (autoresponder) is fully available to free users but they don’t get access to add-on features.

Selz

Selz makes it absolutely clear what a user will miss in each plan. Even premium plans come with limitations which keeps users motivated to move to the next plan.

Zapier

Zapier clearly distinguishes between free and premium plan. Users get to know what they will miss with the free plan.

How to use the technique

  • Choose appropriate limitations. Should you limit features, output, usage, capacity, or something else? This should be linked to customer lifecycle and buyer persona. Let them solve their big problem with your app but with restrictions. This will motivate them to convert and will reduce churn. Read more in our free churn optimization framework.
  • Decide what features to offer free users. Of course, you can offer all the features but do apply restrictions (such as time) so as to motivate users. Else, they will stick with free plan forever.
  • Differentiate premium from the free plan. There should be a clear and significant difference between premium and freemium. It should be evident.
  • Limited support. Use it with care. Limited support doesn’t mean not responding to the queries of free users. Use limited support as a differentiator to persuade them to convert.
  • Tell users what they're missing. Send emails. Send in-app notifications. Use powerful CTAs to show them how they can get what they're missing.
  • Make conversion easy. Keep conversion straightforward. Allow users to upgrade their plan with one-click. This works best to reduce churn and increase conversions.
  • Track conversions. Measure performance and conversion rate. Tweak limitations for comparison. Do users become paid customers? Read our free guide to learn everything about testing and tracking.

Mistakes to avoid

  • Not setting limits at all. This can prove to be suicidal for your business. If there aren’t any limits and free users can enjoy your app without any restrictions, they won’t convert. There has to be something missing to motivate them.
  • Limiting the core feature. Don’t limit the core feature of your app. Let users fully explore your app’s primary feature. It is best to partially limit the core feature.

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Research evidence

Vineet Kumar published an article in Harvard Business Review where he discussed how to make freemium work for your business. The purpose of a freemium plan is to get new users. It should be clear upfront what is be free and how you'll motivate free users to buy a premium plan. Make users understand your premium offer and differentiate it from freemium.

Free

Make it clear upfront what is free and what isn't to maximalize your conversion and cut down churn. It's always good to set-up expectations


Related techniques SEE ALL THE TECHNIQUES >

Implement with our proven SaaS Churn Optimization Framework

Download a PDF with an exact process we use with our SaaS clients to research, define optimization opportunities and test.