Questions

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 ?

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 8 years ago

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