Which Is Better: Freemium Or Free Trial?

DEFINITION
A freemium model gives potential customers free access to limited features of a product, with no time restrictions. On the other hand, a free trial gives prospects a specified period of time to try the features (limited or complete) of a product.

đź’ˇUnderstanding Freemium And Free Trial

There’s no denying that your product is one of your most powerful tools for acquiring customers. Both free trial and freemium models are ways in which potential customers can use your product first hand. The prospects that successfully achieve that all-important “aha moment” while using your product tend to go on to become qualified leads and customers.

It’s similar to giving your prospects a free sample of your product before they commit to a big purchase.

While both free trial and freemium models might seem similar on the surface, they are wildly different, with the primary differentiator being the time limitation.

A free trial generally allows users to try out all or partial features of the product for a limited amount of time, which typically ranges from 7 to 30 days. On the contrary, adopting a freemium model means you allow partial access to your product, but without any time limit.

đź–‹ Takeaway 

Both freemium and free trial models give you plenty of first-party data which you can use to develop your product and pitch your paid features to users. However, you need to be careful and have an in-depth understanding of your market and audience before you narrow down on a single model. 

If you have a large market size with existing solutions, a freemium model will work best for you. But if you have a disruptive solution and are trying to create new demand, a free trial might be a better conversion method for you.


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Freemium Model: Pros And Cons

A freemium model is one of the most powerful acquisition models, but it’s not for everyone and comes with its own share of cons. Here are some things you need to look out for:

Pros:

  • Since there’s no commitment, the freemium model brings more people into the top-of-funnel.
  • Freemium models are able to create more touchpoints with the users. If you’re not investing in a sales team, the freemium model will perform better than a free trial.
  • It has a good chance of bringing revenue even from free users by leveraging word-of-mouth.

Cons:

  • An indefinite freemium model means there can be a lower activation rate to your paid features. If your aim is to bring in more revenue then the freemium model will fall behind a free trial.
  • You need to ensure a great onboarding experience and make sure the users receive their “aha moment” early on.
  • If you have a product that has a high cost to service each new user, a freemium model will not be sustainable. 

Free Trial: Pros And Cons

Free trials work best for a relatively expensive solution. Here are some pros and cons to consider:

Pros: 

  • Free trials convert better to paid plans since they are active for a limited period of time and create a sense of urgency.
  • If you have an opt-in free trial, it creates little to no friction, leading to a higher number of sign-ups.
  • Free trials create more initial trust with your prospects.

Cons:

  • If you’re allowing users to start a trial without their payment details, there’s a high chance of attracting spammers.
  • A free trial can be expensive to run, based on your product or service. 
  • If your product has intermittent usage patterns, the upgrade rate will be lower. 

Which One Is Best For You?

The customer acquisition method you should choose for your product-led growth strategy depends on a number of factors:

  • Type of product: Is your product a highly differentiated one? Or is it a part of a highly saturated market? If you’re trying to gain a share of existing demand, the freemium model will allow you to reach more customers, ultimately increasing your paying customers. If it’s a disruptive solution, let your users access all the features of your product with a free trial.
  • Market size: Are you serving a niche audience or a large total addressable market (TAM)? For a small market size, choose free trials since your users will be able to access dynamic solutions to their specific problems. 
  • Cost: If your product is relatively costly, a free trial will help you gain user trust. 
  • Marketing strategy: For a top-down marketing strategy, freemium doesn’t work as well as free trials. If your ideal client profile (ICP) includes executives, you might need a sales team with the free trial offer.

Both the freemium and free trial models are opportunities to make users understand the use cases of your product. What’s more, both make the sales process easier with the amount of data they provide. 
But organizing and using the data can be overwhelming. Breadcrumbs turn this data into revenue for your organization by giving you actionable insights.

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