Converting free users to paid subscribers in the SaaS context: The impact of marketing touchpoints, message content, and usage

Hongshuang (Alice) Li

Production and Operations Management, 2022, vol. 31, issue 5, 2185-2203

Abstract: As software‐as‐a‐service (SaaS) becomes an increasingly popular business model, free‐trial acquisition, which allows prospective consumers to explore the service at no charge, also becomes a norm for SaaS companies. However, empirical research on the role of marketing communications, consumers’ free‐trial usage, and their interactions is still lacking. This study utilizes the granular data from a leading SaaS firm that provides prospects with free trials and examines the impact of and interactions among various marketing touchpoints, different types of message content, and the frequency and variety of free‐trial usage on consumers’ subscription decisions. Regarding advertising effectiveness, this study finds that consumer‐initiated touchpoints with all message content enhance conversion, but the firm‐initiated touchpoints conveying persuasive messages discourage conversion. Meanwhile, free‐trial usage does not always follow the old adage “the more, the merrier.” When usage is unpacked as frequency and variety, more frequent free‐trial usage encourages conversion, but exploring a greater variety of software leads to a lower conversion rate. For the focal firm, advertising and free‐trial usage attenuate each other in leading to conversion, except for the persuasive messages sent to frequent users and featured messages to variety‐seeking users. The robustness of these findings is tested, and two simulations demonstrate how the model helps firms determine when to contact consumers with additional display ads or emails. This research provides guidance to SaaS managers on the impact of advertising, free‐trial usage, and the interplay between both on conversion, which facilitates decisions on marketing strategies and resource allocations.

Date: 2022
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