We have have a lot of free users (~95%). We operated under assumptions that these users cannot be converted to paid.<p>However, some of smart people here on HN pointed out that some Free users can still be converted to Paid.<p>How to test this assumtion? To make Free tier more restrictive?
Making the free tier more restrictive for current users is probably a bad idea. The generally accepted thing to do is grandfather free users in.
How important are free users to your app? Is it a network-effect, where those free users make your service better? If not, you may toy with removing free entirely. You'll remove a lot of support time/costs, and only keep around paying customers.
Free plans are effectively a type of marketing. The cost to support those free users adds to the acquisition cost per user, which means you need a higher lifetime value from each paying user.
As an alternative to slashing Free, you could make your Paid tiers better. And aggressively try to convert free users. Send drip campaigns, show them screencasts about your Paid tiers, etc etc.
Free users can be converted. You need to find out why they are staying free. Price may be the reason, or maybe not. Do some customer outreach to both free and paid and find out why the two populations are in their current tier.
If you have a way to segment your free users then come up with an idea and test it on 10% of them. See what happens. If you made a bad choice and piss of 10% of them, then you can turn off the test and leave the other 90% of the free users blissfully unaware. If your idea works, then you can expand it to a larger test cell, or to all free users.
View it as an A/B test, but don't just default to a 50/50 split.
Do some work and research the freemium model and you'll see that it is possible. Depending on the nature of your product, you may want to checkout dropbox & Evernote. Both are great examples of different strategies that help convert free to paid users.
Generally speaking, a 5% paid to 95% paid to free ratio is really good.
How important are free users to your app? Is it a network-effect, where those free users make your service better? If not, you may toy with removing free entirely. You'll remove a lot of support time/costs, and only keep around paying customers.
Free plans are effectively a type of marketing. The cost to support those free users adds to the acquisition cost per user, which means you need a higher lifetime value from each paying user.
As an alternative to slashing Free, you could make your Paid tiers better. And aggressively try to convert free users. Send drip campaigns, show them screencasts about your Paid tiers, etc etc.
Free users can be converted. You need to find out why they are staying free. Price may be the reason, or maybe not. Do some customer outreach to both free and paid and find out why the two populations are in their current tier.