Freemium vs. Free Trial: How do I pick the right SaaS revenue model?

At Seodity we previously used 14-day free trial. Then changed to freemium model.

Few observations:

1. Freemium brings more sign ups(obviously)...
2. ...which helped us to validate what people wants to use on bigger control group.
3. On trial people sometimes didn't see the full potential of the product through the trial period.
4. Freemium allows customer to use our product when he's small, and then buy bigger plan later.

One rule of thumb I've heard is that if it takes a long time for your customers to see value in your product, then freemium is helpful. If your customers see value quickly, then go for free trial.

One key thing to understand here is that freemium is not a revenue model but an acquisition strategy, as @patticus says.

I recommend doing a deep dive into some of the Price Intelligently articles on this topic. Especially interesting if you read both their views: for and against the freemium model.

Customers often times can be hesitant to start a free trial. This means you'll have to get creative with how you word it...intercom does a good job at this!

Subscription model with long money-back guarantee period. Two or even three months. And you better have features that I want to pay you, not just a same set of features of already some free to use app.

Why? 14 days is enough for let's say a product that can simplify your online marketing strategies. You pick what you want and it suggest you some steps... And you have 14 days to try it out, in the next two weeks you'll for sure think about some posts on social media, and then decide if you want to continue with it.

BUT, for the personal finance, 14 days is nothing. As a user of one personal finance app I see the value of it in let's say monthly reports. Where do I stand at the end of the month. Even to compare it with previous months. And THERE I expect your differentiator.

Work on your killer features and communicate from the beginning what users gets for his money.

If the time taken for the user to derive benefit/value is longer, go for freemium. If it is immediate or can happen within the free trial period then go for free trial.

For what it's worth, we've tried it all while building Obie. Freemium is great if you have significant volume from your distribution channels and clearly have product market fit, Otherwise, it can be a giant distraction. If you're unsure, what has been effective for us is gating everything (Book a Call - only) and forcing prospective users to talk to us first—you'll learn a lot, at the very least.

We're a website builder and it takes a while for our customers to finish their sites.

Longer than 14 days. Maybe 30 day trial would do and we should test it.

But for now we let visitors try the builder without even using an email. That skyrocketed how many people got inside the app.

As many people here have noted, the answer to this question is "it depends."

Do you have an army of influencers who will promote your product and educate people why they should be using it and how to use it? If you can pull this off - you can charge right off the bat.

Are you going to rely on ads to promote your product? It would be hard to convert a "cold" lead right into a purchase, so it would make sense to lower barrier to entry as much as you can.

But then another set of questions:

• Is your freemium enough to make people enjoy the product and stick?
• Is your premium layer compelling enough to make those free users want to pay for it?
• Is there some "customer nurturing" / "customer lifecycle" thing going on, where you would gradually educate your free customers on why premium layer has a lot more value for them than a free one?
• etc.

PS: I recently recorded a video sharing our thought process behind having a "7 day 7 dollar" trial for our SaaS. It might give you a few more ideas - https://youtu.be/09avD7Y4xpc

By all means go with the subscription model, with a 14-day trial. Personal finance is exactly in the same psychological category of gyms. High initial excitement that just decreases over time (I'll get in shape, get a gym membership, drop it after a month or so), so your chances of converting get lower every day.

You need to get the customer's money as soon as you can.

Other categories of apps are the opposite. Like Dropbox. They catch you with free because they know that once you have all your files there it's hard to let go and you'll end up paying to avoid the inconvenience of moving your files over to another service.

As a last example, compare Mint vs YNAB. The first one is free. Everybody has an account with them that just check once a year maybe. People that have the latter are much more committed an loyal customers.

Go with subscription, you'll do much better.