I once worked at a non-tech startup. It was a startup, it was less than 50 people, it catered to film industry rather than tech. What I learned was this -- giving your software away for free will probably give you bad rep with businesses.<p>In that company, the head of the digital team "understood" tech, obviously. But it took us insane amount of work to convince management to use a free product. They thought of it as a toy, which would cost company time (and hence money) to implement and get used to, and it won't work. And because it's free, probably nobody would come fix it. They were always worried of a 2-person ramen hogging company running away with their data.<p>I also learnt that they paid in name of support, even if we did not need the product. We bought highly expensive Ooyala licenses just to upload videos to Youtube (Ooyala offers a lot more, but we didn't care for that). Yes, I know we can directly upload them, but as Youtube was free, they didn't trust the upload system in case of crisis. With Ooyala, they had someone to call if shit hits the fan during critical and timely upload.<p>Free plans are weird. I would rather try offering companies a demo or pilot. And offer a reasonable money back guarantee. At least with making the customer contact you first for demo, you're in conversation with them. You can gauge if they will ever buy the product. If yes, you have a shot at selling.<p>Automation of demo is awfully lazy for a SaaS startup that's just starting out. Outreach, talk, connect. The lazy free automated trial only helps in case you have a me-too product where the customer is jumping from product to product trying to figure out which one to use. If that's the case, you either don't have a USP or don't know how to use it. Either way, you end up in a spiral to the bottom.
Not sure why companies are still obsessed with obtaining millions of cheap/non-paying users? Fantastic, you've acquired an audience of people so cheap they refuse to buy your entry level tier product.. Sounds like an awful problem.<p>At the very least, if you're going to offer a free tier, make it a trial and capture their credit card up front. Charge it after 30 days. Make the user get serious about whether this product is for them. And in turn, it makes your company get serious as to whether this is a viable business model or not.
We regularly debate whether to continue offering a free tier. Usually one of us will read a blog post like this and we re-start the conversation where it left off last time. In our case, the free plan has survived because, with real analysis, they cost us almost nothing, ask for almost no support, and help us create mindshare of a service that many of our potential customers haven’t discovered yet. I’m not certain we’re correct to keep it, but so far we’ve not found anything that convinced us to stop offering it.
One reason Freemium works for Pandora is because, according to an employee I've talked to there, the advertising revenue from a free user can be nearly as much or even greater than the 4.95/month from a paying user. Granted, I don't have a source other than the person's word and I doubt Pandora reports on their revenue split that way.
It's always good to read data about this stuff.<p>One thing that stood out was "Free users eat up support". I would have thought the first thing to offer to paid users but not free users would be support! By all means provide a forum for community-lead free support, but talking to an actual person should come at a cost.
One thing not discussed is the difference between $0 and $24. It's likely that some users that actually valued the service looked else where because they didn't offer a $10 or $15 option, not because they just wanted a free service. Of course, this is just speculation.
A long time ago Mailchimp had a great post on the free pricing plan. One of the most important observations they made was "Wait until you have a full blown support team in place before offering a free plan" So they were basically saying wait 2 - 3 years in at least until you could layer on the additional free support for these plans before offering them.
I think it depends on what it takes to find out if your service is right for me, which is dependent on the type of product you have.<p>For Zencoder, for instance, I wanted to know if I can interface with their API, and do so effectively and easily. So Zencoder offers a free tier, but the encoding is capped at ~5 seconds. I can't actually use their service as a product, but I can use it as a test and development bed. There were competitors I did not evaluate because I could not evaluate them as easily.<p>So the question becomes, what does it take for your service to offer a trial, so that I can determine it's value to me?
One lesson I've learned, and that's hidden in this post, is to never use language like "free forever." It feels awesome and badass to write something like that, but I think for most of us it's hubris, we can't actually know that "forever" will work out.<p>Later, when the choice is between "iterate on your pricing model" or "go out of business", I also think most of us would iterate. But the feeling of making that "free forever" box disappear is much shittier than the little high you got from writing it.
I believe the simplistic division of product offerings was the problem. Pay to get more users? To easy to circumvent. Divide the product along feature set boundaries, where the user can self-select their way past pain points, or between spending their time or their money to save time, then I think you get more conversions to a paid subscription.
Pretty sure that back in the day 37 Signals said that one of the mistakes they made was giving away a free plan for their apps, and that if they could undo that they would have.<p>Pricing is HARD - properly hard. It's so easy to get an imbalance between value offered and amount paid. It's equally as easy to get distracted by competitors undercutting you. Solution to this? Never compete on price, it's much better (and more sustainable) to offer value that sets you apart. At least this is what we've done with my SaaS B2B app <a href="http://www.staffsquared.com" rel="nofollow">http://www.staffsquared.com</a> and so far so good :)
If your software targets businesses, just charge. Many assume businesses won't pay because their initial target audience are tech savvy individuals who are used to freemium. I work for a small business. They are willing to pay.
Thanks for the insight. We're looking at pricing options for our new SaaS tool, and we have come to similar conclusions. It's important to have a free version (and not just a trial) so you establish a solid user base, but to make sure that there's enough premium content/features worth paying for down the line. Another focus could be enterprise-sales, where free accounts generate some attention but focus on enterprise-sales generate the revenue.
I was contemplating to pick a freemium model for an app I'm building but after reading this (and few more) post(s) from this blog I changed completely my mind. Premium + Free Trial is actually the best choice for many SaaS projects. Read it carefully...<p><a href="http://sixteenventures.com/freemium-or-free-trial" rel="nofollow">http://sixteenventures.com/freemium-or-free-trial</a>
Apologies for a off-topic question : isn't HubStaff from the same guys as Hubspot, which is very well funded marketing platform? if so, isn't Hubstaff a distraction from Hubspot? Or is this the proverbial pivot ?