The Value of Free PlansFebruary 8, 2016 by Val Geisler
Facebook, Google, Twitter, Wifi at the coffee shop. These are all things that are free that we’ve come to expect these days. Sure, we know there are ads and paid features and we’re expected to buy a cup of coffee in order to access said Wifi but the base of it all is free.
Ya know the saying “The best things in life are free”? Well, imagine if everyone at the coffee shop stopped buying coffee and just came for the Wifi. Or if no one paid for ads on Facebook or Twitter. How long would those businesses last as is?
We’ve talked before about pay walls and the pros and cons of a paid email list, but what about a product? Does a free plan actually work for SaaS products?
When Hubstaff founders Dave Nevogt and Jared Brown launched a free version of their time tracking software, they saw a huge uptick in conversions. More customers = happy founders, right?
Not exactly. In a blog article last summer, Dave broke down exactly why it didn’t work for them.
Liam Gooding had a scarily similar list at Trak.io.
Not surprisingly in both cases, when it comes down to is value.
Inherent Value of Free
One of the biggest draws to offering a free product (be it a level, often referred to as the “freemium” model, or an entirely free product, like a mobile app) is that free leaves the lowest barrier to entry. If it’s free all you have to do is create an account or download the app and off you go. Congrats, you’re a new customer!
Only problem is, you’re less likely to actually USE the thing.
How many free ebooks do you have saved up on your computer that you’ve never even opened? And how many apps do you download and then never do anything with beyond Day 1?
With a free account, your product has an inherent value to your customers and guess what that value is? You got it: $0.
Free accounts get a lot of buzz and social shares, but let’s talk about ROI (Return on Investment). If you’re investing $0 your expected minimum ROI is $0. I’m no math whiz but I’m certain that businesses want a greater return than $0 in order to remain in business.
Like Liam Gooding said,
Honestly, how many people would you refer to Google analytics if it cost you $49 a month? Probably zero. It’s not saying much about a B2B product if it can’t add more than $49 of value to your business a month.
Value The Team
Our pal Josh Pigford recently wrote about his experience creating a free plan at Baremetrics. One thing Josh and company didn’t consider was the sizable upgrade his servers would need to manage all of the new free accounts signing up:
And servers aren’t the only thing that potentially take a hit with a big customer spike.
Every customer deserves to feel fully supported in their journey with your product, but it’s been proven time and time again that free customers take up the majority of the customer service time allocated within your business.
More customers = more support tickets. It’s simple SaaS math.
And on a related note…
Value The Entire Customer Base
When free customers join up with a business, the business sees an increase in customers, sure, but there’s also an increase in the number of support requests and account issues (such as forgetting login/password, help getting started, etc.). By increasing the customer base and flooding it with free customers, a business runs the risk of ignoring or pushing back paying customers without meaning to do so.
Without tiered support in place, a top paying customer who has the potential to be a big source of revenue over time runs the risk of being pushed aside by an influx of free customers with plenty more questions and concerns thrown at the support team.
Free, it turns out IS an option over time. As Chris Savage at Wistia pointed out last year, you can always take your time developing your free model if your business truly warrants it:
What, then, if not free?
At ConvertKit we offer a 30 day money-back guarantee. Grab an account, pay for the first month, give it a try, and if you’re not completely satisfied you can write in to cancel and get a refund in that first 30 days.
Baremetrics and Hubstaff offer a 14 day trial, after which you are asked to pick your plan or let it go.
Trak.io landed on an entry point of $10/month with a refund guarantee (like us).
Ultimately, the real reason consumers seek out free is that we all want safety and security when choosing something new. Yep, business decisions often come down to how we feel.
With zero barrier to entry in a free plan, we feel safe and secure to walk away any time, no harm no foul. But with a little skin in the game via a paid trial or refund guarantee, consumers are more likely to use a product and stick around for the long haul.
I’d love to hear what you think. Why do you choose free or freemium products over paid products and how do those free products impact your business?