Don't Offer a Free Plan
nofreeplan.com
nofreeplan.com
Asana has a paid plan with a 5-user minimum limit. I never bothered to even try it since I wouldn’t have the extended time to play with it. As a result it never even got mentioned to companies I’ve worked with.
So, it’s important to have a free plan (or at least very cheap paid plan as the article recommended) for “influencers” to get heavily involved with.
My experience is that I rarely have enough time to determine if I really like the service or if it's still just a shiny new tool to play with. I need more than 14-30 days to actually put in the work to understand a reasonably complex tool (say a CRM system) well enough to make a commercial recommendation.
Obviously this issue doesn't apply to all SaaS companies but it's probably common enough to be worthy of consideration.
Of course specifics and circumstances matters. If a tool is critical for the business then we will review everything in depth and pick the best, regardless of trial/free plan/etc. And of course, sometimes the critical task is simply to ship ASAP...
I, personally, rarely use a trial period for anything I’m testing for the long term. It’s not worth integrating it into my day to day if I may have to pay more then I want.
BUT, I do think it’s important to offer a free level for a lot of simple services to get people hooked. Costco does it, and it works for a lot of software.
- where free users are an onramp for getting $x,xxx/mo-$xx,xxx/mo contracts with companies.
- where many, many free users are subsidized every time a company signs up.
Trello/Jira/Asana seem to fall pretty firmly into that territory.
On the other hand, those running SaaS with fairly low per-month subscription value (e.g. $99-150/mo, as a lot of smaller or bootstrapped SaaSes seem to charge [1]) wouldn't necessarily get much value from these users.
[1]: https://plausible.io/#pricing (just picked these folks at random)
For me free plans work best for products that other products can be built on top of, because if I think I am going to build a product I want to have enough of a free tier that I can build the service and when I start having to pay for it I will have enough progress to know that it is worth investing money as well as time in it. Basically when I start paying for a service like that I want to have my product in release and at least a customer or two.
Of course I have only ever achieved this once.
On the other hand, if I have unlimited time then I will likely start with a pretty broad look at the available competitors and then once I've signed up for what appears to be the best option, I'll only look into competitors as I hit roadblocks.
Also, please don't send multiple "You've only got X-N days left in your plan!" pressure-to-convert emails.
(edit, removed indefinite pronoun)
Daily quota is the way to go. Amazon free micro instances are a perfect example. Enough to build. Not enough to go to production.
Without a free version I'm less likely to try out a new version or deviate as much as I would if there's not a clear benefit. It makes the software stickier (assuming they did improve it).
ALWAYS have a lifetime free plan. It's okay to make it a useless lifetime free plan (your data disappears every 2 weeks; you have a 3 email per day quota; etc.). It just need to be enough to seriously evaluate your product, and if it has APIs, to develop to them. There are sometimes good reasons to do more, and sometimes not. But that's the minimum.
In the early days of AWS, I would build thing on AWS' free tier, and they turned into products later. One product is making AWS millions (literally). AWS lost out when I changed orgs, my one-year free tier quota was gone, and I couldn't do the same at future orgs.
At big organizations, the overhead of a PO is sufficient that you don't do it unless you have a compelling business case. Free plan allows you to build a business case over a weekend.
I've gone free->paid many times.
It's worth noting the figures here. The case for a free plan is much more compelling for a Fortune 500 company who will sign a million-dollar contract than for a small business.
As a user:
- If I need the service and only intend to use it for a very small project, I love forever free plans. Because I know I can subscribe use your server time and forget my account forever. I often subscribe with a temp email so that I don't even receive your emails anymore.
- If I seriously need the service and is ready to pay for it, I don't really care about the free forever plan vs free trial vs paid trial.
As a business:
- Any time I have offered a free forever plan, basically 95% of the created accounts are dormant free accounts (like I personally am when I find the correct tool to scratch my itch). 4% are from people (usually from south east asia) creating hundreds/thousands of accounts (sometimes manually !) to circumvent the free plan limitations instead of just paying for the service. And 1% are from legitimate users/customers.
- People in the 95 and 4% categories still believe they are owed support. And if you don't give them an easy way to let them contact you, they now have twitter and facebook and business reviews websites to get to you. On top of emails, LinkedIn messages and yes, phone calls.
- Cutting the free accounts has almost no impact on real customers acquisition. You can let people experience your product with a temporary trial, that includes support and way more features, but behind the credit card screen. Extend the free trial as much as needed if people ask for it through your usual support channel. You will still get abusers but those are easier to detect, because they need to provide some payment details which are harder to fake, and after you shut them down for the third time in a row, they usually go away.
What's the issue? Unused account shouldn't be a big spending. If it become one, take a bit of time to change it a bit (delete data/stop service after a set amount of inactivity) and use that occasion to send them an email that remind them that your service exist.
Google Cloud is this way: stay below their free usage limits for some services and you'll never need to pay; but you need to give them your card up-front because it's a post-paid service and they need to ensure they can charge you if-and-when you do go over those limits.
Or, for another approach: how about a plan that's free, but where there's a small one-time fee on signup, regardless of the plan you choose? (You can be upfront to your users and tell them it's a KYC measure, if you like.)
Or, how about a free service, but gated with a real KYC/AML process on signup (of the "sign in through your bank" or "upload your driver's license to this third party" variety.)
Any of these approaches, IMHO, would filter out the 4% of spammers; and also act as a barrier to anyone who isn't serious about eventually trying the service — while not being as much of a barrier to people like the GP poster, who take five months to get around to testing a service before becoming a diehard fan of it, and don't want to be paying for those five months, but also look in apprehension at the idea of possibly having to spend time trying to get their (as-yet-unused) trial extended.
Maybe. MAYBE. I'll give you a credit card number since I know I can always dispute/chargeback if you turn out to be dishonest. No way do you get anything that can't be 100% undone within a few minutes.
Re: bank accounts, nobody was suggesting that, that's not how KYC systems work. Re: driver's license info, that's not quite how (well-implemented, modern) KYC flows work, either.
For "signing up using your bank", I wasn't talking about giving the service a photo of a void cheque or anything; I was talking about doing Single Sign-On into the service, with your bank acting as the SSO (usually SAML) provider, through a SAML broker.
I don't know if this is common anywhere else, but in Canada we have a pretty popular SAML SSO broker doing this (https://securekey.com/) ; it allows you to use all our major banks as SSO authentication agents (works with both web and mobile-app flows); and this SSO method is in use for many government sites (e.g. it's how you log in to file your taxes, pay federal student loans, etc.) Any (Canadian) business can actually add SSO to their site/app through this broker. And, just like with any other (good) SSO method, the app being signed into through the SSO broker doesn't receive your credentials.
Re: driver's license info, with regular KYC flows, you don't upload your driver's license info to the first party. Instead, you're directed to a trusted neutral third party (the KYC/AML provider), who has their own app; you give your credentials to that service, through its own app, which is essentially the account-creation flow for your account with that service; and then the first-party service you were interacting with SSOs you through the KYC service as an OAuth/OIDC flow.
I don't mean to spread FUD, it just seems needlessly risky to make banks the central point of auth.
In theory, the bank is really incentivized to provide proper and secure authentication (if someone can impersonate you to your bank, you're kinda screwed anyway). So, it only makes sense to trust a bank to provide the authentication service. One should realize that SSO integration with a bank doesn't mean 3rd party has any sort of access to the bank - it' just means that you authorize your bank to tell a 3rd party "yes, I believe this is really curryst"). Doesn't increase the attack surface for you - it only increases the "blast radius" if someone successfully compromises your bank account. But that one is typically already a dire situation.
Once the bank won't authenticate you for some reason, all the accounts bound to this SSO provider also go the way of dodo.
Personally, I use my bank only for banking and would never ever consider using them as an SSO provider. They handle my money, I don't want them to handle anything else or have any more information about me than they already do. Also, in my personal experience, the banks aren't very technologically competent, so the less they are expected to do, the better.
I can easily see use cases where someone without buying power can get a 50, maybe even 100 USD bond or 'license' of some sort PROVIDED that there's either only one or even more ideally a set of competitors who's "not a bad actor" licenses are interoperable; and work on the whole Internet for that task (without expiring until bad karma is dinged).
However no, nickle and dime-d to death, as well as those 'free but remember to cancel' plans, are the exact reason I'd never hand over real billing info until I'm serious about being billed.
What you're talking about with that "license" is exactly what you get by everybody relying on a small set of KYC providers; except that the KYC provider doesn't charge you for registration, but instead requires a Proof-of-Stake in some state's legal system (i.e. a set of documents that require laborious up-front proofs to acquire, such that it's very hard to acquire two sets of them, but which can be used to validate identity freely once issued.)
KYC providers that just charge $100 instead of requiring a Proof-of-Stake challenge exist, too. That's essentially the (secondary?) purpose of businesses that will only trade with other incorporated businesses (or, to abstract that away, only with businesses that have a Dun & Bradstreet DUNS number): it costs $100 to incorporate, or to register one of those numbers, so you have to be at least $100 of serious to bother them, and you can't just keep spending hundred-dollar-bills forever to keep generating new identities to DDoS someone.
What I haven't heard of, interestingly, is a KYC provider that requires a proof of work. Something like "solve a thousand Captchas to create an account." Or a formalized version of the old "take a photo of yourself holding up today's newspaper." But that'd be totally workable as well.
About 10 months ago I got emails from a company that developed an development environment that was I was mildly interested in. They presented an offer with said it was free so that people could help educate themselves during lockdown. Unfortunately the terms was after 1 year you needed to pay something like $1500 if you didn't cancel, these terms were right at the bottom of the page and very hard to spot. Paid through PayPal and the about $1500 was there right in front of me. I cancelled it on the same day.
A company offering that sort of deal waiting for people not to cancel and saying it is to help people during the lockdowns is just awful.
> Would you rather have 10 users that pay $100 monthly, or 1,000 users that pay $1?
I think this question is meant as an illustration but perhaps it hints at a rule of thumb. Let me substitute a different question and see what you think:
Do you want 1000 users paying $500 a month, or 5 million users paying a $1 a month?
5 million suggests a broad but shallow appeal to the app, and I don't doubt at all that the author has seen customers exhibit all of the listed behaviors - and more. But perhaps an application with a narrow but deep appeal makes sense with a free tier. You can always expand the appeal of your product to reach more markets once you have a proven track record and word of mouth working for you.
I would also say that at a minimum, if you don't let people test drive your application, you have to be quite skilled at creating demos and walkthroughs, and encourage third parties to do the same. Growing that kind of talent in house is probably too slow and unreliable. You're going to have to pay for at least one person to give you good advice.
Well, that. Or somebody with leverage trying to reduce risks before jumping into a platform. Or somebody evaluating the options before deciding. Or somebody just making something the quickest way possible, leaving slow decisions for later...
There are many cases that fit the same sequence. They do impose different requirements on the free tier, but I don't think you'll ever measure them well enough to discover what is what.
This is exactly it. I've been both with and without purchasing authority.
WITH purchasing authority, at many organizations, I still need paperwork and approvals. To give an extreme example, try working for an EU government agency....
My patterns definitely fit the ones described. 95% of the time, I create an account, and nothing comes of it:
* I try five tools, and pick one.
* I try five tools, and pick zero.
* I do a weekend hackathon, and there is no business case
* I do a weekend hackathon, there is a business case, but yours isn't the right product
... etc.
But 5% of the time, there's a conversion, and with big orgs, quite often a big $$$ conversion. Those 95% cost you nearly nothing, or act as discovery (I rarely make a support call, but if I do make one, it's valuable to you).
As a footnote, in many industries, you give actual, physical products which cost $$$ for free (e.g. an IC) for this reason. Some of these do put up gateways to make sure I'm from a place which might go from 1 sample to buying 10,000 (or an ed institution). I don't think those are a good fit, but I do think it's possible (and not too difficult) to screen out abuse in most cases.
You don't need a free-forever plan to make those decisions, in these cases, just a sufficiently long timed-trial.
I've exhausted enough 2-week trials to know.
And at the same time, I'm hesitant to start them, since once they're gone, they're gone. You want minimal friction. Two clicks, and I'm using your tool. Yes, lower friction decreases your conversion rate, but that's because more people who aren't sure will try your tool.
You're right that there is a place for free plans, the article I wrote is probably too one-sided. I planned on adding an extra section near the end for some cases when a free plan does make sense (I will wait until it is no longer discussed here).
Other than the "influencer" angle you mentioned, it also makes sense for products where you can offer the first X units for free, and many will have the desire for more (2 free designs for a website builder, or the first 10 levels free in a video game).
The core point of your article was still clear, and as a result generated interesting discussion and follow up for an update.
One thing is for sure, no one likes a service that changes prices with free > paid being the least likable. (paid > free as the nr 2?)
I think you can get away by describing the situation properly in advance. i.e. what might happen with the free service in the future. Something like: Guaranteed to be free for 6 months (12 months if you register now). If we fail to reach an audience by offering a free plan it will be x dollar per month/year/query. We will contact you 3 months in advance.
It seems the free pony! era has to end. Downtime from cleaning up after a vanishing free service is to annoying.
The broader problem with this example is that the companies in question evidently don't value information, and have instead relied on personal hubris, which speaking as a longtime service provider is itself a red flag for "problem customer", and if not quite the horrors depicted in the article then certainly on that spectrum.
All of which illustrates that talking to anyone who self-describes as an "influencer" is generally a net negative, unless you're in the FMCG category. Influencers demanding freebies is something to be abhorred, and there is no equivalence here to seeking high quality professional advice.
> the companies in question evidently don't value information, and have instead relied on personal hubris
Nothing in the post indicated hubris to me. "I have used this service before and can give you an estimation of how well it fits our usecase" is probably the best information about a service you can get. The alternative is to spend time and money to discover that yourself.
Claiming that you are personally responsible for Jira and Trello's marketing cut-through is sheer hubris.
And furthermore:
> The alternative is to spend time and money to discover that yourself
That's not an "alternative", that is simply professional consulting behaviour. Making the recommendation whilst declining to invest in the quality of that recommendation is hubris. And I'll double down by adding that "influencers" demanding freebies is downright obnoxious hubris. In the last few years, some segment of the tech community has normalized this behaviour as somehow acceptable and rational, but in practice it's as toxic as the article suggests.
I've also got a number of solutions that just solve the problem at reasonable price. My recommendation in those categories will be "X can do it; have you got specific requirements that X doesn't match? if not, I can implement it with X and we can review that in months/years".
Somewhat tautological perhaps, but also, thereby, not a compelling reason to offer a free plan, nor to be proud of being glib.
In addition highlighting that any comparison between an influencer and a consultant depends on false equivalence, which is why I don't consider them part of a product ecosystem (esp. when compared with ISVs, VARs and MSPs), or a substitute for thoughtful, professional advisors.
You’re totally correct in your assertions and the understanding of the intent and meaning of my post.
We have a free plan that basically locks you down collaboration wise (limits inviting anyone to your projects).
We haven't had many people convert yet (https://portabella.io/open) but I'm starting to think it'd be better to offer no free plan but a 7 day free trial
To someone that you don't hate?
How much do you cost the company by using the software for free? How much cost the thousands of users that use the product for free and don't recommend it to paying users?
Free plan doesn't have a one sided answer. Sometimes it is a good idea, sometimes it is not. Would Salesforce benefit from having a fee plan? This is not obvious to me
But even beyond that, there are just so many generalizations here that may not apply to you. Deciding whether to have a free plan or not should depend on what the actual percent of your users that convert from free to paid is - you shouldn't just go with no free plan because someone says, "Many users will never ever pay, regardless of how good your product is and how much of a problem it solves."
There's some reasonable thoughts in here, but the absolutism of it shows that the author hasn't really considered the breadth of possible scenarios here - likely they've gone through this analysis with a product or two and come to the right conclusion, but that doesn't mean that conclusion is anywhere close to 100% applicable.
> In some cases, sure, a free plan is going to cost more in effort than it pays in users who convert to paid
Definitely. This is the most common mistake I see with free plans. Over-eager founders like to think of their free plan as a trial period, where users will either stop using the product or go on to subscribe.
Instead, huge portions of your userbase simply want as much free product as they can get without paying for anything. Never underestimate the number of people who will gladly use your product right up to the limits of the free plan without stepping over.
This can be okay if those free users end up doing free marketing for you. Dropbox is a perfect example of a tool where many (most?) users never even have a need to upgrade from the free plan. However, those free users were poised to recommend Dropbox when their companies were looking for a file storage and sharing solution. They also spread the Dropbox name around with Dropbox share links.
Slack is another great example of a free plan that lulls users into proselytizing for you. How many companies adopted Slack simply because some of their teams were already using the free plan to get work done?
Yes, free plan customers tend to complain way more than you'd think. However, you don't have to listen to them whine. You just have to make sure they aren't soured on the experience in general. If your core product can be reduced to something with near-zero operating costs and an absolutely bulletproof, hands-off operating mode, a free plan isn't much of a drag on your company.
However, if your product is such that free users generate the same costs/server load as regular users, you're going to inadvertently create a business model where your 10% of paying customers are subsidizing the 90% of free customers. You really need some clear limits on the free plan and an ultra low overhead backend to make this work at all.
You can take the Dropbox example further though. The free plan was absolutely necessary for Dropbox. If you're in the file sharing business, it's only going to work if all users are using Dropbox.
This is also precisely the point - in Google's case, they find a way to monetize their free users in addition to selling paid plans. The author totally fails to consider that possibility along with any others that might make free plans viable.
Whether the assumption is right or wrong for each business, it's not hard to see how we've gotten here.
As discussed elsewhere in this thread, this line of thinking can even be completely reasonable for various services that have low costs associated with the free offering. It's when the free offering costs a significant amount to operate that you start running into trouble.
People whining for more is fairly normal. Wanting it for everyone in perpetuity is new.
Does everyone think most businesses are somehow ad supported?
Not necessarily ads, but they might assume most businesses will monetize whatever info they get their hands on however they can. Especially so for free offerings ("you are the product" etc.).
Nah, that behaviour has been around since before this millennium. They don't actual want it for everybody but they think they might get a better response if they look less self oriented.
"do what I want/need, not just for me you understand, but for the community"
Cheap users tend to be inexpert users. Expert users who really value your offering enough to pay more are those who understand why it's worth the money. They likely understand the problem or use that your work addresses, and they have enough knowledge to know which knobs to turn to use your product and be aware of the limits of what it can and should do.
A cheap user is more likely to be one who isn't very savvy, doesn't understand the scope and limitations of your product, and thus thinks it should solve more problems than it does, or to put it another way, 'be a dessert topping AND a floor wax'
I work for an amazon subsidiary. We have free unlimited aws enterprise support. It's like pulling teeth for me to get our engineers to engage enterprise support. We know they have a ton of experience with triaging various aws tools and usage. Again we pay nothing for it, but one might consider we pay a massive amount for it as well. But we think we are experts on every system we touch.
Many of our issues would have been solved N days faster if we had just reached out to them immediately.
I would say we greatly over index on not bothering support.
Not all are like this if course. But the proportion who are terrible is higher than you'd like.
We've had a couple on the dark side though. Perhaps because we are "too helpful" and actually, respond instead of forwarding on the support procedures documentation or pointing at the contract and coughing! Give 'em an inch, they'll take a foot, and before you know it you won't have a leg to stand on...
If there's any consolation, people like this have near zero impact on the actual sales. Reasonable customers who research reviews are used to filtering out nutty feedback. So all you get is megabytes of virtual outrage from people that would have never bought your product in the first place.
If the results seem fairly rational, I may have second thoughts about going that way. If the negative reviews come from people who seem unhinged, then the fact that they bubbled to the top is a good indication that only nutbars hate the project.
Call it hyperloglog as applied to counterarguments for a product.
We took a hard look at that free personal plan and how it worked with our goals. Instead of phasing it out, we decided to make it unlimited - now personal users can make as many blocks as they want [https://www.notion.so/personal]. But importantly, we also switched up our segmentation at the same time: we restricted the personal plans' collaboration model and created a new "Team Trial" plan, with the same 1000 block limit, but with all the teamwork features included. Another thing to note about our Team Trail is that it's not time-limited at all, teams can keep trialing Notion until it has clear value to them. We have many fewer users frustrated by the block limit, but those who are are much more valuable, and are getting a lot more out of Notion -- when they upgrade, it's to a Team plan with strong network effects and a path to future expansion.
And all those (now) very happy users on the free plan? They're like jonpurdy [https://news.ycombinator.com/item?id=26059666] - they'll take Notion into their (future) teams and workplaces, even though in the shorter term they're a strain on our systems.
My advice is - there's more nuance to this than "MAKE IT FREE" vs "DON'T MAKE IT FREE". Think about how you structure upgrade incentives around value, and about how your free plans fit into your overall market strategy.
Completely agreed that the nuance is critical to this discussion and the absolutism makes the great clickbait but isn't supported by reality.
Thanks for sharing!
All you've done is essentially say, "I'm an end user online who only knows one half of the equation but you should ignore costs!"
It just feels like a failure to engage with the point the article is actually making.
The author appears to have a freemium product in their portfolio, and acknowledges there can be reason for that.
Countless established or major players (Dropbox, Basecamp, Trello, etc) seem to make use of the freemium angle. Suspect there's something in that and that a free tier is a necessary evil at times.
(This was after Final Cut Pro X, not 7.)
Although you may have been unsatisfied with iMovie, it is in fact the free tier of Final Cut Pro, much as GarageBand is the free tier of Logic.
Interestingly enough, iMovie and GarageBand even have iPhone and iPad versions (though sadly there's no iPadOS version of FCP/Logic yet.) Though Final Cut Pro and Logic do run amazingly well on an M1 Mac mini.
Are they though?
I think of a free version as having the same interface and core functionality with locked features. Does iMovie have the same interface/menus/workflow as Final Cut now?
These seem more like the "let's not dilute the product by repackaging some of the codebase into a mass market interface" versions.
Admittedly I haven't used them in years but I do recall learning about non linear editing in premiere pro years ago and ditching iMovie for adobe in a flash.
More recently I've gone the resolve route as well, even though I have active adobe subscriptions through with along with years of experience.
I just don't like cloud dependent software.
As I understand it, it was Final Cut Pro X that changed to be closer to iMovie; this was criticized at the time as Apple removed several features that had been in Final Cut Pro 7.
I have seen trial plans with a small $ attached before though.
How likely is the free plan to work to do that, how do you make it more likely? i don't know. I just recognize the products that have done it. There is of course still a danger in the free plan costing you more than the marketing is worth.
Of then of course, once you become a household term (which would have been hard to do without the free plan), the free plan can be an albatross you'd like to get rid of.
An example which comes to mind is travis, which I don't think would have become nearly as popular without the free plan -- in part because they were kind of introducing the whole market of cloud CI. And of course, the recent new private equity owners of travis just got rid of the free plan, although I don't know how generalizable that particular example is, private equity is almost always about slashing costs at the intentional expense of future growth.
In fact, this now reminds me of recent discussions we've had about open-source centered busineses, like perhaps ElasticSearch. The open source license is what gets you the market share, but then perhaps interferes with your desire to maximize exploitation of that market share. Similar perhaps to what free tiers, at their best, will do.
To a large extent, this is why advertising (and related data selling) is so widespread: because it is obvious how to make money from the data. Someone said they'll give you $1,000 for a list of all the users who are male, in Canada, and have typed in stuff about Python.
The parent's example about tag hierarchies... That sounds like exactly the kind of nifty feature I've seen launch a dozen times that has precisely zero impact on revenue.
Take a look at Google for a great example of this: Their "local guide" feature on Google Maps is using gamification to improve location data by convincing users to work for free; or Recaptcha using user input to train their machine learning models.
Quantity data is not a substitute for quality data.
Give an engineer a qualitative data point and they'll find a way to invalidate it.
But give them a million invalid data points...
What it makes me think of is genealogy, part of which can be thought of as the process of assigning records (birth, marriage, death, census, etc) to entities (natural persons). These are complex determinations requiring understanding and correlating multiple records, and analyzing them in terms of information which is not explicit in the records (eg, knowing about relevant place names, name changes, etc). In the case of businesses, imagine trying to figure out the connection or lack of connection between the many Ray’s Pizza shops in New York City, as they open, close, and change names, locations, and owners over time.
I can tell you that AWS free tier in my case didn’t “convert” from their metric perspective, but they turned into commercial accounts that generated $5-6M for my customers that early adopted.
I can think of a lot of other paid SaaS stuff (Trello, Basecamp, Dropbox come to mind) where that free plan translated into real revenue. For work stuff, the effort to spend $500 is as much as $5M.
Free trials don't create this dynamic of having skin in the game, most of the time people will forget they're on a free trial and aren't incentivized to give any feedback as to why they didn't convert. By them needing to reach out to get a refund things are much more aligned with your goal of understanding if you are delivering enough value or why not.
I think as you grow larger (or are VC backed/trying to capture market share), exploring a free plan is pretty important to help with that. But if you've grown to that point, having a free plan or not is likely the least of your worries.
If I'm trialling this for usage in my workplace, I am not going to give you my personal credit card, and the business credit card is very rarely used for software subscriptions, and only if we have no other choice in payment options.
It's an immediate turn-off, plus it speaks of a slight lean towards dark patterns where my free trial turns into a paid account if I forget to cancel (because I wasn't using your service enough to think of it). I'm sure it looks good on your conversion rate Excel graph though.
Regarding the argument that free users don't convert: this does not mean the would have bought the product when there was no free plan. Maybe the product is not good enough, maybe it does not integrate in to the user's workflow, maybe they tried and moved on.
And if I offer a free plan people have to apply for, what happens if I spend more time reviewing those applications as I had to "support" users on the totally free plan?
If you offer a free plan: clearly state there is no official. Maybe offer a public forum where users can help each other. You'll probably find users using your product in a way you had not thought of and use this to advance your product.
If you don't offer a free plan, have a long enough trial period and totally consider this:
> Bonus points if you don't require payment details, as this may increase the friction of an employee of a larger business from trying it out without approval.
In my company I simply can't give payment details without going to the whole way via department head and accounting department which usually takes a couple of days and is an annoying hassle. And privately am I extremely reluctant to give my payment data for a trial. I don't know how save it is, I don't know how easy it is to cancel my trial subscription and so on. Too many scams out there, can't be cautious enough.
I wish there wasn't such a focus amongst tech companies to squeeze as much money as possible from consumers. Sometimes I just need to look at it in my own time and sometimes a service isn't worth paying for. Service for hosting a web service? Sure, I'll pay. Transfer music from one cloud provider to another? I'll write a script for that.
> If you're curious about my SaaS projects, the first is Friendly Captcha, a privacy and user-friendly alternative captcha. Friendly Captcha does actually have a forever-free plan, mostly because it also has the social mission of fighting ReCAPTCHA's dominance
I have not looked at the author's product yet but I'm very supportive of anything that replaces re-captcha. Not only is it offensive to be asked to perform those tasks for Google, it is effectively a way for them to punish people who don't allow Google to track them. Re-captcha is google exercising monopoly power in the worst way. I routinely abandon transactions that ask me to solve a re-captcha for them. It's very nice to see alternatives.
Free plans are usually bad if you're a small B2B startup trying your way...even more so if you're bootstrapped.
I also see that people disagreeing with this tactic are talking more about how they like it to be, not how it's best for the business.
The real downside to a free plan as I see it is that you're effectively building two products - first a free one that needs to be good enough to get attention in the marketplace, and then a paid one that needs to be sufficiently much better to justify upgrading. That takes a while when you're bootstrapping, and you might not have the runway to execute all that. But the upside is that our free plan is a massive part of our marketing strategy, it's scalable and it's "pay once" (server costs are negligible for us, so it mainly cost us in development time). Our product is B2B, so isn't suited for a Dropbox/Airbnb-style referral system, but the app marketplaces that we integrate with (G Suite and Slack) grant visibility based on active users (and on G Suite also positive reviews), which we have 4 times more of than we would without the free users. It's much, much better for us that someone uses our free tier, than that they use a competitor. Used this way, a free plan is effectively a way to turn engineering/product dev hours into marketing - that might not be a good tradeoff for everyone, but it's been great for us.
The DO $5 vs $500 comparison is odd as well. Maybe you would be able to spend less support time per customer. But what DO offers is pretty much a commodity by now. If DO no longer offered anything under $500/month... well, it's not that hard to figure out what would happen.
The article goes on discuss alternatives, but while these solve some free-plan problems, these have other problems:
- trial periods means you will probably put people off sign up, because they are waiting for a 30 day period where they think they will have enough time to try it out
- free for FOSS/education/charity means you have to spend time deciding and justify who gets it and who doesn't
- lifetime try-out plan eliminates recurring revenue, which is kind of a big thing for SaaS products...
And then to top it off, at the bottom there is a link to the author's "Friendly Captcha" project, which alongside more paid plans with more features and limits, has... a free plan!
I would never have transfered my task management to todoist if it was only a trial. It's a fair amount of effort to switch over a large chunks of how you function. I'm not going through that effort only to find out the product might be okay, but not enough to justify a subscription, at least not initially: Starting off often means you grow into using it more, more often, more features. A 30 day trial doesn't leave enough time for that.
Then there's word of mouth: A free plan I use regularly will be much more top of mind when talking to others.
Also bootstrapping: It's all well and good for an established SaaS business to not want a free plan, but plenty of products might never get to that point if they didn't bootstrap with a free plan first.
If you offer a free service, it'll be used to host spam, porn or other illegal activity
We’ve all worked on social websites (including Facebook) and we’ve all seen what users are capable of uploading.
One of our internal initiatives is improving our ability to find this stuff and remove it without having to actually engage and look at it regularly. Ugh. Offering any kind of storage at all, free or paid, comes with some risks.
This is a "never do X" opinionated click bait (click bait because we are always interested in a confident never do X expert opinion vs. the less interesting reasoned debate.).
another thing is free user will more likely look for other free solution and always a free solution will pop up. So it is really hard to compete. take gmail, how can you compete with google free offering？
And drunker.
3 big arguments for a free plan from our perspective: Ease for marketing, allow Enterprise users to try out when giving up credit card info is a process for them, and lower Stripe dispute rates.
Yeah, this has stopped me trialling services several times in the past, because I don't want to use my personal credit card, and the hoops to use a business credit card are rather time consuming.
The real question is, how targeted is the email list towards a japanese language course offering, and what is the open rate on the email list.
If everybody on the list is interested in learning japanese, AND, the email list has good open rates, that MIGHT mean her pricing is too high. Or not.
That said, I'd rather have 5 customers paying $300 than 50 customers paying $30. Let the big companies take on the cheap users. As a solopreneur you have to chose your battles wisely.
I'm skeptical that price is the problem. People pay thousands of dollars for courses with super beginner, freely available information all the time. If you save me a day of research to cobble together all that beginner information, that's $300 well spent.
Going by your logic, why doesn't she increase the price to $30000?
Millions of people in the US pay $30,000 or more to do basically that same thing (per year!) ie. they take a series of outdated 101 basics classes for an “associates” degree.
Look at what Ramit Sethi does, he charges thousands of dollars for what can be summed up in one sentence; “live below your means and buy index funds.” And people find that a good value because it’s convenient and structured!
Anything is possible if it’s positioned correctly.
It‘s a very niche product, it‘s not easy to say which one is selling for better the value.
The OP sort of addresses this in 'won't I miss out on paid users', but it's sort of a cop-out/has some unmentioned assumptions। Anyone small wants to start off free and pay more as their usage (and own revenue) grows - enterprise may be willing to pay hundreds per month off the bat, sure, but are they your customer?
My only suggestion would be that be honest with the value proposition of your product. Know that your electron-based note-taking tool is not the same as the entire g-suite or ms office.
And finally, remember that no one is more emotionally invested in your product than you are. So let the suggestions trade.
As an indiehacker, the free plan allowed me to iron out bugs and improve the overall experience of the platform. But the amount of effort it took to maintain the free plan was enormous so, I shut it down. I informed users about the decision and, I am glad few converted to being paid customers.
I have a lot of free time now and I can focus on delivering value to my customers. The server load also reduced due to reduction of free requests and database writes/reads.
For a large SAAS company like Slack, Trello etc, it makes sense to have a free plan since you have a lot of resources at your disposal but, if you are a small team or worse alone, then no.
For example Duolingo. Love Duolingo. My kids use it. So we want to support them, but that means paying 120 euros per year per kid (240 euros!), so we use the free option.
If they had a plan that was, I don't know, 1 euro per person per month, we will gladly pay 4 euros per month (we are 4), and then pay 48 euros per year. Or even a family plan of 5 euros per month per family of 4.
Instead, we pay 0, and use the exact same resources.
The same happened with a calendar service (those apps that allow you to reserve and appointment with a doctor or hairdresser or whatever).
Their free tier was obviously 0. And then they asked for 30 dollars per month for 20 features. I needed only 2 of those features.
I asked if there was a way to pay only for those. It wasn't. So I ended up moving to a competitor which was much cheaper (10).
If you're building your own SaaS you will quickly realize it's very difficult to build a sustainable business if you only charge 1 euro/month.
I just looked up the price of Duolingo [0]. It looks like it's only ~6 euros/month not 10, but think about the difference in revenue between 6 euros and 1 euro.
You need 6x as many customers at 1 euro/month to make the same amount of money!
I don't know what kind of analysis they did, but you can have 90% of your uses using your resources paying 0 euros per month, or you can try to have 50% of your users paying 1 euro per month.
About the cost, I would gladly pay 60 euros a year for a family pack (4 people). You can even offer the Lite Family Pack for 60 euros and adds, and full family pack for 120 euros and no adds. Or something like that.
But a family of four is 288 euros per year. That is a lot of money because it is not the only thing you pay, you pay duolingo, netflix, amazon prime, office 365, etc., and in some countries it is absolutely prohibitive.
I mean, I would understand the pricing if they didn't have the free tier, but if you have it why that big jump in cost?
And I am not saying it is not the same scale or anything, but in the beginning Whatsapp charged you 1 euro per YEAR! I know as I paid at least two years.
It is a known fact that "consumers build internal reference prices in time through exposure to different prices. When they see a new price tag, they compare it to the reference price and form an opinion".
If Office 365 or Google Suite can give so much value for 5 to 10 euros a month, it is hard to (at least mentally) justify paying that much for products that do less. And yes, I understand it is a perception thing.
Another option is "free for non-commercial use" (teamviewr or irfanview for example) or "free if you make less than this much a year" (unity I think?). You can then have to different steps of payment, like free, basic, basic plus, premium, etc).
This serves as a time-unlimited trial that lets you try the product before upgrading, and if some people are fine with super short periods, good for them. It's worked out very well.
The intelligent free plans are the ones that offer some things for free, but they say "If you like what you get in the free plan, you can pay to get X" for some useful X. Evernote did it for years with their free plan. Evernote was THE notes app. Now that they don't really have a free plan any longer, but Notion does, it'll be interesting to see how it works out. But keep in mind that Evernote is an established company, not a startup looking for the first 10 paying customers.
1) Some folks build a small SaaS product to sharpen their skills, learn new things and as a strategy to position themselves for a higher paying job (they can put it on their resume and discuss it during interviews)
2) It also depends on your target market. Some folks convert to paying customers (huge paying customers) because they have experimented extensively with your product. Take Google App Engine (GAE)- folks use it extensively for small websites, and then when they have something they think can be commercialized, they become paying customers.
3) You can do like GAE and have a daily free quota which is basically a freemium model
4) Regarding the complaint about the headache of supporting free customers - you can make it clear that the free plan doesn't come with support or it comes with limited support
Comment thread here: https://news.ycombinator.com/item?id=25978396
This honestly feels like my argument written from the perspective of the product maker. I hope we meet in the middle on this subject, because it seems like there’s some good overlap to be had. Good tools should not just be built for free because that’s how we’ve always done it. Make everyone happy.
How did it come to this? Well, at least in the short term, this kind of business busts up traditional high-quality paid tools. If a Google-like business enters a market where a high-quality paid competitor exists, they will subsidize something similar with VC money and suck users away, bankrupting the competitor. Then, with the power they have gained they are free to focus on monetizing their users, which is a story for another time.
This is especially made easier by the fact that it is really difficult to get paid on the Internet: you are essentially selling access to information, not a physical good (all of this might not apply to businesses rooted in the physical world like Amazon and Airbnb). When an average user sees a free service and a paid service both offering what is essentially information, they will go free every day. Since the price of reaching people on the Internet is so low, and the difficulty of getting paid is high, freemium platforms emerge and can outcompete paid competitors by leveraging this fact.
As a consequence to this, quality tools have retreated into paid niches, driven to raise prices. We are essentially left with two product types: gigantic Google-like freemium platforms, and high-quality high-expense alternatives (e.g. Feedly in the Google Reader example). While the former might suck at serving their users and providing value/quality, they make so much money that a cheap, quality tool or a paid, large platform will be quickly snuffed out like a candle without huge investor subsidies.
I have been surprised to see how many new users we have picked up in just the first few days since this change went into effect. We had fewer than 500 users (all paid) from over 5 years of being in the store. In the last two weeks, we've picked up another 500. Granted, most of the new users are not paid, but some percent are converting to the paid subscription.
Because this is a Chrome extension, there are no server costs. There are some purchase-related customer service inquiries, but these are mostly due to glitches in our new purchasing system, which will presumably go away over time. We've had no questions so far that are unrelated to purchasing (i.e., from unpaid users).
Only include a free plan if you can demonstrate it leads to a better outcome (holistically).
So then, does the author plan to remove the currently available free plan from their own SaaS product, Friendly Captcha?
For people building Thiel-esque "zero to one" SaaS products, I've found free plans absolutely invaluable in educating users on what your product can do and why they might want it. In my experience, offering a free plan lowered an otherwise-high barrier of entry and helps those users then build a habit (incorporating your product into their workflow/dailies) that converts comparably to hiring salespeople.
There are indeed a lot of unintended/hidden costs to having a free plan, but there are a lot of costs to selling a paid-only product, too. Seems like every product should gauge what's best for their use/market. :)
An inactive user doesn't cost much and can convert into an active-and-paying user once. A slightly-active newcomer doesn't cost much either and can actually bring value by reporting bugs (incl. UX bugs like unintuitiveness).
I wouldn't pay for what I had no chance to try. A free month is also useless: I just sign up and then see it expire as I fail to find spare time to actually try it.
Just measure how active the user is and tell them they will have to start paying soon once they reach a certain threshold in median daily interactions or in storage/traffic/whatever. Don't forget to provide an option to export and delete their data.
As with any marketing, it's easy to get it wrong. "Don't offer a free plan" is a good advice if there is a problem understanding the balance between revenue generation and expenses or there is a better way of doing marketing, but it's hardly a universal recommendation.
Free plans usually a good idea for a starting business when you look for approval from your target audience and stabilize the product. As companies grow, confirm product/market fit, polish the product, and discover more efficient ways of doing marketing, it's perfectly OK to discontinue the free plan.
Consumer services are like this.
But SaaS can be as well.
But it's true you don't need to provide businesses anything for free over time.
If a company can't pay you $20 a month, they are mostly useless to you.
If you're a B2B startup then it definitely makes sense. For B2C it can be a bit tricky to determine because you want to know if your users find your product useful and the quickest way to get your product in the hands of many users/potential customers is to offer the product for free(with some restrictions).
Especially for indie developers like me, we need to get validation and feedback on the product as quickly as possible, and free plan allows us to get that quickly.
Once you gain some traction then it makes sense to not have a free plan to filter out free users, but in initial stage I wouldn't shy away from free plan personally.
I think the example in the article used such low numbers to make the calculation easier. In most cases, the kind of SAAS they are talking about would have at least one or two orders of magnitude more users.
Reshaping the question: would you rather have 50,000 users paying $1 or 1,000 paying $50 each? your MBA caveat largely becomes moot.
I would also point out your logic about his revenue stream comparison falls apart when you double the numbers to 2,000 vs 20 customers.
Even better if it's an open-source tool that I'm paying for.
We just added a free for life plan to ZenMaid.com after a lot of thought and effort
Time will tell if it's right for but there's no way that it's a simple across the board as "Don't offer a free plan"
Did get some good ideas from the article though, thanks for sharing OP
For anyone interested I wrote in depth about our decision on my notion here:
https://www.notion.so/ZenMaid-Should-Launch-a-Free-Plan-1b81...
Let's say your digital asset manager used per-view micropayments. Browsing through your photos would be soured, however slightly, by the cheapskate voice in your head, wouldn't it?
What product would want their user experience to be saddled with that cloud?
(Or am I just an extreme cheapskate?)
2) The most critical users frequently covert to evangelists if you listen to them (considering their "demands" are reasonable) 2.1) It's really useful to have active community around your product for different reasons. And it might be hard to do with corporate users for example :)
3) Access doesn't have to be completely free. You can make them hoop through some loops - sharing about SAAS on social networks, inviting friends and so on.
4) Frequently you can actually convert a decent amount of free users with good discounts. Longer people use your service the higher is gonna be the conversion rate. In general discounts ain't a good solution, but a lot of people don't actually need your software - they see a good deal for some interesting product and buy it in reserve for the future. I think a lot of us been there with all deals on Steam, having hundreds of games in a library you haven't and probably won't play :)
5) Many users are actually ready to pay for some kind of support if it's not too expensive. But if you built a decent community around your product your free users can frequently get help they need on your forum or some board.
6) As others said frequently previous personal experience really helps with onboarding so there is a higher chance somebody gonna recommend it to their companies.
There are gonna be other benefits as well too. Personally I have around 10 years in product marketing management and development in Russia and USA. And as some of our products were Shareware I must say the biggest problem in ex-USSR countries was always a huge amount of pirates, but from my experience if you play it right you can use even them as huge promotional channel.
P.S. Getting a good "PR" manager is a good thing too. Frequently you can contact people who are vocal and berating your product and just give them access to Premium features for free :) You won't receive money from them, but having less negative reviews will help your sales. Frequently they would appreciate the gesture and make favorable recommendations. (In many times people just are unhappy with something else in their lives, they just project negativity on your product cause they are in a bad place and getting a response from a real human means a lot to people - if it's not just some "sorry script" many customer support agents use).
If your free plan is killing you you're structuring it wrong. Free users shouldn't get support, that's reserved for paying customers. A free user should basically have to just read documentation. And if there's premium features with expensive hosting costs that aren't trivial to subsidize, then that is not a free feature.
You also lose a lot of market share when your competitor starts offering a free plan.
Have a free plan, but never think of it as more than a lead generator.
Having read this article, I will replace free-tier with low-one-time-price / lengthy-but-capped duration / all-you-can-eat of somewhat restricted functionality. Where functional restrictions obviously correspond to our cost increasing linearly.
This approach seems especially pertinent to a service which has mostly one-time utility. ie few people would need a recurring subscription anyway. e.g. wedding planner for brides
"No free plans" are prevalent in media subscriptions e.g. Netflix, Prime, AppleTV, Disney+ which offer free trials, but I'm struggling to think of any popular pure Software SaaS services that don't have a free plan?
(In many ways I prefer the opposite: by hanging everything off of jefftk.com people who come for one post or project may find others of mine they like.)
The intent was to say in a convoluted way: focus on those that value your business, and in particular focus on paying customers (the higher the better). In general it's better to have fewer customers that pay more and pamper them.
If you have millions of users the story is very different of course.
If you don’t offer a free plan because it’s too expensive, but blow $$$ on social media and web advertising, you’re probably doing it backwards.
For example, why does anyone know or care about GitHub? Because it’s free.
I do see some of the points of the article though. There are a handful of ‘entitled’ free users, but in my experience they are few and far between...
https://www.remarkbox.com/remarkbox-is-now-pay-what-you-can....
Yes, you can simply not cater them
Leaving a void in the market means someone else can consider making a competitor and inheriting all those problems, and maybe they have a good time
If you are that competitor, ignore this article
Well, and saddening that this drivel seems to be a reliable way to get on the HN home page.
I think author’s opinion about subscription fatigue is low-end market thinking or B2C. Most businesses actually making money are used to the subscription model now, Gsuite, Office 365, Adobe Creative Suite, NetSuite, etc. The trick there is to reduce the risk for them to try it on. Unless you want to pay an army of salespeople.
Consider the wages paid to tradespeople who make useful, non hyperscale products. Or even the salary differential between fields of computer work (web vs embedded, for example).
My biggest issue is the free plan doesn't expose bad UI patterns in the payment path.
$4 plan.
Hmm. This rounds to free. I wonder how he squares that.
Anyway, my advice would be: depends on your unit economics.
That said, I will probably double that number (and the included usage) prior to launching.
I expect there is a large difference in the quality of your users whether it's actually free or it's $4 per month.
1. It’s rare for a business to experience dominantly viral, product-driven growth. Most don’t, including the successful ones! The few businesses that do succeed that way tend to attain ubiquity, so people mistakenly assume a free tier is the best path. (This winner’s bias must be a known fallacy, but if so I don’t know its name.)
2. Moving churn earlier in the customer journey speeds up iteration cycles and increases fidelity of feedback. We’ve all seen “hugely successful” apps that get a lot of users but never find a business model. Maybe if they started charging earlier in the customer journey they would have found product-market fit. It is extremely difficult to calculate customer value and pay for marketing without rapid feedback.
3. Not charging users can create hideous feedback loops. Just take a look at Facebook.
4. Free tiers are a consequence of the non-linear reality of venture-backed teams. Backing capitalists prefer a 5% chance of scoring 1,000 than a 50% chance of scoring 10, so they will of course encourage freemium (or rather, metrics like “daily active users”) alongside a whole host of other too-risky-for-most methods.
5. The author is completely correct that those willing to pay are the easiest to serve, and those unwilling to pay are most likely to need help, leave poor reviews, and give misleading feedback.
6. Again as highlighted by the author, the infrastructure behind multiple tiers is way more costly than you’d expect. It’s easy to get caught in the business mechanics when one could be making the product and marketing better. How costly do you think it will be? Multiple that by 3 to get the actual engineer/design hours, now multiple it by 3 again to understand how distracting it can be.
Sounds like he wants to contribute to the conversation on a subject that he cares about by building something? Seems like generally a good thing to me.