Free Trial vs Freemium vs alternative models
How to effectively acquire new customers is one of the most essential and critical questions for companies to answer at any stage in their development.
In his great article How To Develop a Customer Acquisition Strategy Myk Pono covers the key aspects of designing and implementing an effective customer acquisition strategy (i.e media, channels, and tools to gain new customers). It zeros in on a few important decisions when it comes to the customer acquisition process:
- What is the most effective way to entice prospects into trying a product?
- Is it better to offer a freemium, a free Trial, or an alternative model?
Freemium provides access to part or all of the product free of charges, without a time limit. There are many well-known companies such as Dropbox, Slack, Trello, MailChimp, and much more offering freemium products.
Alternative models such as the hybrid approach — a combination between freemium and free trial to get the best of both options — or the no freemium & free trial — which forces prospects straight into a sales engagement (relevant for enterprise deals) can also be found among all the SaaS companies.
“There is no clear answer about which is the right approach because it varies case by case. The context of your market forces, competition, product, and even corporate culture all play into the decision.” — Myk Pono
Free Trials are great. But they aren’t for every app.
As Jason M. Lemkin once said the “problem” with trials is that the more your app requires business process change, or onboarding, or data entry, etc. … the less the odds the trial will be any good.
Moreover, as a company’s business moves to enterprise levels and involves business process change, fewer prospects will want a trial. Instead, they may push for demos and pilots. That requires you to do all the work.
“Trials are great. But they aren’t for every app.” — Jason M. Lemkin
That said, there are several factors to consider when it comes to offering a great trial experience and getting trial users to convert to paying customers.
Here are some of the most important ones:
The first complexity in defining a proper Free Trial strategy is this idea of duration. The length of a trial depends on the type of product you provide and what best suits your business.
Indeed, you need to consider a lot of factors such as length of setup (obviously), team members’ onboarding, business process changes, data entry, low/high average selling price, etc.
Close.io CEO Steli Efti (Why your free trials are way too long), ChartMogul (SaaS Free Trial length), Madkudu (30-day trial? 14-day? Freemium?), Tomasz Tunguz (How Long Should Your SaaS Software Trial Period Be?) … lots of articles have been written on the best Free Trial practices.
Most of them favor relatively short trials, usually less than a month (7, 14 or 30 days). This time limitation creates a much stronger incentive for the user to convert from free to paid while reducing the period during which your team is almost fully dedicated to the user (high level of time investment).
If someone asks for an extension to his or her trial, you should probably give it to them because extensions are better than losing them forever.
But you should take advantage of the situation to learn the reason behind the extension request and roll that learning into the trial process itself. You should also get them to engage during the trial extension.
If you want to know more on this topic, especially how to handle a free trial extension request, to treat the symptoms, and to eliminate the underlying problems, you should read this detailed and really interesting article from Lincoln Murphy.
3. Payment Information
Should you ask for a credit card to begin with your Free Trial?
Lincoln Murphy also said (in this article and this one) that if anything has changed in the last few years, it’s that people have become less trusting and less willing to whip out the credit card to try something.
Why? Because 100% free options abound. So they don’t need to.
Couple that with the fact that people are busier and more distracted and asking for a credit card up front (what Lincoln calls “putting up a cc-wall”) becomes yet another distraction rather than something that helps them move closer to becoming your customer.
Distractions + Lack of Trust = Fail
4. Product limits
It is common not to release the full product out to the trial user.
In general, top product limits are:
- features (e.g. important functions are disabled),
- usage (it restricts how much a certain action can be performed),
- capacity (e.g. limited amount of data),
- output (e.g a watermark to an output design piece).
Obviously implementing limits — one or several combined — depends entirely on your product and strategy.
5. Marketing system
During the trial period, users have their (almost) full attention on you and your most important job is to convert them into paying customers.
With the right email sequence and system automation, you can smoothly onboard and educate them while they’re testing your product.
If they do not convert by the end of the trial process or its extension, you will be able to keep them in the loop about any product changes and target them as potential future customers.
More information on how to market to customers when the Free Trial is over by Neil Patel.
Forest’s experience = No Trial
While we are convinced that using Forest from day one on a project can bring great operational value and avoid a lot of unnecessary costs as the business grows, we chose to offer our users free access to our product with unlimited users and activities, shortly after we launched the company.
It has been a great way to alleviate the friction startups had to adopt Forest (more explanation in our No Pricing Manifesto) and it helped us iterate on our product thanks to the tons of invaluable customer feedback and complex situations we had to solve.
At the same time, it also made us realize that today’s businesses and their processes are increasingly complex and that is key for Forest to keep evolving to keep up with our customers’ use cases (collaboration, team-based permissions, advanced analytics, 3rd party integrations…).
The No Pricing Manifesto
Learning with you, not at your expense. Forest is the first company to provide a back-office interface as a service. In order to accelerate our development, we’ve decided to review our pricing...
Since the release, we have observed first hand that companies typically do not or cannot always anticipate the increase in the complexity of their operations. As a result, they sometimes find themselves not using Forest to its fullest potential as they start to scale.
That’s even more true of our freemium users which cannot leverage our productivity rich premium features which are locked behind a paywall. This definitely delays their full-blown experience (‘aha’ moment) and narrows their use of Forest.
It is with this pain in mind that we have recently decided to promote a full blown experience of our solution by making all our Pro plan features available for free in our users’ development environments.
This allows our users to be in a position to fully test run Forest, without any limitations:
- No time restriction.
- No “End of Trial” stress.
- No marketing nor sales back-and-forth negotiation.
Only one focus for our user: create the best back-office interface possible!
Obviously, a similar decision may not be applicable to all SaaS products. It was “easy” for us because of the way our product is technically built.
What about you? How are you dealing with your Freemium and Free Trial strategy?
We are curious to know more about it so leave us a comment below or send us a message at firstname.lastname@example.org.