Your Subscription Model Is Capping Your ARR. Your Free Users Are the Fix You Are Ignoring.

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Welcome to the 204th edition of The Growth Elements Newsletter. Every Monday and sometimes on Thursday, I write an essay on growth metrics & experiments and business case studies.

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Two monetisation mistakes are happening simultaneously at most B2B SaaS companies.

1. First: charging only one way, subscription, when your customers want to pay differently.

2. Second: treating free users as a conversion problem when they are actually a marketing channel.

Fix both and your ARR grows without touching your acquisition budget.

Mistake 1: Subscription-Only Pricing Leaves Revenue on the Table

Most SaaS founders treat the subscription as sacred.

Monthly or annual. Pick a tier. That is it.

The logic made sense when usage was consistent and predictable.

But in 2026, usage is bursty. Customers go deep on your product for a sprint, slow down, come back hard again.

A flat subscription charges them the same whether they are getting maximum value or sitting idle.

The result?

They downgrade or churn during the quiet periods. Not because they do not love the product. Because the pricing does not flex with how they actually use it.

Enter top-ups alongside subscription.

The outcome: retention improves, and ARR grows incrementally without cannibalising existing subscription revenue.

[1] What flexible monetisation actually looks like

• Adding ad hoc purchase options alongside your subscription is not complicated.

• It looks like credits, top-ups, usage bursts, one-time project tiers, or seat add-ons that customers can buy as needed without upgrading their entire plan.

[2] The fear that stops most founders

• Most founders avoid this because they worry it will cannibalise subscription revenue.

• It does not. Customers who would have churned during a quiet period instead stay on a lighter footprint and top up when they need more.

• The ARR you protect by keeping a customer at a lower tier is worth more than the ARR you lose by making them choose between full price and cancellation.

Mistake 2: Treating Free Users as a Conversion Problem

If you have a freemium tier, there is a good chance your team is spending significant energy trying to convert free users to paid.

That is the wrong question.

The right question is: how many of your free users are doing your marketing for you?

A free user who gets genuinely delighted by your product will talk about it.

• They post on LinkedIn.

• They mention it in Slack communities.

• They refer colleagues.

That is an earned acquisition you cannot buy.

Lovable tracks what they call a Lovable Score: how often free users refer others. It is one of their most closely watched metrics.

[1] How to start measuring this

• Track referrals and word-of-mouth signals from your free tier separately from paid conversion rates.

• Ask: what percentage of new signups come from referrals from free users?

• That number tells you whether your freemium is working as a marketing channel.

[2] Redesign free for delight, not conversion

• Most freemium tiers are designed to frustrate the user just enough to push them to upgrade.

• Flip it. Design the free tier to deliver one complete, genuinely impressive outcome.

• Let the user feel what good looks like. That experience is what gets shared.

• Conversion will follow. But the primary job of freemium is to create advocates, not transactions.

Final Words

Subscription-only pricing and underused freemium are two of the most common and most fixable ARR leaks in B2B SaaS.

Neither requires a product change. Both require a monetisation mindset shift.

[1] Audit your churn data: how many customers are leaving during low-usage periods that flexible pricing could have retained?

[2] Add one ad hoc purchase option alongside your subscription and measure the incremental revenue over 90 days.

[3] Start tracking referrals from your free tier. If you cannot measure it, you cannot optimise it.

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintankumar Maisuria