I got this question from a SaaS vendor and wanted to share my response to him with you.
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:
- Clearly understand the psychological differences between Freemium – free forever – and Free Trials.
- 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.
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.
If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Free Trial – contact me and we’ll setup a time to discuss your options for moving your company forward.
- Lincoln
About Lincoln Murphy
I can see why it’s rare, including options for free trial and freemium seems too complicated. Too many choices – having to choose between free options adds friction.
There are only two reasons I can think of for doing both:
1) you’re transitioning from one model to the other or testing both
2) if both of the following apply
- you have a lot of complexity in premium that can’t effectively be tested in freemium e.g. team support, technical integration
- you gain from having free users who stick with free permanently for network effect e.g. skype
Confused minds don’t buy, or sign-up, or click, or whatever it is we want them to do… so yeah, too many options can be a major problem.
The reasons you listed for why someone might have both a Freemium version and a Premium version with a Free Trial are absolutely valid, though there are others.
An example would be OfficeDrop who added a Freemium version to appease those who discovered their service through Mobile App stores and didn’t like that the app was free, but he service cost money.
But where there’s not a solid reason – like OfficeDrop – the main culprit is generally lack of a strategy.
If your app isn’t selling, give it away for free and then cross your fingers I guess.
Good points and thanks for your comment!
- Lincoln