It’s one of those magical words that grab people’s attention and has become a popular option for many SaaS businesses trying to attract customers and validate their service. But is it the right option?
5 years experience has taught me the hard way that surprisingly, giving your product away for free can cost you more than you think.
True, many SaaS businesses successfully use the freemium model. It’s a perfectly valid option and, depending on your business and your objectives may be a great choice.
However, some enterprise SaaS products are offering free trials of their MVP (minimum viable product) when they start up. It seems like a no-brainer way to gain traction and get feedback from real people. In fact, that’s exactly what we did in the early days of Leadsift…
No Strings Attached
We looked for potential customers in our network matching our buyer profile and offered them a chance to try our service for free in exchange for their feedback.
Roughly 90% said yes, which we thought was great. Looking back, it’s unsurprising. Who would say no to a free program that makes your life easier and save you money? There were zero barriers to entry. Excitedly we waited for the feedback to roll in. And waited. And waited.
We never got that feedback.
It turned out the people just weren’t using the product. It wasn’t solving a pain point for them.
Not to be put off, we tried again. This time we required a commitment from our prospects. They had to agree, in writing, to sign up for a paid plan if the free trial was successful. For some companies, just signing this agreement meant lawyers had to be involved. Still, there was very little reason to say no. The results were better and we received slightly more feedback, but adoption was still low.
Clearly, we needed to qualify our potential customers further.
For our third iteration, we added a clause that we’d be allowed to use the customer’s logo. This had some obvious benefits for our marketing, providing an element of social proof, but more importantly, it also required more commitment. Frustratingly though, we still weren’t getting enough feedback to make it worth it.
How Much is it Worth?
For our next attempt, we offered the same deal but this time, along with a logo, we charged a nominal fee. Even with a money back guarantee, this was an important qualifier. Did our prospects think our solution was worth paying for? As Steli Efti points out, if they’re willing to part with their cash for what you have to offer, you know they’re truly getting value out of it.
As you’d expect, significantly more backed out when we included a fee of $99. At the time it was painful that some prospects wouldn’t close for such a small fee. Long term though it was a positive turning point. We learned more about who our ideal customers really were and just how important this pain point was to them.
Putting a dollar value on your service also completely changes the relationship. Prospects take the whole thing more seriously when they have skin in the game. When there’s money involved, people will be quick to complain if things aren’t working as they expected.
Still, we wanted to see if we could improve things further. For our last iteration we required prospects to sign up for an annual contract, with a 90 day success period included; Use the service for 90 days, then review the results. If you’re getting value, that’s great. If not, then no problem, you’re not tied in for the year. Having been on the other side of contracts, we hate the idea of being locked into a service that’s a bad fit, so this was important for us. 90 days is enough time to demonstrate value, but getting someone to sign a contract is great for business (plus it keeps our accountant happy).
Getting that commitment in the form of a nominal fee and a signed contract was the best decision we ever made.
It’s Not About the Money
That’s our experience offering free trials, and how we changed to improve adoption and feedback. While services with a baked in freemium model may work for some, for enterprise SaaS businesses it’s simply not worth it.
Get a commitment, charge a price, then provide 10x the value in return. More than the financial gain, you’ll receive truly useful validation for your service.
How about you? Have free trials been useful for gaining traction and validating your product? Or have you found other methods more effective? Share your thoughts in the comments below.