How one company makes millions in revenue with a 100% free SaaS product.
Compared to just a few years ago, SaaS is getting harder.
Well it’s actually getting easier to build and launch a SaaS company and that’s why it’s also getting harder: easier to start a company → more companies launched → more competition.
It’s hard to find a completely virgin industry or vertical.
This is especially true for some specific industries. Martech is one of those.
But it gets worse: within the broad “martech” category there are some specific subcategories that seem to be especially crowded; “Conversational Marketing & Chat” is one of those.
As per Chiefmartec.com from 2019 to 2020 the subcategory grew by 70%.
t’s hard to be seen and get adopted when the market is so crowded.
But there’s one company that adopted a clever strategy to differentiate itself from the competition.
Tawk.to is a company founded by Robert D’Assisi and heavily relies on the fact that the main product is 100% free.
We can agree on the fact that when you can claim your product is 100% free, then you have a great way to get new customers. And that’s exactly what Tawkto does.
t’s their main differentiator and they want to be sure you know their product is 100% free.
It’s the first thing you see when you google their name.
It’s also stressed on their homepage.
And instead of the usual “Pricing” page you would expect on a SaaS marketing website they have a “Why Free?” page.
And this is actually the most interesting page because here’s where Robert, the founder, explains the strategy and thought process behind their free model.
So by now you must be wondering how can a bootstrapped company actually make money and serve millions of people.
Here’s the interesting part. While the software itself is free, Tawk.to charges you ($1/hr) for professionally trained, native-speaking people who are trained to answer chats on behalf of your business 24X7.
So, a pretty interesting business model that can be defined as SaaS++: you are charging for a service on top of software.
I don’t have data about their conversion rates but I guess that when you can just start to use the product right away, with no credit card details to give, knowing that you are not on a free trial but actually using a product for free, it’s easy to build a large customer base.
You don’t see this model very often but you can apply it to a number of other industries:
- Social Media Tools: Similar to Tawk.to’s approach in the Conversational Marketing & Chat industry, social media tools could offer their basic courses or learning materials for free, then offer a premium service where users can pay professionally trained people to manage their online presence.
- Financial Management Services: Free financial tracking and basic budgeting tools can help users get a handle on their finances. The platform could then charge for personalized financial advice, investment management services, or integration with other financial institutions. The same goes for example for SMBs accounting software. By providing essential services for free, users are more likely to trust the platform with more advanced, paid services.
Can you use a similar model in your companies? Do you know other SaaS companies adding a service layer to their software?
We are always studying the SaaS industry, so let us know in the comments.
