SaaS Free Trial vs. SaaS Freemium – A Comparison
Selling SaaS is a whole different science of subscription business, even. The SaaS sales cycles are expensive and are affected by the contributions of each subscriber. The best way to keep the recurring revenue intact without increasing the costs of acquisition is to offer the free version of the SaaS to the customers to experience ease.
These free version of SaaS are known as Free Trials or Freemiums. These free versions are the keys to create an organic pool of users who become paid customers and then advocates to bring more users into the SaaS Sales Funnel.
This article is your definitive guide to learn about the purpose, differences, and the impact of Free Trials and Freemiums on SaaS sales and which option is more appropriate to enlarge the pool with the paid customers.
Also Read: Key Business Processes, Key Resolutions—Gear up to Skyrocket the SaaS Subscription Growth This Year
Free Trial And Freemium—The Kickstarters of SaaS Sales Funnel
Both, SaaS Free Trials and Freemiums are not the things that can generate revenue streams but, they play a pivotal role in the SaaS sales funnel to draw the users that can eventually be onboarded as the potential paying customers and became the consistent sources of recurring revenue.
As a GTM (Go-to-Market) product-led strategy, it takes SaaS to establish reputation and familiarity in the market. The Free Trials and Freemiums help them identify the bottlenecks in the business, pain points of the product, market needs, demands, and temperature, etc.
What option suits best to accelerate the SaaS sales funnel depends upon the nature of the product, market type, demands, and requirements, SaaS company stability and feasibility, and some other factors.
Some prefer Freemiums over Free Trials, whereas for some, Free Trials perform best. The industry practice is SaaS with a lower price tag, simpler platform, wider customer base, and general need tends to opt for Freemiums. In retrospect, SaaS with a higher price tag, specialized function, and niche market are more inclined towards offering the Free Trials of the version to convince their users to switch to the paid version of the SaaS product.
It can further be understood with the perspective of the type of the market. We can see often the free versions of the B2C SaaS that also has a wide B2B market are available as Freemiums. Examples include Grammarly, Skype, Google Apps, DropBox, etc. In contrast, the SaaS solutions focused on the requirements of B2B enterprise solutions offer free trials. These include Subscription Software, Sales and Marketing Automation and Management Software, OTT platforms, and more.
Also Read: Optimize your Freemium Subscriptions Conversion Rate and Business Health with SubscriptionFlow
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Difference Between SaaS Free Trial and SaaS Freemium
From the discussion so far, it is clear that SaaS Free Trials and Freemiums are not the same. So, what are they and how they are different from each other? Let’s dive into the form and nature of these free versions of the SaaS.
SaaS Free Trials
These are mostly the free versions of the SaaS focused on B2B with complex functions, requirements, and a set of enterprise business solutions. These SaaS offer their free versions as the free trial of their original premium product, often, with all the features and tools to allow the businesses to experience the performance and the management. These Free Trials are often required to provide payment information, business email and other contact information, and offer guided demos to provide more understanding of the product and tools. However, some B2C SaaS also offer free trials that include the names Netflix, Vimeo, Gated Content, Medium, etc.
SaaS Freemiums
These are often the free versions of the SaaS premium products with B2C focused. They provide simpler solutions for different needs. They are available as free versions of the SaaS with limited features, time, or usage. But, this is no thumb rule. Several B2B SaaS also offer the Freemiums as a part of their branding strategy. Freemiums usually does not require the user to enter the payment information, but they can be asked to sign-up for the freemium with public or business email and/or contact details.
Also Read: SaaS and Subscription-Based Startups are More Prone to Business Risks, Learn How
What Should Be Your Choice To Get More Paying Customers?
A recent study by Vimeo, a leading OTT platform, revealed that the free trial of the platform helped them gain more paying subscribers. According to their data, the free trial conversion rate is boosted up to 60%. The Vimeo report suggests that the free-trials conversion rate is quite appreciating in the video industry, however, the rates are different for SaaS across the industries.
Several studies also suggested that providing payment information also increases the Free Trial conversion rate up to 20 percent. In contrast, HubSpot reports that freemium conversion rates generally fall somewhere between 2% to 5% on average. Again, Slack reported a 30% conversion in 2014.
Opting for any of the free version of the premium product depends on the spread of the conversion rate. In general, free trials are seen served more, particularly, when are conditioned with providing the payment information.
How Does SaaS Free Trial Help in Gaining More Paid Subscriptions?
For a wide range of reasons, SaaS Free Trials are advocated as the boosters of the conversion rates. Here are the five most significant ways that make Free Trials prior choice to attract more sources of revenue in the sales funnel:
SaaS Free Trial Structure
Different Free Trial structures are followed by the SaaS. Mostly, it is offered as the premium version but available for a limited time. Though some offer it as a free trial minus some exclusive features for a limited time. It is also available as a free trial that does not cut the cord when it expires, rather it switches automatically into a freemium—a basic version of the SaaS product. This is the way to keep the users connected and kept them in the loop to capitalize on later.
Guided Demos
Usually, the free trials are the premium versions available for a limited time to use. As we already have discussed that the free trials are more focused on the B2B market and provide a set of solutions for enterprises. In these situations, the users appreciate more if free trials begin with the facility of the guided demo to explain how each module works and what solutions they can get from the SaaS.
Consultancy for Personalized Solutions
The guided demo leads to another marketing opportunity that can influence the user and increases the likelihood of converting, even, before the trial expires is providing the consultancy for the customized solutions.
For instance, SubscriptionFlow offers a two-week free trial version that gives users complete access to the premium product. In addition, the user can ask for a guided demo where they can be asked about their pain points and other trials. Our experts suggest to them how these can be dealt with well on our subscription management platform.
Payment Information
SaaS free trials often ask users for the credit card information before beginning the trial versions of the SaaS premiums. The credit cards will not be charged until the free trial expiry. After the end of the free trial, users are shared with the plans that suit their budget and needs to subscribe. And if the user chooses to opt out, users can unsubscribe from the free trial. Providing the information qualifies the lead that has a great potential to convert to the paid subscriber.
Usage Analytics
It is the monitoring and tracking of the usage of the free trial that also assists in closing the deal and learn more about the user. Trace the customer data points and figure out the reasons why he or she is going to stay and why not? Optimize the experience before the free trial expires and share the usage analytics with the users, too. So, they get to know how they are using the SaaS and how it is helping them to manage their work with minimum efforts in less time.
Other Proven Ways to Convert More Free Trial Users Into Paying Customers
- Make free trial user-friendly and highly customizable
- Offer valuable features as personalized solutions
- Share usage metrics with the free trial users
- Design plan for the end of the free trial
- Condition free trial with the payment information
- Offer perks on switching to the paid version before the free trial expiry
- Work on plan B to capitalize on free trials as well with exclusive paid features
Also Read: Trial Management System
