Should I be concerned with a low conversion rate?

I have a new bootstrapped SaaS app that targets small businesses. It has a 30 free trial offer. The visit to trial conversion is around 1%.

Currently I have 9 paying customers with 360 trial sign-ups (around 2.5% conversion).
Service is priced at $20/month.

We've been live for two months. The companies who ARE using the service are very happy.
Is this sample size too small to draw a conclusion? Is is a matter of scaling/marketing?

You can really never compare your conversion rates to other peoples. Obviously the conversion rate is an indicator of the success of your website or software, but there are too many variables to make it anything other than a baseline to measure improvement against.

As an example, let's say you have a awesome website for selling t-shirts. 50% of people that visit your website would buy one if they are t-shirt wearing people. That's an amazing website. The only problem is that you have set up advertising and are targeting the wrong people. What is happening is that most people that come to your website don't wear t-shirts, so no matter how good your site is they aren't going to buy one. Now your conversion rate is just 1% and you think your website is no good.

As you can tell from that example, the number really doesn't mean a lot. What matters now is that you tweak your website, possibly A/B test and try and get that 1% to 1.2%. It's about using it as a baseline to improve upon.

The same goes for the conversion rate of your software from free trial to paid. Stop worrying if it's a good number in it's own right, noone can tell you that. Just start trying to make it better.

A great place to start for improving your trial signups to paid customers rate is to look at your first use experience. What do they see when they first log in, I hope it's not a blank slate that they can't do anything until they go through a lengthy set up process.

In summary, don't be concerned with a low conversation rate, be concerned with improving your conversion rate.

Conversion rate is going to be your main driver of success you are at a point where you just beginning and that 1% gives you a base line. Obviously it's not that big, but rarely do online tools go over 5% (to give you a basic idea). Starting today you need to rely on analytics as much as you can:

• Conversion rate by source of traffic? How does it differ between Adwords you bought, Facebook links, Twitter, pure SEO results, etc.. Then try and optimize the preferred sources.
• Conversion rate by landing page? You need to have different landing pages (based on source for example) and test how each of them convert. Sending people to a generic page is not the most efficient. For example, you can target certain keywords for your product and make sure that the landing page emphasizes those keywords very clearly because that's what drove the user in the first place. A/B testing is critical here.
• Conversion rate by feature used during the trial? If you notice users using X or Y feature tend to convert more, try to make that feature more prominent.. Help them discover that feature, etc.. Try to find what makes people click in terms of what feature they use and push that.
• Conversion rate by login frequency? How many times and how often do people login to your trial? Can you infer conversion from that data? If so, make sure you send reminder email at the right time, not too spammy, but enough to drive usage, etc..
• Other things are Country, OS, gender, age, etc.. anything that can give you data on who converts more and try to figure out why..

It's all about analytics and A/B testing.. It takes time, but you can do something.

Good luck
Antony

I don't think there is a magic percentage, but it needs to fit in with the costs of making a conversion compared to what you charge. It is possible to convert 100% and still lose money if the cost to produce the sale exeeds the amount of the sale.

You may be attracting people to your site who will never buy/have no use for your product. Maybe they are confused about what it does or you are targeting them incorrectly?

Are they quiting at a certain point in the sales process? Too many steps, too long, payment methods, sticker shock, delays, can't decide which options they want.

Do you follow-up through your trial period? They may sign up, play with the site and never return. Are there components of your app you think are critical, but they never bother to try? Early on, you may have to offer to do a demo or provide personal support until you get the site to the point where this gets taken care of. Don't assume it's easy because it's easy for you. They may require prompting.

I know you don't want to have to do this to close every sale, but you'll learn a lot in the mean time. Let's face it, you proposed the problem without any indication why the other +90% never buys. Seems like you never asked.