Are Free Trials Working for SaaS?

I love to follow the blogs of companies that help SaaS grow. One of these is analytics provider ChartMogul. On 5 May 2015 their post was an analysis...

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I love to follow the blogs of companies that help SaaS grow. One of these is analytics provider ChartMogul. On 5 May 2015 their post was an analysis of the pricing offers of their SaaS customers. Most of these customers are aiming at SME customers. The results make fascinating reading.

The full post is worth reading. One major point stood out for me. 97% of companies offer a free trial. This is a staggering statistic. Free trials have gone from a good idea to standard practice. Yet SaaS leaders are not happy with the results. I facilitate a group of SaaS companies for a workshop every month. By chance we discussed free trials in our session a week earlier. All but one of the 16 people in the room offered this option. None were satisfied with the outcomes.

Frustration was the most common emotion. Most people had found a cost effective way of generating sign ups. But many of these potential customers stop there. Long before conversion. People don’t even use the trial. Most sign ups never open the product again. SaaS companies put a lot of effort into packaging the right features. Landing pages are well designed. A well constructed funnel of engagement is ready. But nothing happens.

The end result of all this is low conversion rates. Opinions vary but the industry average seems to be 5-8%. if my group is right, most of this attrition happens as soon as the sign up form is completed.

Question is, if the SaaS sector is so innovative, why is everyone doing the same thing? Even when it fails? It is time for a different approach. I have come across three ideas that may be worth trying:

* Invest in careful design well beyond the landing page. The sign up page. The welcome message. The first screen. everything needs designed to pull the user in. This is hard, detailed stuff. Your product needs to be a continuous delight.

* Target only users that have a commitment to change. The hard part for an SME is making a business change. Finding time is tough. Making a change is risky and scary. Can your ad copy and market targets aim at people who are ready to change? If you find these people does your product and your support help the user make the change?

* The exception in my SaaS group went right to the other end of the spectrum. This company has no free trial. The site has no pricing. It doesn’t even have a sign up page. Access to the product is invitation only. Marketing is through networks and recommendation. The attraction of scarcity is working. In a market where every potential customer is an SME.

Anyone who follows the startup scene or tracks SaaS companies will read a lot of advice. Many posts will cover similar ground. Best practice is in danger of being reduced to a formula. Those pricing tabs and screens on SME SaaS sites all look alike. There is a huge amount of product innovation out there. Success means innovating in the business model and differentiating in the market as well. Its not enough to have a disruptive product. The aim of SaaS is to disrupt a market.

by Kenny Fraser @sunstonecomms Sunstone Communications provides small business consulting for startups focusing on the SaaS business model

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  1. Pierre-André Vullioud

    should we require a valid credit card to get started in a SaaS free trial? Thanks for this good post 🙂

  2. Brent

    Hello! I agree free trial is dying. While we are mobile (mobile Saas?) we have chosen to shrink the trial window down to 5 minutes per day. For our app it should show the potential, but not give away the goods. Hopefully resting thee trial everyday for 5 minutes keeps them using and eventually buying.

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  4. Craig DesBrisay

    One other well-tried model is Freemium. I’ve heard that free to paid conversion rates are 3% to 5% at best.

    Do you think that Freemium is worse or better than free trial?

  5. Pierre Lechelle

    Your post raises some very good point. Most founders will start investing in free trials because they can see trials everywhere, they feel like they need to offer one if they want to compete within the industry.

    One thing I’d like to add is that having (or not) a free trial should be part of an experiment. Nothing can contradict customer’s feedback. Maybe people will convert better with a free trial, maybe they won’t.

    It’s always worth a try :)!

  6. Hannah Chaplin

    Great to hear the feedback you’ve gathered on this topic. We’ve found free trials to be a good source of leads and customers for us – both in our current and last SaaS company but they certainly aren’t without their problems. Wrote about our experience this week specifically around the pitfalls of listening to feature requests from free triallers and where, in our experience, they can add value:

    I think the thing is to try things out and keep experimenting. What works for one SaaS product or market won’t necessarily be what’s right for you. For example, our customers and triallers tend to very tech savvy and used to purchasing SaaS so it’s easy for them to sign-up and try us out. Not sure we’ll stick to this though and I do see the merit of replacing a free trail with a demo and more contact with us before a sale.

    Will let you know if/when we try that theory out!

    1. Kenny Fraser

      Thanks Hannah – would love to hear how you get on.

      1. Hannah Chaplin

        Will do Kenny! Might be a while off yet but it’s definitely something I’d like to experiment with.

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