There’s a lot of misunderstanding around free trialing, the “try before you buy” approach to finding product-market fit. I’ve been running and advising dozens of startups over the past 20 years, and I’ve seen the free trial model produce tremendous results — and also crippling mistakes.
On one hand, a free trial can be an indispensible method for getting customers to accept a new paradigm that’s 180 degrees from the traditional market offering.
For example, when Netflix wanted to accelerate a paradigm shift from physical to digital media in the at-home entertainment market, a shift they were betting the company on, they offered a free 30-day streaming trial, almost any time you wanted it. Today, with the fully evolved streaming market being what it is, they don’t offer a free trial anymore, but almost every new market entrant will. They do this so you’ll change your habits.
When a free trial is targeted like that, it works well. On the other hand, a poorly-thought-out free trial can create a non-revenue generating customer tier that can become an excuse for the startup to raise or spend money on the expectations of revenue that might never materialize.
Should your company offer a free trial? And if so, how and where should you target it?
I’m running a startup that aims to change the way other startups get advice, and the model I’ve chosen is so different from the accepted paradigm that a free trial is necessary. I’ll use what I’ve learned as an example for a checklist of goals that any free trial should achieve.
5 Goals Your Startup’s Free Trial Must Achieve
- Limit the free tier by form, not function.
- Tease the full value of the paid tier.
- Find out why they didn’t convert.
- Keep your lapsed trial prospects engaged.
- Track everything and follow the rule of 10/10/100.
1. Limit the Free Tier by Form, Not Function
This is the big one, and if you only hit one goal, this needs to be it. The split between free and paid usage should never be arbitrary. The first cut of functionality you make for the free tier must still show the full potential of the paid product.
Now, here’s the most popular mistake (and I’m guilty of this, too). We product builders and entrepreneurs get so deep into the weeds of how our product does what it does that we want to show everyone, including our customers (and investors and even our significant others), how cool, slick, and sleek our product is.
Your customers are the ones who will care the least about this.
In other words, when you take your customers off the road from point A to point B of their job cycle, and instead set them on the road to point C, they will only care about how quickly they can move forward, not how pretty the vehicle is.
The free tier shouldn’t offer all the things they could possibly do, it should focus on how little they need to do to get to the same place using your model.
Another good way to think about this goal: The limits you need to set for your free trial should have nothing to do with your company’s technical or economic limits, but instead allow the customer to get from point A to point C once, quickly. If any of the limits you set hamper the customer getting their job done more quickly with your product, you won’t convert them.
If you can’t set functional limits without impacting the customer’s job, set time limits instead, i.e. a 14-day free trial of full functionality.
2. Tease the Full Value of the Paid Tier
The other major problem free trials can cause is a lack of motivation to convert to the paid tier. Personally, there are dozens of “freemium” apps I use that I never think about paying for, and I’ll bet that for at least a few of them, I don’t even know what additional functionality I’d be getting, let alone whether or not I need it.
But just offering “more” of something at a paid tier doesn’t mean the customer will equate more usage to more value. You have to establish the notion that if they get X value out of the free tier functionality, they will get 10x value out of the paid tier. This doesn’t have to translate to quantity — i.e. free gets you one, paid gets you 10. It could be stopping points within a workflow, number of users, time, or even feature set.
My own project is a content-based advisory, so I can build a logical wall between the free and paid tier that lets free users see the full list of teased content (questions) and even some preview text, while paid users get access to the content itself (answers).
Whatever you choose the paywall to be, your free tier users should be compelled to hit it, often, then presented with as few clicks as possible to immediately convert.
3. Find Out Why They Didn’t Convert
Sounds like a no-brainer, right? But you’d be surprised at how often this step gets skipped, or it’s just assumed that the answer will be easily found in the data. Website analytics can tell you where your users converted, and that might give you some insight into why they converted, but data alone can’t tell you why users didn’t convert.
This is relatively easy to do. If you use a pop-up or landing page to notify the user they’ve reached a paywall limit, you could include links away with reasons, i.e. “too expensive,” “not right now,” “not what I need,” and so on, that get them back into their free-tier flow.
Anything else would likely have to be done after the fact, which only works when you have contact information. Send an automated email with a two-question in-email survey. You could even reach out personally and directly.
This takes time and thinking, but if you don’t have this information, you’ll be throwing darts at a wall blindfolded.
4. Keep Your Lapsed Trial Prospects Engaged
A rejection of your paid tier might have nothing to do with your product, it might have everything to do with the customer’s own situation. You need to be on their radar when they’re ready to move forward.
I’m always surprised at how many prospects start a free trial, let it lapse, then come back — anywhere from a week to a year later — and convert. It’s not a ton of customers that convert that way, but for those that do, it’s essentially free money.
So I started encouraging it. I experimented with various campaigns that I could send weekly to free trial users who had lapsed. What I learned was that “reminding” them of the value of the product didn’t move the needle, neither did discounting or special offers. The campaign needed to show the value they were missing — any kind of value — to boost lapsed conversions. Otherwise I was just asking them to tell me not to email them again.
I took the lightest bit of value I could add, something I could give away for free (bonus posts that paying members get), and started sending that in a weekly “we miss you” newsletter. My lapsed conversions tripled and it cost me nothing.
5. Track Everything and Follow the Rule of 10/10/100
This is where I get quantitative on you. Unless you’re tracking every touchpoint on your funnel from free tier to paid, you’re again blindfolded and throwing darts.
I use Google Analytics for website traffic to tell me how many new visitors I’m getting, then my own internal metrics for the free tier, then Stripe for the paid tier. Once I have that I like to use a rule I call 10/10/100.
My goal for conversion is:
- 10% of new website visitors claim a free trial.
- 10% of free trial users convert to paid customers.
- 100% of first time paid customers re-up for a second payment.
My results will ebb and flow depending on the time period, but once I know where they ebb and flow and can tie that back to marketing and sales efforts, I can start creating efficiencies, reducing the cost to acquire the customer (CAC), and increasing lifetime value (LTV).
That’s really the primary goal of any free trial. Giving the product away can be a great lure, but when your CAC starts to eclipse your LTV, that’s where the crippling mistakes tend to happen.