Freemium vs free trial: Where do you stand?
I recently posted about what to include on a free tier vs a paid tier. But that assumes that you’re opting for freemium. Many don’t. So I thought I’d dig into the (heated) debate between free tiers and free trials.
And from what I'm seeing, it's pretty divided. In a survey posted here on IH last year, 51% of indie hackers voted for 30-day trials while 49% voted for a free tier. That's close.
Clearly, there’s no silver-bullet answer. But knowing the arguments might help you decide what’s best for you.
Why freemium is better than a trial
Freemium is a little bit newer and it gets a lot of press. Here's why it's a really solid option when compared to free trials.
- Maximizes user adoption.
- Allows you to monetize free users in some cases (e.g. ads).
- Gets users more invested in the product over time.
- Tends to be more sticky.
- Makes users feel more valued, since they're getting more for free.
- It doesn't incentivize depict accounts.
- Allows for a larger market share, faster.
That's not a bad haul. Here's what few indie hackers had to say about it:
@paulmit: We have been developing a SaaS for 4 years, reached 300k users. 95% of paying users come from the free plan, and only 5% start a trial. One of the main principles of the Product-led Growth strategy is the freemium model. Imagine if Slack had only a 30-day trial?
@theAprilBuilder: Freemium is powerful since it provides a set of free features that hook users to the platform. Once they start using those, they put more effort and "properties" on the platform, this is really a good thing for better retention.
@indydevdan: Freemium is superior because it gives your users all the time they need to build trust and cultivate knowledge with your product.
Why freemium is overrated
But it's not all rainbows and gumdrops. Here are the downsides:
- Free users who don't convert will cost you money.
- Turning free users into paid users takes more time and effort.
- There's no sense of urgency to convert.
- It's difficult to find that sweet spot of the free tier being good, but not so good that people don't upgrade to premium.
When to go with freemium
Here's when freemium might be the right choice for you:
- If the cost of free users is negligible (or if you can afford it)
- If the time commitment for free users is negligible
- If paid users cover the cost of free users (and then some)
- If you can monetize free users
- If your product has a large number of features
- If you have a large addressable market
- If headcount is a very important metric
- If you are not serving enterprise companies
- If your product is designed for teams
More on this from fellow indie hackers:
@theaprilbuilder: [Freemium is] good if part of your product is widely offered by many other products. Those functions are a commodity and it makes no sense to charge your users for them.
@eraalex: It always depends on your product. If you can offer a good free plan, where the user can enjoy the basic features - do it. But if you are limited on features, stay with the 30-day free plan.
Freemium best practices
Here are a few pointers on how to do freemium well:
- Make sure you can afford it.
- Provide enough incentive for conversions. More on that in my last post.
- Analyze why free users convert and why they don’t.
- Display the premium features and trigger upgrade prompts when they click them.
- Implement upgrade email campaigns.
- Put upgrade banners unobtrusively around your product.
@caminvestipal: Provide enough value that there is incentive to convert from free to paid.
Why free trials are better than freemium
That all sounds pretty great, but let's muddy the waters a bit. Because free trials are a stellar option. Maybe even a better one than freemium.
- Cheaper since free users have a time limit.
- In line with the above, customer acquisition cost will be lower.
- Speeds up the sales cycle.
- Requires less support for free users.
- Allows you to show off the full product instead of only offering some features.
- Organic growth is more sustainable.
- Acts as a filter.
- Ensures that the feedback that you receive will come from higher-quality sources.
Some interesting points from fellow indie hackers:
@indydevdan: On the other hand, limited free trials adds scarcity to your product. This forces users to purchase or churn which acts as a concrete filter.
@deepakmarath48: Free trial will help you eliminate the ones who never intend to pay.
@bluniccorn: We're currently trying the free forever plan on Squeaky but we're not convinced it's the right approach. It's helped us bring in users and spread the word about our product, but in a way it's not that helpful for us to primarily attract people that want something for free haha.
I think basically if your business has really explosive growth, or is VC-funded, then the free forever plan/approach is valuable because you'll generate enough revenue from upgrades in a short enough time frame to make it work. But if you're bootstrapping like us it's not ideal, as freemium converts at around 2-3% typically. So for every 100 companies that join our platform 2-3 start paying.
Why free trials are overrated
Of course, these have their downsides too:
- You'll lose anyone who isn't ready to commit within the given trial period.
- Growth will be slower.
- It's more difficult from a technical perspective, as you have to lock people out at a certain point instead of just disabling certain features.
- Some trial users won't even try the product before the trial period ends.
When to go with free trials
Go with a free trial:
- If there's no clear path to converting free users to paid users
- If each each new user increases costs
- If you don't have a ton of features
- If you're tight on cash
- If free users don't push the needle for your business
- If you need users to pay quickly (or not at all)
- If products that would otherwise have to be on a premium tier need to be tested before a user will convert
And a few words from indie hackers:
@theaprilbuilder: [Free trials are best if your] feature set is small and built around a single value. The free trial will offer time for users to confirm the value that you tell them on the landing page.
@mcmsb: Unless it doesn't cost much to keep a forever free plan, don't do a forever free plan. If your service cost increases as the amount of usage increases, then you need to put a limit on free plans. The best would be something like a 30-day free trial after which you start charging. If they truly like and need your product, they would be willing to pay else they're just a cost center for you.
@vlucas: It does depend on the business, but I would say that most indie hackers, solo founders, and small startups without funding are not in any kind of position to support a "forever free" tier.
Free trial best practices
If you go the free trial route, here are a few pointers:
- Give trial users full access. The exception here is features that cost you money and one-and-done features.
- Give extensions when users ask for it (once).
- Prompt users to upgrade when the trial ends.
- Send reminders when the trial is nearly over. Follow up with a winback campaign afterwards.
- Make sure your trial duration is long enough that users A. Have a chance to try it, B. See the value, and C. Become invested in the product. But make sure it's not so long that it ends up costing you a lot if they don't convert. And not so long that they get everything they need either. Consider your product's complexity, time to value, usage frequency. Longer trials give more time for finding value and becoming invested. But short trials have the benefit of urgency and shorter sales cycles. It's also worth mentioning that according to one study, duration actually has no impact on conversions, so shorter may be better.
- Require a credit card for the free trial. There is some debate on this, as it may reduce signups, but it acts as another filter and increases the likelihood of conversion. @patio11, who many of us will know as an expert in the space, recommends agrees with this, particularly in early-stage companies that are less sophisticated in the nurture campaigns.
A few more thoughts on these best practices:
@simplisticallysimple: I'm willing to give them trial usage as a show of goodwill, but they must also show goodwill, show me they're serious, and meet me halfway by putting down their credit card.
@gabep: We launched free trials recently, and it has tremendously increased sign ups and conversion. However, this is something we waited a long time before offering, as you may lose some considerable money in the first weeks. For us, we decided to build capital before doing this.
@cbartlett: Recently we moved from a 30-day to a 14-day trial and we have liked the results. Mostly, it's a shorter time for us to discover the results of experiments and how they affect conversion rates.
@rlepore: I think it's about showing value. If your customers need some time to get value, maybe it takes some time to set up, then I think a trial makes sense. Personally, I think 30 days is long. If you are to offer a trial, I would go with 7 or 14 days to be honest.
@caminvestipal: I always feel rushed with a 30d trial (or less) to see if it's of value.
A third option
There’s a third option, which is to do both freemium and a free trial. And I think it’s a really solid option. Many companies start users on a free trial of the premium tier so that they can get a taste for everything the product has to offer. After the trial ends, the user can go down to a free tier, or they can pay to continue on the premium tier. It still creates urgency, but you don't lose the user if they don't convert immediately.
@getscreen: If you don't need money - do a free plan. But it is better to make the free plan limited and give a trial period for the full functionality, followed by a paid subscription.
@stephenn: Ideally both! A free trial allows a user to test the full features of your app. A free tier allows them to come back often to use some features of your app.
I'd say the answer for most companies is Free Trial followed by a Free Tier :)
A fourth option? A fifth? More?
And there are other options too. I briefly touch on a few.
In some situations, a 30-day, no hassle, money-back guarantee can work well. You get paid. Customers have the assurance that they'll get their money back if they don’t like it. And it’s pretty unlikely that many people will ask for their money back, assuming that your product is quality. I know of one person who saw a 100% increase in revenue when they did this.
@robwalling: It sounds like your tool is super easy to get value from (enter my URL, I get valuable recommendations). In this case, I would lean towards charging up-front and offering a 30-day money-back guarantee.
You could offer demos. They do show off some of the value, but they don’t allow potential customers to really get their hands dirty. So this generally isn’t enough by itself IMO. And I think it’s only really applicable for enterprise customers anyway.
And of course, you could just not offer any free usage at all. But that’s probably a bad idea in most situations, unless you’ve got a dead-simple product with killer copywriting.
A framework for deciding
One way to decide is by analyzing your addressable market, as determined by the price and complexity of your product. The short of it is this: If you’ve got a product with a low price and low complexity, opt for a free tier. If you’ve got a product with a high price and high complexity, opt for a free trial. If it’s a product with a high price and low complexity, opt for a free tier. And if it’s a low price and high complexity, well then you’re in a tough situation regardless.
The idea here is that your addressable market determines what you should go with, and the price and complexity of your product determine the addressable market. But TBH, with how much indie hackers need to niche down, I have doubts about whether this is the best framework for us. Use it with a grain of salt.
I also came across this quiz that might be able to steer you in the right direction.
But ultimately, for indie hackers, it will come down to your costs. Can you afford a free tier?
Wrapping up
It depends on your product, but I'm a big fan of option #3: Freemium with a free trial.
If I had to choose between them, though, I'd generally go with a free trial.
Good luck!
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I think it really depends on your product
For my own (Evoke), a freemium plan would not be feasible due to cloud compute costs. However, I think if it costs nothing for you to implement a freemium or free trial, or at least costs very little, it could be beneficial.
Agreed, it 100% depends on the product. And particularly the marginal costs involved in new (free) users.
You are right man every plan does fit on every product.
A huge factor to me is the value (or lack of value) that free users bring to paid users. If you have the functionality to make sharing/communities/connection a good, useful experience, free users can be awesome -- they might make the coolest, most useful stuff for the paid users.
But at most of the places I've worked, freemium didn't make logical sense, even when we really wanted it to. We didn't want to put in the product work... we just wanted lower acquisition costs, haha.
Network effects are huge — if your product has those, then freemium makes a ton of sense!
@IndieJames Thank you, man, for sharing a detailed post about the pricing of the product and which one to choose and why to choose a free or a trial option.
We have worked for our product's free trail option because our product is not much complicated but the first users want to see how our product can help them to grow their business.
If you have a good product and giving a free trial is a good option. We are woking on Churnfree a customer retention tool that is helping the SaaS membership business to reduce customer churn and increase the customer retention rate.
Recently a person facing high customer churn and sign up for free and on the same day he converted to the paid pro plan because on the same day our tool helped them to save to users from churning... he is selling $39/memerbership and on the same day our tool saves his 39+39 = $78 and he pay us only $49 for our tool service it means he is on the profit from the same day.
the rest of the 29 days he will enjoy the revenue he was losing on the name of churn.
I share if you have a good product then your customer can be converted to your product in short period of time because they see their growth first that does not matter what you have developed... they see how your product will help them in their business growth.
Reduce your customer churn rate with Churnfree. Enjoy 14 days free trail.
Good point you'r right if your product is good user will definitely select your service until he found an alternative with more features.
Oh cool, I like that “free tier + trial” approach. Best of both worlds. Will implement. Thanks!
I completely agree that freemium is a better model than a free trial. One of the key strengths of freemium is that it allows users to try out the product without the pressure of a ticking clock. They can take their time and decide if the product is right for them. Additionally, freemium offers a more sustainable revenue stream compared to free trials, which tend to be a one-time event.
In our case, we started with a free plan and added premium features over time. This allowed us to build trust with our users and show that we weren't just looking for a quick cash grab. We kept the core features of our product free, but added additional filters to our premium plan. This approach has been successful for us, as it has allowed us to offer a valuable service while still generating revenue.
However, freemium also has its weaknesses. One of the biggest challenges is finding the right balance between free and paid features. If you don't offer enough value in the free plan, users may not even bother trying it out. On the other hand, if you give away too much for free, users may not see the value in upgrading to the premium plan.
Overall, I believe that freemium is a great model that can benefit both users and companies. By offering a free plan with valuable features, users can get a taste of the product and decide if it's worth investing in. And for companies, freemium can provide a sustainable revenue stream while also building trust with users.
Thanks for sharing your experience! Yeah, freemium is a great model. I don't know if it's better than a free trial though - I think it just depends on the product.
Curious - why do you think freemium offers a more sustainable revenue stream?
What I believe is that freemium provides a sustainable revenue stream because users who find the product valuable are more likely to pay for additional features. Free trials can be risky because users may stop using the product once the trial ends, resulting in a high churn rate.
Thanks for clarifying - yeah, that's definitely a factor!
All option works according the the product nature, user base, location and features of the product.
For sure, it really depends on the product!
Great post. Thanks for sharing. Here’s my take on the subject. Phil… https://abitgamey.substack.com/p/our-product-led-growth
Depends on the product and your standing. If you can afford a freemium model for your users do it. If it costs you a lot of money and your pay users have to pay for the free users ... i think it is not a great idea.
Well said!
Both models can work well in different contexts. It ultimately depends on the specific product or service, target audience, and business goals.
💯
At GoLogin, there's a free plan and free trial of commercial plans. We have a fair amount of free users for which free features are just enough, they won't convert into premium buyers. So for us a freemium just won't work. It depends on your product and offer a lot.
Some of our competitors don't offer a free plan, which is a serious drawback in my opinion. I'd never pay for a software I haven't even tried.
Yeah, I agree, there's gotta be some sort of free way to try the product!
From my experience, in order to make money from a product you should ask for money in the first place. Capping the free version at the right spot between being useful but pushing the majority of customers to upgrade is a fine art that I've never managed to master.
I'll go with a free trial every time, unless, each user brings some kind of alternative value to me. ( e.g. Network effect mechanics )
Yeah, I lean that way too :)
Very interesting and insightful content !! Agree with the conclusion .
Thanks! 🙏
Thanks for the detailed post with great suggestions and actionable information. One thing that might factor in here as well is the operational issues related to more complicated pricing strategies. Depending on the platforms and integrations that you are using, setting up more complicated free trial plus freemium options might take some gymnastics.
Great point, thanks!
I've been seeing this fight "freemium vs trial" for so many years but honestly, my opinion is: the pricing model is based on solely the fact of how a founder treats their users: either he/she looks at them as a milch cow or if he/she wants to do something kind.
In the first case, the trial is the only option, the second case gives a chance for freemium.
Of course, the technical limits could make some effect too.
For example, if having non-paid users requires pretty expensive resources from a founder, obviously, it's not an option. On the other hand, non-paid users can have more restrictive limits.
It's always a trade-off. As a user, I prefer the freemium model, and so do I as a founder.
I think that's a fair point that, all things being equal, you should treat your users as you'd want to be treated.
Whether people believe or not, all the big tech companies offer free products or services that made them what they are today!
I'm agree first they capture the market by providing the excellent service then your have no option to get their premium service. Companies know well when user will buy their membership.
True, it worked for them! But you've also gotta consider funding. Most big companies had funding to help them make freemium feasible. Most indie hackers do not.
Indeed! But it is also true that most big tech founders were indiehackers in the very beginning!
True!
Not even half of the FAANG tech companies started with free services, only Facebook & Google. Two of them didn't even have a free anything (demo, trial, etc) for their money makers (Amazon, Apple) starting out, and for many years. I don't think Netflix did a free trial for DVDs either, but don't remember on that one as a customer in 2000ish.
That is cool, thanks
My pleasure!
Really well detailed post. Thanks.
I think that both (or three) could work, but it depend a lot on the business that you are trying to build.
How important is interaction between each users in your app? If it is, probably a freemium model is better than free trials. At least at the beginning.
If you are builiding a SaaS and you are validating, you probably should charge even for the free trial, with money back guarantee.
Interesting points! When validating, I'd probably suggest using whatever acquisition model you plan to use post-validation — include it in the validation process.
I for one am completely against free tiers. It puts the cost of the free users onto the paid users. Get rid of the free users and focus on your paid users — they are who you should be catering to. Move those cost savings over to them.
Love it! I have tried both and have now ended at free trial with required credit card when signing up.
Btw, I only ask for credit card information after the user has entered his email address. that way I save the email address early, and can send "Please finish signup" emails in case the user started signing up, but did not enter his credit card info.
I chose freemium for my product (Embed N Pages) for a single reason: the viral effect.
Free embeds display a watermark on the bottom of the page, so the main idea is free users will hopefully bring me more users and some of those might become paying customers.
We'll see...
I am with freemium.
The choice between freemium and free trial depends on factors such as the nature of the product or service, the target audience, and the business's goals and budget. A/B testing can help you determine which model is more effective for a particular product or service.
i think freemium is best than free trail but its upon one opinion. but for me freemium is best.
Great post - also pulling existing indie hacker's comments back in is a sick (positive) engagement move. Like @RichardGao mentioned, it really depends on your product.
For Timeva free trial is the way to go since it cost nothing and it gives new users 100% value immediately. I tend to veer on the side of giving potential users everything so they can see the big picture of your value prop.
Awesome post.
Hah, thanks! Plus, I just think it's way more interesting to hear it from a variety of indie hackers with a variety of experiences/products.
And yeah, that's what I love about free trials too :)
Thank you for sharing your thoughts on the debate between free trials and freemium. It is true that this debate is quite heated, and your article helps to provide clarity on the advantages and disadvantages of each option.
I think you've done an excellent job of outlining when it is best to use freemium, and when free trials might be the better option. Your advice on freemium best practices is very useful and can help companies to maximize the benefits of this model.
I would like to add that while freemium can be a great way to build a loyal user base, it is important to consider the potential cost of supporting free users who may never convert to paying customers. Companies must ensure that the cost of free users is not too high and that they are able to provide enough value to incentivize conversions.
Similarly, while free trials can be a good way to filter out users who are not serious about purchasing, it is essential to strike the right balance between the free trial and premium features. If the free trial is too generous, users may never convert, while if it is too limited, they may not see enough value to make the purchase.
Totally agree on most of this, but why would a generous free trial prevent conversions? I think the opposite is true most of the time.
Thanks for your input, I see your point, and I agree that a generous free trial can actually increase conversions. The important thing is to strike the right balance and offer enough value during the trial period to entice users to upgrade to the premium version. However, if the free trial is too generous, it may create a sense of entitlement among users, and they may never see the need to upgrade. It's all about finding the right balance.
Whether freemium or free trial is better depends on the specific needs and goals of a business. Both models have their advantages and disadvantages.
Freemium is a pricing model in which a product or service is offered for free, but certain features or functionality are only available to paying customers. This model is often used by software companies, mobile apps, and online services. The idea is to offer a limited version of the product for free in order to attract a large user base and then offer premium features that users can upgrade to for a fee.
Free trial, on the other hand, is a marketing strategy in which a product or service is offered to customers for a limited period of time for free. This model is often used by businesses that sell higher-priced products or services. The idea is to give customers a taste of the product or service and then convert them into paying customers once the trial period is over.
Freemium can be beneficial for businesses that want to build a large user base and have a lower-priced product or service. It can also be an effective way to test different pricing strategies and features to see what users are willing to pay for. However, the downside of freemium is that it can be difficult to convert free users into paying customers, and the revenue generated from paying customers may not be enough to sustain the business.
Free trials can be beneficial for businesses that want to demonstrate the value of their product or service and have a higher-priced offering. It can also be an effective way to generate leads and convert them into paying customers. However, the downside of free trials is that they require more effort and resources to set up and manage, and not all customers may be willing to commit to a paid subscription after the trial period is over.
In summary, whether freemium or free trial is better depends on the specific needs and goals of a business. Both models have their advantages and disadvantages, and businesses should carefully consider which model is best suited for their product or service.
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Thanks for the thorough post! Especially for including so many points for either approach, and working in the responses from others.
Some of the advantages/disadvantages really depends on the product. For example, user growth can be a horrible metric if you don't have sustainable conversion to paying customers with that growth. User growth without net profit growth is a vanity metric. Besides figuring out marketing based customer acquisition costs (CAC), you need to figure in all of the overhead (IT, customer support) for those free-tier users into CAC. Especially if you're not filtering use cases you don't plan on building features for.
It would be really interesting to tie in how advertising spend performs and affects the trial vs freemium CAC for paying customers. For instance, does freemium act as a cheaper top-of-funnel lead magnet over ads+trial, or do you spend as much in ads cost for either one? Since freemium might be a lower barrier and act as a list builder, is that cheaper, or at least take less ad spend?
As you said, cost of freemium depends on your overhead costs per non-paying user, so CAC is going to vary widely for different services.
Really interesting points! Yeah I’d like to see a case study on how ads affect this too 🤓
My guess is that it would increase free users (and to a lesser extent trials) but paid conversions would suffer
I stand with free trials. I've seen them working the most.
Fair enough!
It's like you say. It depends heavily on the product. I guess I've seen many products for which free trials work better 😅
Great insights on the freemium and free trial. Keep up the good work 🚀
Thanks!
ill go with Freemium sure because i think its better than free trail.
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Fantastic Post! Great breakdown.
We're about to a lunch a SaaS based on Exclusive PPV content that works on the freemium model but allowing people to have an upgrade to the premium account for three months.
Our model allows for free accounts, freemium and premium.
Really good reading the positives and negatives! Very insightful.
Thanks and good luck with the launch!! 🚀
I would definitely go for trial with a limited period for my product A-Bot. https://a-bot.app/ which is a plugin for microsoft teams. Would you recommend me doing that ?
Freemium could work if you're trying to onboard teams (think Slack's model). But if it's individuals, yeah, I'd go with a free trial. You don't have a ton of features so a feature-based free/paid tier wouldn't work very well.
That said, since you're offering bday reminders and things like that, there might be a long time-to-value, so it may have to be a pretty long trial.
So it's tough to say without digging deeper into your product, but I hope those thoughts help. Good luck!
thanks @IndieJames for the suggestion.
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