6 YouSendIt Lessons for Increasing Customer Conversion Rates

Any business depends on converting prospects into paying customers. For a technology business like YouSendIt.com, which uses a freemium business model of giving away service and getting a small portion of customers to opt into a paid account, conversion rates are critical.

But there's more to conversion than hoping that someone will ask you to dance. That realization, combined with practical applications of direct response marketing, is what has helped YouSendIt, which lets people send large files, to increase its conversion rate by 200 percent to 300 percent. A phone conversation with CEO Ivan Koon offered lessons for companies that are heavy on tech but less savvy on the necessary direct marketing.

In-product promotion
The first step was to add promotional elements when people sent files. "We used to do zero promotion as you sent a file," says Koon. "Now at a critical moment, like you're trying to attach a second file, we'll say a multi-file [transmission] is a premium service and click here to upgrade."

Lesson 1: Hit people up for paid conversion when they need a service you charge for.

At first, YouSendIt would pull a person out of the process and force them through a sales process:

1. Look at a comparison chart of account types.
2. Choose the account type.
3. Enter credit card information.
4. Press send.

Many people abandoned the process. Now, when someone tries to send files that are larger than the free option or multiple files, the person gets a form offering premium service. "It drastically changed the conversion rate," Koon says. "Don't take the customer out of the send flow "

Lesson 2: Make the upgrade process as simple as possible, or you lose customers.

For a while, the company offered a pay-per-use (PPU) option, but dropped it from the form. "We don't want you to buy PPU. We want you to buy subscription. It makes more business sense to us," he says.

Stretch the price
Next step was to test price elasticity. For years, customers bought monthly subscriptions over annual at a 9 to 1 rate. But monthly increases the chance of someone discontinuing use. "In the second half of 2009, we started to target different people based on [things like] usage frequency and offer them the annual plan at a lower price," Koon says.

Lesson 3: Often you make more money when you charge less, so test pricing.

YouSendIt's annual premium price is $109. The company tested $99, $89, and other prices until it found "a pretty optimal annual price" that maximized the total revenue from subscribers. During these trials, YouSendIt kept the $9.99 a month price fixed. "We want to set a main street price," says Koon. "We don't want to confuse the user too much. "

Lesson 4: Give customers a perception of stability so they can compare pricing or other terms and have the sense of getting a bargain.

Not only did YouSendIt make more money overall, but the churn rate of annual customers is much lower than for monthly, which reduces overall customer acquisition costs. The company's paying customers are in a roughly 50-50 split now between annual and monthly plans, with only about 5 percent remaining pay-per-use.

Get by with a little help from some friends
Up through the end of 2010, 70 percent of customers came from word-of-mouth, with the remaining being people who had received files through YouSendIt and decided to use the service to send files as well. The company was missing many other opportunities, so began to test search marketing and, starting January 2011, became the large file attachment solution for Yahoo Mail.

That last step doubled new registered traffic overnight, from 320,000 to 600,000 by February. In March, the number jumped to 800,000. YouSendIt has begun an in-product conversion program with Yahoo. Through the rest of the year, it will strike deals with other sites to increase the flow of prospects.

Lesson 5: Experiment with different ways to reach customers. Don't sit on your laurels.

YouSendIt has found that the direct marketing process is a real grind. "If you just make an assumption, 75 percent of the time it will be wrong," Koon says. "The kind of people that will fail in direct marketing are the people who are adamant that their ideas sounded good."

Lesson 6: Keep trying and don't be discouraged. If it was easy, everyone would do it and you'd have no competitive advantage.

Later this year, YouSendIt plans to introduce new product lines: persistent storage, file synchronization, and electronic signatures. "I think we're going to have to test like crazy to figure out how to package it," Koon says.

Related:

• The Real Cost of Freemium
• Exploiting the "Market Gap": YouSendIt.com Gets $14 Million

Image: Flickr user PinkMoose, CC 2.0. Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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