Questions

Freemium v.s. free trial for a marketplace?

We're building an online workforce marketplace, and we're considering introducing a free version. What would you recommend us to use - Freemium (i.e. having a free plan) v.s. Free trial ?

3answers

It depends on a number of factors but I'd boil it down to two key things to start:
1) What is your real cost to provide a free plan or trial?
2) Who exactly is your customer and what are they used to paying and who and how do they pay today?

When you say "online workforce marketplace" it sounds as though you're placing virtual workers. If that's the case, or if you're paying for the supply side of the marketplace, the question is how much can you subsidize demand?

Depending on where you're at in the process, I'd also question how much you can learn about the viability of your marketplace by offering a free version, assuming again, that free is actually a real cost to you.

I was part of a SaaS project that started charging people for early access based mostly on just a good landing page (we clearly stated they were pre-paying) and were amazed at the response.

I've also run a SaaS product that offered free trials and realized that the support costs and hand-holding and selling required to convert from free trial to paid wasn't worth it, this despite the product's significant average ARR.

You might be better off providing a "more information" sign-up form (to capture more leads) and let them ask for a free trial while only showing your paid options. I've been amazed at the lead capture potential from a simple "have questions? Click here and we'll contact you"

This is all the generalized advice I can offer based on the limited information I have, but happy to dive-in further if you'd like on a call.


Answered 6 years ago

It is difficult to give a specific answer with little context, but I'll suggest two things to think about.

The first thing to note is the question of conditioning.

Is your target market conditioned to spend money? If so, a free plan to bring them in with an offer may make sense - since they've demonstrated a willingness in the market to spend money for value. Once you offer the promise of delivering the value, they'll upgrade. But lots of other folks in many markets aren't prepared (or conditioned) to spend anything. In that dynamic, all you're doing is incurring cost. One study I'm familiar with (for online membership sites) showed that an increase from free to $1/year saw a reduction in sign-ups by upto 30%. That's a whole lot of people not conditioned to spending a single dollar.

The second is the notion of the cost of marketing.

I don't know what the cost or kind of marketing campaigns you're imagining. But the logic goes like this - if you offer free plans, you'll still see very low conversions to the premium plans. That means that you goal will be to bring as many people into your funnel. I'm hoping your market is huge. But assuming that it is, the real cost is your marketing campaigns. Even if offering your service for free doesn't cost you (maybe you're already paying for servers and that's sunk cost), it will cost you in marketing.

So be clear you know your cost of marketing, and your conversion rate, so that you can determine the real cost of this approach.

All that said, I'm not a fan of free plans or trials. Instead, my bias is towards charging people (it really highlights their intent to pay you when they give you their cc number). You can always have a 15 or 30 day money-back guarantee, which will act like a risk-free trial.


Answered 6 years ago

This really depends on your target audience and your overall sales / growth strategy.

Without knowing the specifics of your business I can't give specific advice (feel free to contact me for a call), but I can give some general guidance.

If you're selling to established businesses, don't go freemium. Businesses spend money to make money, and if they have a problem that needs to be solved, they're used to spending money to solve it. A freemium model in this case is probably just going to attract pathological customers, and not the good, well-paying, easy-to-work-with clients that you want.

On the other hand, if you are targeting smaller businesses that you hope will "grow into" a paid plan, a freemium strategy might work.

It could also work if you are targeting corporate workers who have no budget authority, but who might be able to convince their boss to pay for the product if they can demonstrate results using your free version.

Go out and talk to the customers you're building this with and get a sense for what they're willing to pay for, or what their purchasing authority is and what it would take to get budget for your product.

If you're not building this with customers already onboard and helping you guide its development, you are much less likely to be successful. Go out and find some customers, validate your business model by pre-selling the product, and take their feedback into account as you build and market it.


Answered 6 years ago

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