When I started outlining this article, I asked a
The conclusion? Most of the startup founders I’ve talked to prefer free trials by a mile.
But hang on, that doesn’t mean you should ditch the freemium model right away. In this freemium vs free trial guide, I’ll explain why.
Today, you’re NOT going to learn the questions you should ask yourself (“How mature is your market?”) when evaluating the freemium and free trial models.
There are plenty of articles out there that already did a thorough job explaining them.
Instead, what you’ll learn here is how five startups (like Surfer and DashThis) approached their business model. Ready? Then let’s get right to it.
What Is Freemium?
Freemium refers to a free product or service with limited features (e.g., Dropbox’s 2GB storage).
Usually, users who outgrow freemium will upgrade to a paid plan (e.g., Dropbox users pay $9.99/month to access 2,000GB of storage).
The biggest upside of going freemium? You get to gather early-stage user feedback and use it as a channel to acquire more customers.
Lydia Sugarman, CEO of Venntive, explains, “It’s an opportunity to build a community of evangelists. It shows investors there are ‘customers’ for the app who don’t churn.”
However, watch out for downsides. Supporting these free customers comes at a cost (e.g., customer support, maintenance, software updates).
What Is Free Trial?
Free trial refers to a product or service offered free for a limited period of time. In the software space, this can be anywhere from seven days to a month.
Not all free trials come with a time limit.
Some come with limited features. For example, ScreenFlow, a screen recording software, offers a free trial with no expiration date, but there’s a catch: Exported videos will include a watermark.
If you want to access more features, you need to upgrade to a paid plan.
Time-based free trials drive urgency. Users will want to make the most out of the limited time period to explore the features. If they experience “delight” by the product and experience, they convert to paid customers.
However, it’s not all rainbows and unicorns. Like the freemium approach, you run the risk of spending more supporting these trial users who may not end up converting.
Freemium vs Free Trial: A Deep Dive In The Process Of 5 Startups
In this section, you’ll learn how five startups went about the freemium vs free trial debate.
Freemium vs free trial: 15-day free trial.
Kicking off the free trial model is DashThis, an automated marketing reporting tool that helps marketers and agencies save hours of work.
Founder Stéphane Guérin never once considered the freemium model.
As a bootstrapped B2B startup that doesn’t get a high volume of business, it was important for Stéphane and his team to earn revenue fast. Otherwise, they’d be swamped by infrastructure, support, and development costs.
He knew he was on the right track when he didn’t face objections from clients. Most were willing to invest in a robust marketing reporting tool.
He divulges, “Our strategic questions were more about the length of the free trial and the price points we should charge.”
Stéphane’s tip: Go with a free trial when validating a market.
“A free user isn’t a client. Until proven otherwise, a free user is an expense.”Stéphane Guérin, Founder of DashThis
Does this mean you should scratch off the freemium option entirely? Not quite.
“Once you have a market willing to pay $X, you can start thinking about scaling. At this point, you can consider freemium if it makes sense and if your financials are right,” clarifies the founder.
“If you have a great probability to upgrade a free user to a customer, then it might be worth a try. In our case, a free user will likely stay small, so it would be a bad bet.”
Freemium vs free trial: 14-day free trial.
As much as Mike Sadowski’s a fan of the freemium strategy, he knew it wouldn’t work for his business.
The CEO of Brand24 explains, “Freemium offerings work for businesses with low free account maintenance costs. For a platform like ours — a media monitoring tool that’s based on data from external sources — the costs can be significant.”
Brand24’s free trial offers partial data access and usage (i.e., track five keywords instead of 10-25). Only paid users have access to full data.
Most of Brand24’s competitors work in an enterprise SaaS model where prospective customers are required to book a demo. While this brings on high conversions, it makes the product — in Mike’s words — “difficult to try, let alone buy.”
To set themselves apart and make themselves more accessible to their target customers (Fortune 5,000,000, not Fortune 500), Brand24 operates on a self-service model.
Instead of booking a demo, users just need to sign up for a 14-day free trial to access the media monitoring tool.
Freemium vs free trial: 14-day free trial.
Ethical Clothing co-founder Ben Heinkel, who previously held the co-founder and CTO position at Photoslurp, divulges that the “freemium vs free trial” debate never even made it to the discussion table.
The reason: They were targeting medium to large enterprises.
Ben adds, “None of these companies were going to put a free tool up on their website as a test, and the companies that would have been willing to do so did not fit our ideal customer profile.”
The team interviewed their ideal customers to better understand the buying process. They discovered the majority prefer researching tools (through free trials) before committing to a sales call.
Ben’s tips: If you choose to go with freemium, make sure your financial model supports the additional expenses (e.g., increased server capacity and support team if documentation isn’t enough).
“Freemium has the potential to open up your user acquisition funnel significantly, which also makes it expensive. Chances are, your freemium will attract a lot of users that will never upgrade, and your financial model should support this additional load while still benefiting from freemium as a profitable acquisition channel.”Ben Heinkel, Co-founder of Ethical Clothing
Update: As of 13th May 2021, Surfer has suspended its “7-day trial for $1” offer and swapped it to a 7-day money-back guarantee for new subscribers. I’m keeping Surfer’s previous pricing model here nonetheless, as it shows the strategy behind it. More importantly, this serves us a reminder: It’s always good to experiment to make sure you’re not leaving money on the table.
Freemium vs free trial: Freemium then free trial.
monitorQA, an inspection and auditing SaaS, initially offered a free version of its product before switching to the free trial model.
CRO Andrew Motiwalla shares, “We treated the free version as a lead magnet to help attract small companies.”
However, Andrew and his team noticed these free users didn’t stick around long. He interviewed them and discovered a crucial insight: Users who stopped using monitorQA were small businesses that didn’t see the value in the product.
Whereas the customers who stuck around? You guessed it, they were larger businesses.
The monitorQA team went back to the drawing board and deduced: Their best customers were large operations, not small businesses.
Since these bigger companies with bigger budgets had no use for free products, monitorQA swapped the freemium model for a free trial.
Andrew’s tips: Get to know your target customers deeply.
“While this applies to every aspect of business, it’s also true when it comes to your pricing strategy. Don’t let finance set it; it should be derived from your customer insights.”Andrew Motiwalla, CRO at monitorQA
Freemium vs free trial: Freemium.
Hey, that’s us!
The co-founders at Breadcrumbs knew the freemium route is a no-brainer after considering the industry they’re in.
“Lead scoring is still perceived as an enterprise play by many, but it can provide huge advantages to startups,” explains co-founder, Massimo Chieruzzi. “As stated in our Revenue Acceleration Manifesto, we want to make this technology as accessible as possible to as many users as we can.”
Massimo and his team knew they were heading toward the right direction when they began noticing Breadcrumbs’ impact on these startups and how it’s helped them scale to the point where they’ve become happy customers.
What’s more, given how Breadcrumbs works (it scores leads based on who they are and how they interact with websites and products), users need more than the standard 14-day free trial to realize its full potential.
“To really enjoy and understand the power of Breadcrumbs, users need to go through their sales cycle. They need to score their leads and have them go through the pipeline and become won deals. That way, they can quantify the increase of revenue that Breadcrumbs generated.”Massimo Chieruzzi, Co-founder of Breadcrumbs
Consider these three questions when you’re mulling over the freemium vs free trial model:
1) “Can I get these free users to bring onboard more users?”
For every free user that refers 10 more users, 10%-20% of them will likely become paying customers. Massimo stresses that this ultimately depends on your product’s nature. He adds, “When we started AdEspresso (author’s note: AdEspresso runs on a free trial model), we knew all the magic would happen in the background and there was no way to leverage free users to bring in more users. Adding a ‘Powered by AdEspresso’ in their Facebook ads was clearly not an option.”
2) “How fast can my users realize the value of my product?”
If they can’t get to the “aha moment” in a few days, the free trial model might be a wrong fit.
3) “What are my competitors doing?”
Some industries might be used to freemium that a free trial won’t stick. But then again, going the unconventional route just might differentiate you from the competition. It’s your call!
Freemium vs Free Trial? There’s No Straightforward Answer
There’s no clear-cut answer, but these real-world startup examples should help you evaluate which model (freemium vs free trial) is better for your business.
Don’t write off the freemium model completely. As you can see from the founders here, it does have its place and can be a powerful customer acquisition channel when done right.
Breadcrumbs is on a mission to help startups unlock revenue acceleration. Want to identify which of your freemium or free trial users have the BIGGEST potential to convert to paying customers? Sign up for your free account today to filter out the noise and get started in a few clicks.