Free Trials Do Not Devalue Your Enterprise SaaS

free-trials-enterprise-sales-buidling-trustThe CEO of a SaaS company reached out to me on Clarity the other day and he had a very dangerous misconception that could seriously impact their potential as a company.

I hope by talking about it here I can save more SaaS companies from falling into this trap.

They sell to large customers and the dangerous misconception was that offering a Free Trial would devalue their otherwise “enterprise” product.

That couldn’t be further from the truth!

Free Trials DO NOT devalue your offering.

Let’s explore why that is and what you can do if a Free Trial simply isn’t something you can offer right now.

Free Trials Don’t Hurt your Value Prop

Let’s just get this out of the way; Free Trials don’t hurt your Value Prop. Your offering or company doesn’t look cheap for offering a Free Trial.

I suppose a Free Trial could hurt your value prop if it’s a crappy experience, poorly executed, incongruent with the prospect’s Desired Outcome, etc. But a Free Trial in-and-of-itself will not hurt your value prop.

But, assuming you’re acquiring high-value prospects that have success potential, a Free Trial should help reinforce that value prop with the prospect and allow them to get to know, like, and trust you and your product.

Free Trials lower the barrier to entry for a prospect significantly, taking the focus off of an immediate buying decision and putting it on just the technical, functional, and successful onboarding process.

Isn’t “Free” Bad, though?

Free isn’t a negative in this context. Free Trials are different than giving something away for free, forever. I really suggest you spend a bit of time understanding the difference.

Ultimately, a Free Trial says to a prospect “try my product for 30 days, and then, when you’re hooked, pay me $250k.”
Or $20… or $2000… whatever.

It’s a Free TRIAL of a Premium product, and the customer knows this.

Their expectations are that they try the product and at the end of the trial (though you want to make this happen ASAP), they either pay you or they stop using it.

Does test driving a Ferrari reduce the value of a Ferrari? No… if anything, that’s what seals the deal for most buyers.

Free Trial Alternatives for Complex Enterprise SaaS

Sometimes however, typically for Enterprise SaaS, doing a Free Trial is legitimately not feasible. It’s usually when there’s simply too much manual effort that’s required to get the customer to a point where they can recognize value (or recognize the true value potential).

In those cases, you should still do whatever you can to lower the barrier to entry for the customer.

Remember, the customer still needs to know, like, and trust you. So I always suggest at the very least offering one of (or all of) these options as a way to reduce friction and lower the barriers to entry for your customer.

Offer a Proof of Concept

I always suggest that these are paid POCs – $10k or $25k is not much to Enterprise customers and should (ideally) be enough to cover your actual costs associated with the POC.

There’s not a formula to determine the POC price – like always saying 10% of contract value – so just pick a number that allows you to cover costs and get them to a point where becoming a paying customer is the most logical next step.

Give them a 90-day “out” clause

This is basically a way for the customer to ensure they’re getting value in the first 90 days or they can cancel their contract. That might mean that they pay nothing or they just pay for the 3 months.

Regardless of whether they’ll pay anything for this first 90-days if they opt out, this can be a great risk reversal tactic for the customer… but your job is to ensure they get value within that first 90-days and that continuing as a paying customer is the most logical next step.

90 Day Money-Back Guarantee

The granddaddy of all risk reversal tactics, money back guarantees – whatever the length of time – are super-simple to implement. If for some reason you don’t like our product, you get your money back.

It can be a no questions asked scenario, or it can be a “if you aren’t satisfied, contact us” and then you can offer to help them achieve their Desired Outcome instead of just immediately giving their money back.

If they insist, obviously fulfill your refund obligation, but it’s critical to know that achieving their Desired Outcome is what customers want… they didn’t buy your product just to waste a few months and then get a refund.

Sometimes SaaS vendors don’t want to offer a money-back guarantee because of the abuse potential, but remember this – especially for larger or Enterprise deals – customers don’t sign-up just to cancel later. They’re putting in resources on their end – an investment that is likely more than what they’d pay for your product – and aren’t doing this just to ask for a refund of your subscription fee.

This isn’t something people in Enterprise deals will just take advantage of all willy nilly. That’s not something to worry about.

Keep ’em From Wanting an ‘Out’

The key to all risk reversal tactics is to never let the prospect or customer get to a point where they want to take advantage of an “out” or a refund.

Instead of worrying about people taking advantage of your willingness to offer a refund, just offer it to lower the barrier to entry and then work diligently to get customers to achieve their Desired Outcome. Do that, and you’ll never, ever have to offer a refund. Nice.

That all said, a Free Trial is still the best and I’d encourage you to get to a point where offering one is feasible… that’ll also force you to think about – and optimize – the entire onboarding process, which is definitely a good thing.

About Lincoln Murphy

I am a Customer Success Consultant focused on Customer Success-driven Growth. I wrote the Customer Success book which you can buy at Amazon. If you need help applying Customer Success-driven Growth principles in your company or would like me to speak at your event, please contact me. Also, connect with me on LinkedIn or follow me on Twitter or Facebook.

Comments

  1. Awesome post.

    I’m sure it varies but traditionally for products that are under $50 a month and you offer a free or $2 first month trial….what is traditionally the conversion from Trial to customer if you obviously have an awesome product?

    We’re debating offering this very soon or a lower cost entry that is under $10.

    See you on Twitter ~ Mike

    • It varies a great deal… I’d segment into two *broad* categories: trials designed for conversion and those that aren’t designed for conversion. I can’t imagine there is any widely-sourced empirical evidence on this if for no other reason than it requires a person to self-report their trial not as “unsuccessful” but as “we didn’t put any real thought into it.” People don’t often like to admit that.

      That said, for the companies that haven’t designed their Free Trials to convert – regardless of price – the conversion rates are always below 10% and usually in the single-digits. For those that design their Free Trials to convert, conversion rates of 50% aren’t unusual… I’ve personally worked with companies in the 90% range. Of course percentages have a way of masking things.

      Since we’re often dealing with an overall smaller number of “prospects” due to better targeting, this higher percentage – while still representing a net gain in new customers – doesn’t really represent a 9x increase in new customers (if you went from 10% to 90%).

      Something else to consider is that along with more customers coming out of the Free Trials, by focusing on Customer Success during the trial, the customers that convert are also far more likely to stay longer, spend more, and tell their friends and colleagues.

      I would advise against doing a $2 trial. I’ve written about this before (well, I talked about $1 trials but the logic applies), and while Free Trials – maybe even ironically – don’t devalue your offering…. applying a price that’s super-low, such as $2, could cause a negative price anchoring issue. If you’re going to do a Trial, I’d stick to Free. Or don’t offer one and use one of the alternatives I mentioned in the post.

  2. Thanks for a great article Linconl! We at Reply also think that a free trial means confidence in what we do and some clarity for our customers to see what they get before they pay.

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