How to Offer Both Freemium and Free Trials

I got this question from a SaaS vendor about offering both Freemium and Free Trial options and I wanted to share my response to him with you.

UPDATED FOR 2014!

Our current app has two pricing tiers – free and paid. Simple pricing has its advantages!

We’re coming out with a major redesign of the product (plus new features) in early 2012 and need to decide how many pricing levels to have. So far, the discussion is free plus two pricing levels.

I have also questioned whether we should continue to have both Free and Freemium, as this combination seems to be the minority case.

And here was my response to him…

Steve… thanks for the question.

You’re right that having a Freemium version and paid version w/ Free Trials is not common, and while I have seen it more lately, only 7% of those I’ve surveyed report having both Freemium & Premium w/ Free Trials, so it is pretty rare.

That doesn’t mean it is a good or a bad thing, though… just that it is rare.

But to make it work, there are a couple things you need to make sure you do if you continue going down that path:

  1. Clearly understand the psychological differences between Freemium – free forever – and Free Trials.
  2. Have a clear path to conversion for BOTH Free Trial users and Freemium users.

Where most companies fall short with Freemium is the same place people fall short in everything else… they fail to map out how – once you have someone’s attention – you can move them through to becoming a customer.

free trials and freemium How to Offer Both Freemium and Free Trials

Whether that takes 14 days in a Free Trial or 6 months as a Freemium user, you need to know what that path looks like and actively move the user closer to becoming a customer every day.

And if you have a Free Trial that ‘downgrades’ to the Freemium version if they don’t convert – which is what most vendors with this hybrid approach do – you need to have a clear idea of how to move them back to becoming a customer again, or how to get them to spread the word for you, or how to monetize / leverage / productize them in other ways.

Otherwise why just let them hang out as a free user – after they didn’t become a customer the first time around – and waste resources?

What’s the quid pro quo for on-going free use of your product?

But you should also work diligently to get those in your Free Trial to convert rather than failing to convert and falling back to the Freemium level.

Should You Pivot to Profit and ditch Freemium?

For immediate consultation and advice on pivoting away from – or otherwise optimizing – your Freemium model, schedule at least a 15-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.

Lincoln

SaaS Customer Retention: The Secret to Reducing your Churn Rate

When it comes to SaaS Customer Retention, I get questions like this frequently:

Hi Lincoln, I’d like to hear your perspective on minimizing churn, especially in an industry with steadily declining prices, Adding more value with a better customer experience and more product functionality to mitigate price erosion and churn helps. Better segmentation. What else?

Churn happens for many reasons, but especially when people think your product doesn’t do something they need it to do (especially if they thought it would), if it doesn’t do that thing as easy as it should, or if the experience is incongruent with the price paid.

SaaS Customer Retention: The Seeds of Churn Are Planted Early

Clearly these are just a few of the reasons for Churn… but in many ways, these are the basis for the things you might be more likely to hear or see, like Customer Service problems or post-sale price sensitivity.

So, up-front price sensitivity often results from directly comparing your product to a cheap competitor’s product… when 12 different products seem to be identical, price becomes the main differentiator and the lowest price “wins.” (Does anyone really win the race to the bottom?)

What is really interesting to me is that Increasing Retention (or Reducing Churn) and Converting Prospects into paying customers share many of the same requirements.

It starts with attracting the right crowd and managing expectations properly early in the process.

Improve SaaS Customer Retention by Adding Value Before the Sign-Up

It is easy to say “add value” so you can charge more, but what does that mean?

Where I’ve seen success in “adding value” is in what I call pre-sale or pre-signup Indoctrination.

How you position your product, the sales copy you use, the imagery and social proof, and even what you do to engage with your prospects before they sign-up (webinars, whitepapers, etc.) will all help in that Indoctrination process.

And it will help better prepare your prospects and customers for the post-signup experience, allowing them to become more Engaged – faster – thus leading to a deeper level of Investment and, of course Conversion.

So the goal of pre-sales lead nurturing / Indoctrination is to get them engaged, then get them invested in the product.

Customer Retention / Prospect Conversion are the same in that respect…

Get them and keep them engaged, then get and keep them invested in the product.

And never stop doing that.

You can also leverage some of my ideas and tactics from this other post on Churn Reduction / Customer Retention.

SaaS Customer Retention is a Process

So yes, a great User Experience, managing expectations, Engagement, Investment (time, energy, resources, etc.) are all part of the conversion – and the retention – process.

But the secret to both is having a plan for conversion and revenue expansion.

When someone enters your Free Trial or becomes a lead in any other way, you need to have a specific conversion path that they get on as soon as they sign-up (or hopefully before they sign-up).

Now everything you do should lead them down that path, never letting them fend for themselves or virtually wander around.

Well, the same thing should happen after they become a customer, too… you want to up-sell, move them to a more expensive version or incorporate add-ons into their current plan, etc.

To keep converting customers, expanding revenue, and growing Customer Lifetime Value (CLV) requires a clearly defined path and you should guide your customers down that path in everything you do.

And, of course, if you’re constantly moving them down that path, then you know you’re engaging them and they aren’t a churn threat.

Let’s Optimize your Free Trial Conversion Rate

There is only one of me, so I can only help a limited number of SaaS providers at any one time. But if you’re serious about finally turning your SaaS Free Trial into a customer-acquisition machine, email me with the details of your situation and I’ll get back to you to setup a meeting.

Lincoln

x


Get Exclusive Updates For SaaS Executives Only...

Lincoln can only help a few SaaS providers at any one time. But he can help you with exclusive Growth strategies and tactics by email.