Freemium: how to make it right?
Hey guys,
What is your opinion on when should a SaaS start charging its users?
My understanding is that there are 2 extremes in this decision:
-
Start 100% free and charge later, after reaching a considerable user base (e.g. Trello, Grammarly);
-
Start freemium since early (e.g. Slack, Dropbox).
I'm asking it because I currently run a SaaS (https://dragapp.com) under the freemium model and have followed second model, but also hear from defenders of the first model.
Love to hear your thoughts :)
#1 depend on having VC-money mostly.
I certainly prefer freemium from start, but with some caveats on how to do it.
I like a model that is like a trial not based on time. A freemium where the free version is not enough to fully satisfy a customer.
Dropbox and Slack do that, millions of people are more than happy using their free version. This model also requires VC money.
I also dont like pure time-limited trial. It prevents the user to be fully committed to engage with your app - consciously or unconsciously.
So I prefer a free plan, with all features, but with a limitation on one metric. Example: my side-project is a SaaS for one-on-one meetings. The customer is the leader and he/she adds their team members to the app.
When at the free plan, a leader can only add one team member. Allowing them to fully appreciate the app, but, if they are serious about using it, they need to upgrade. No leader leads only one person
You are so right about "trial not based on time". As a customer, I have wasted many opportunities to use tools simply because installed it and didn't have enough time to fully test it (for x days in a row, during the trial).
I can think on a couple of points to improve our current model in Drag now, very helpful! Thanks :)
I think #2 is more honest for you and your customers. It primes users into thinking your service will cost, allowing them to plan for the future. Personally I get suspicious of services with zero pricing info, thinking if it's free, there's something fishy going on.
It makes complete sense 👍 thanks!
I have to agree with Louis Nicholls that it wasn't clear what your service actually does by looking at the landing page.
I personally prefer the second model, helps me to plan what my future costs are going to be. With the first way I'd be a bit upset if I was using a product for a few months only to later be told it's not free. I'm always a bit hesitant if a service has no or unclear pricing; nothing is ever really free.
Would rather be told upfront it's $X for Y features.
I kind of agree with you, from a customer point of view the second model is more transparent and may generate more trust from user to SaaS.
But from a company point of view it may not be so straightforward. It's essential for companies that need cash to charge since the beginning (and this is my case!), but I always face the old dilemma about the trade off of having a smaller user base in exchange for some cash flow... Tough decision!
Nice. BTW small nitpick - I was on your landing page for maybe 20 seconds, and have no idea why I would want to buy your product.
(as in, what problem are you solving for me? How do you make my life better?)
The only way I'd do #1 is if I a) didn't need the revenue, b) was damn sure that there were people who would pay me though (eg an amazing lock-in which just grows with time), and c) was in a winner-takes-all market.
I'd do #2 if both 'a)' and either 'b)' or 'c)' from above were true. Otherwise, I'd just charge from the moment I start providing my customers with value...
Hey Louis, a feedback like this about our website coming from a completely external and impartial person deserves a lot of attention! Thanks for feedback on both parts :)