The Reality of “Free Trial” pricing for SAAS

free trial

In this we make the final call on “free trial” pricing and how it should be used in your SAAS application.

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As a SAAS company, you have much to consider when offering a free trail. It is a great way to lower the bridge for use of the application, but does it really offer a better return in the end? In this post, we look at how free trial pricing plays out in the long run, so you can make the right decision for your business.

Top of Funnel Growth

There is no doubt that a free trial will increase the numbers on the top of the sales funnel. Being able to test drive your application in some ways, its critical to the buying process. Many try this in other ways with demos, videos or screenshots, but nothing really exchanges value beyond a free trial. Getting them to this free trial, is a bit trickier.

To Pay or Not To Pay?

This is the tougher question when it comes to the free trial. Do you require payment information or not? There are a lot of reasons to choose one option or another. You could have infrastructure issues, or marketing limitations that do not allow you to perform one option better than another. You could also reference the research. Totango published this data which shows a real balance to the decision making process.

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Stage Payment Required Payment Not Required
Visitor Signup 2% 10%
Trial To Subscription 50% 15%
Retained Customers 60% 80%
Overall Conversion 0.6% 1.2%

 

You see that initially, not requiring payment does increase overall conversion to the software. Yet, in the second phase, you see the overall conversion to actual subscription is fairly balanced.  So after the free trial these statistics show only a 0.6% increase in conversion for the not requiring payment method. Its a small win, but easily off set if your application does a poor job of converting people to the overall subscription after the free trial.

Customer Retention is Key

In the last metric, it reviews the “retained customers“, which contributes to a fairly large swing in the overall outcomes. I would argue that doing a better job at customer retention could move that 60% to 80% making the overall conversion rate for payment method, be closer to 0.8%. And there is nothing to say that a poorly done app, even with a no-payment free trial is going to secure 80% of its users. Yet, either way you look at it, retention of the customer plays a huge role in how your overall conversion rate, and MMR are factored at the end of the day.

The Winner: No Payment, With Retention Focus.

Looking right at the numbers, its simple to say that not requiring a payment will give your app the best chance of success. Yet, it must be matched with diligent follow up and nurture campaigns to best retain and build customer loyalty. Without clear and measurable customer retention efforts, it’s a toss up. With a SAAS model, the best acquisition plan can be crushed with poor followup.

 

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