A key element of product-led growth in a modern go-to-market (GTM) strategy is allowing customers to try your product for free and helping them understand its value features before committing to a buy.
The two main models that companies usually follow for this are free plans and free trials. For companies developing dev tools, open-source access often acts as a free plan or serves as a gateway to it.
While this option looks and sounds good, in this article, we will discuss the advantages, disadvantages, and common pitfalls, you should know before launching your free/trial plan.
Free Plan vs. Free Trial Plan: Overview
Here, I’ll explain everything you need to know about free plans and free trial plans. You’ll gain a clear understanding of how both options work and what they offer.
What Is A Free Trial?
A free trial allows users to access a product’s full features for a limited period, typically ranging from a few days to a month. It offers potential customers a comprehensive experience of the product, helping them decide if it meets their needs before committing to a purchase.
How Does It Work?
A free trial is a customer acquisition model that lets users test a product or service before committing to a purchase. During the trial period, users can explore the full features of the offering. The primary limitation is the trial duration, which ranges from a week to a month.
Users can assess the product’s value and suitability by experiencing it firsthand. Businesses use free trials as a marketing strategy to attract quality customers interested in their offerings.
To protect your privacy during sign-up, consider using a secondary email address and researching the company’s background.
What Is A Free Plan?
A free plan is a customer acquisition strategy that provides partial or complete access to your product for a limited period. During this period, users can explore its features and functionality. The goal is to entice potential customers to experience the value firsthand, leading to a paid conversion period.
How Does It Work?
A free plan provides users ongoing access to a limited version of your product or service at no cost. It includes core features but with restrictions, such as limited usage, reduced functionality, or less storage.
The goal is to give users a taste of the product’s value, encouraging them to upgrade to a paid plan for full access.
This approach fosters long-term engagement, builds trust, and allows users to become familiar with the product over time. It’s particularly effective for products that enjoy regular use and word-of-mouth promotion, converting satisfied free users into paying customers.
Free Plan vs. Free Trial: Which One Is Better?
People often say that free plans increase initial interest, and free trials boost revenue. Both can work if you get credit card details upfront. Yet, your product’s success depends on market demand and how well you execute it.
Poor messaging, bad positioning, or a strong self-serve experience can help your conversion rates. If your product doesn’t provide immediate, unique value, conversion rates will also suffer. Asking for credit card details upfront can reduce your audience and increase churn.
Choosing between a free plan and a trial depends on your product and market, not your conversion rates. The right strategy focuses on long-term revenue growth, not short-term sign-ups.
When To Choose A Free Trial Of Your Product
Things to consider before selecting a free trial:-
- Costly Plans: For complex or high-priced products, a free trial lets users explore without financial commitment.
- Creating a New Category: If your product is innovative or unique, a trial helps users understand its purpose.
- Business with Network Effects: Trials can speed up network growth by encouraging user referrals.
When To Offer A Free Plan For Your Product
Things to consider before selecting your free plan:-
- Launch of a New Product: Introduce a free plan to create buzz and attract early adopters.
- Competitive Markets: Stand out by offering a free version in crowded industries.
- High-Value or High-Cost Products: Allow users to experience the value before committing.
- Products with Clear and Immediate Benefits: If your product delivers quick wins, a free plan can showcase its value.
Free Trial vs. Free Plan Advantages And Disadvantages
Both free plans and free trials have their pros and cons, and you should understand them before signing up.
Advantages Of A Free Trial
- High Conversion Rates: Free trials allow potential customers to experience your product firsthand, increasing the likelihood of conversion to paid users.
- Immediate Feedback: Trial users provide valuable insights, helping you refine your product and address any issues.
- Targeted Marketing: Tailor marketing efforts to trial users based on their interactions, improving engagement.
- Building Trust: Offering a trial demonstrates confidence in your product and builds trust with prospects.
Disadvantages Of A Free Trial
- Short Engagement Period: Users have limited time to explore the product, which may not be enough for complex offerings.
- High Churn Rate: Some trial users won’t convert, leading to churn.
- Cost of Acquisition: Acquiring trial users involves costs (e.g., marketing, support).
- Potential Abuse: Users may exploit the trial without genuine interest.
Advantages Of The Free Plan
- Lower Barrier to Entry: Attract a broader audience by removing financial barriers.
- Long-Term User Engagement: Users stay engaged over time, increasing brand loyalty.
- Viral Potential: Satisfied free users may refer others, leading to organic growth.
- Upsell Opportunities: Convert free users into paying customers by showcasing premium features.
- Data Collection: Gather insights from user behavior to improve your product.
Disadvantages Of The Free Plan
- Limited Revenue Generation: Free users don’t contribute to revenue.
- Customer Support Demand: Managing free users can strain support resources.
- Product Perception: Some users may associate free plans with lower quality.
- Resource Allocation: Balancing free and paid features requires careful resource allocation.
Free Trial vs. Free Plan: Factors To Consider When Choosing
Based on the 2022 OpenView Product Benchmark Survey findings, free trials have shown higher conversion rates than free plans.
- Initial free trial sign-up conversion: While free trials may initially attract fewer sign-ups, they often lead to more conversions. Typically, for every 1000 website visits, a free trial yields around 30 sign-ups, resulting in approximately 5.1 paid customers with a conversion rate of about 17%.
- Initial free plan sign-up conversion: a free plan can generate more initial sign-ups (approximately 60 for 1000 website visits), but only about 3 of these users upgrade to a paid plan, resulting in a lower conversion rate of 5%.
These statistics highlight that free trials are more effective at converting users into paid customers than free plans. However, when choosing an acquisition model for your product, these figures are just one aspect to consider. You should also evaluate other factors such as your product’s complexity, target audience, and overall business goals.
Pitfalls To Avoid While Choosing A Trial vs. A Free Plan
You should avoid all the below points to make your trial good and eventually boost sign-ups:-
- Limited Always-Free Plans in a Competitive Market: Providing a restrictive free plan can turn away users, especially in a competitive market where alternatives are available.
- Free Trials with Poor Onboarding: Ineffective free trial onboarding can confuse users, leading to low engagement and poor conversion rates.
- Bad Payment Experience: Complicated or unclear payment processes can frustrate users, causing them to abandon upgrades.
Conclusion: A Free Trial Is Better Than A Free Plan!
The free trial is for a limited duration but you can use all the paid features for free and can make a decision whether you should buy a subscription or not. This is why free trials are better than free plans.
However, to encourage users to upgrade to paid plans, you need to give them reasons. You can achieve this by strategically limiting the duration and benefits of your offering.
Now, it’s time to put your knowledge into action. Experiment, analyze what works, and double down on what brings the best results.
FAQs
Free trials often attract users quickly due to the urgency of a limited-time offer. Free trial is for less duration but they have full access to features this is the reason free trial attracts more users.
Yes, free plans can convert users over time by demonstrating ongoing value and building trust. The free plan is a strategy to give access to a few paid features and if the user likes it they convert free into a paid plan.
Free trials often have higher initial conversion rates, while free plans typically see gradual conversions over a longer period. The free trial is for a limited duration which is why the free trial has a conversion rate.
Yes, combining both can cater to different user preferences and maximize reach and conversions.
Free trials are generally better for high-cost products, allowing users to fully experience the value before committing. For high-cost products, a free trial is the best as its conversion rates are higher.
Yes, free plans can keep users engaged and excited about new features, leading to potential upgrades.
Consider your product’s value proposition, user behavior, and market competition. Business goals to determine the most effective model.