Freemium or Free Trial — Which is better for an ideal go-to-market strategy?
Companies that launch apps eventually seek to make money from it.
People who download apps are used to paying no money to use apps to their full extent.
The gulf in expectations and objectives makes mobile app monetization a big challenge. Any given Android or iOS user is hopelessly habituated to go to an app store and get an app for free.
The numbers tell a similar story. 96% of apps on the Google Play Store are free. Over 92% are free on the Apple App Store. This overwhelming tilt towards free apps underlines the widely held belief that people prefer free apps to paid ones.
Source: Statista
Why do people prefer free apps? There is no need to reason why people like free stuff over the things they have to pay for. However, offering premium apps for free doesn’t make sense for companies either. This brings us back to the gulf in expectations and objectives.
There are two solutions companies adopt these days — freemium and free trial. Both these monetization models are geared towards making more people pay for the service an app provides.
Also read: Paid vs Free Apps: Which mobile app monetization model should you choose
The following sections will cover both these monetization models from a go-to-market (GTM) perspective.
Freemium model
Let’s say you are building an app for your sports blog with an online app maker. You essentially convert WordPress site to Android app and bring an app to the market.
To make money from the app, you decide to publish ads using one of the top mobile ad networks.
These ads slowly begin to hamper the experience of your users. While you relate to their concern, it is not feasible for you to remove the ads entirely. Since users aren’t likely to pay for a paid app either, you’re stuck with ads as your sole source of monetization.
To give your loyal readers a better experience, you decide to launch a membership program. Those who buy into the membership program won’t have to see ads along with access to other premium content.
This is a typical example of a freemium model. Apps offer users the chance to get access to some premium features in exchange for becoming a paid member.
YouTube and Spotify are premier examples of apps that follow this revenue model. Both of them have a premium option that comes with an ad-free experience. YouTube even offers premium content as part of its paid plan, along with other features like playing content in the background.
Benefits of the freemium model from a GTM strategy perspective
There are some obvious benefits to using the freemium model for monetization. They are discussed in the points below -
#1 — Eliminating the entry barrier
Many paid apps don’t work because they restrict people from using the app. Most app users are unlikely to pay for an app if they can’t even see if it’s worth the money.
The freemium model gives free app enthusiasts no reason to not use the app. Once a user downloads the app and starts using its free version, the app’s marketing team can go to work and drive the user through a sales funnel.
This is an ideal scenario for a company bringing a new app to the market. It doesn’t take a genius to know that people don’t generally trust new apps. A freemium model removes the price barrier at the very least and allows users to take a chance on the app.
#2 — Reaching a wider audience
Offering both free and paid versions open up an app to a larger audience. A B2B app for instance can continue offering paid apps because its users consist of businesses that are ready to pay for premium services.
However, if the same app adopts a freemium model, it can also invite freelancers and entrepreneurs into the mix. This clearly shows how freemium models can help companies reach a wider audience. From a GTM perspective, this enables companies to plan marketing efforts from multiple segments of the audience.
Also read: Development to downloads — The complete guide to mobile app strategy
#3 — Better user retention
Companies are often skeptical about launching a freemium model because they fear not meeting the expectations of premium users.
Yes, paying customers are often the most difficult to impress and satisfy. However, they’re also the most committed app users you can get.
Why? People who pay money for premium features have a greater level of commitment to the app. They won’t just up and leave like free users because they’ve invested money in the app.
Premium users improve overall app KPIs as well. Metrics like churn rate, retention, and session time all improve if an app manages to provide an attractive freemium model.
Free trial
The free trial model comes from the same school through the freemium model does. It is another way to encourage users to pay for an app.
How does a free trial work? Let’s you decide to create an eCommerce app using a mobile app builder. You essentially turn WooCommerce to app and bring it to the market.
You furthermore decide to offer all your app users premium features like free shipping and fast delivery. Since these features don’t come cheap, you decide to add a price to your app.
This can significantly reduce the number of people who download your app partly because users can’t validate the true quality of your premium features.
To solve this trust barrier, you decide to offer a free trial to new users. They are essentially free to download the app and use all its premium features for seven days.
This naturally opens up your app to more users.
Benefits of the free trial model from a GTM perspective
The free trial model has its own set of benefits. The following sections discuss the same.
#1 — Giving users the ultimate experience
Free trials generally provide users all the premium features a paid user enjoys for a limited period of time. The availability of all premium features gives new users a complete picture of all the things an app can provide.
This gives an app the best shot at converting a prospect into becoming a paid user.
#2 — Getting feedback
Many app users who take up the free trial won’t convert into paying users. This is not entirely a lost opportunity. For one, companies can study the behavior of free users through mobile app analytics tools and study how they use the app.
Secondly, they can also collect voluntary feedback from users on why they’re not buying the paid version. This helps companies reflect on their monetization model, premium features, and overall app quality.
#3 — Attracting lower-funnel prospects
People who take up a trial version do so with the knowledge that they have to pay up at a certain point in time. Thus, they’re lower-funnel prospects who are only looking for a slight nudge into becoming paid customers.
Marketers can approach them the same way they approach any lower funnel prospect. Some tactics include offering incentives after buying into the paid version, giving away discounts on the paid version, and so on.
Freemium or Free trial — Which works best from a GTM perspective?
The free trial model does show a lot of promise in the long run. However, a freemium model is a better option from a GTM perspective.
It is difficult for a new app to convince users to buy into a free trial. This is because a free trial has a direct connotation to paying money after a given period. Furthermore, many apps ask for credit card details from users opting for a free trial. This can easily scare away many prospects.
A freemium model doesn’t necessarily come with the same baggage. Users can freely use the app’s no-cost features without any need to pay after any period of time.
For the purpose of removing an entry barrier alone, the freemium model is a better option compared to a free trial model.
Companies can also integrate their freemium model with a free trial. This simply means freemium apps offer their premium version on a free trial to their users. Once the free trial ends, users revert back to their free version. This can help users see all the things they’re missing in the free version.
This way, companies can co-opt the advantages of a free trial model into their freemium apps.
In conclusion
Both freemium and free trial models are solutions to the big challenge of monetizing mobile apps.
This piece provides a complete analysis of both the freemium and free trial models of monetization. There is also a section on which model is a better option from a go-to-market perspective.
