How to level up the recurring billing with free trials and freemium

Coming up with a successful subscription-based billing plan is not a matter of a few days. Time and energy both are needed to enter this highly competitive market. You not only need to work on your business plan but have to think about the giants already sitting in the market. Freemium and free trials are not the new strategies in the world of the subscription business. However, the success of these strategies further depends on the time when you offer free versions and for how long you offer them.

The freemium model is based on the idea that a product is launched for users with limited features. The users can use it forever, however, to enjoy more functions users need to upgrade to the premium version. The goal of freemium is to increase users who can turn to be subscribers. When it comes to freemium, people are widely using them from free versions of games to free subscription management software.

Free trials, nonetheless, comes with a time limit. Users are given access to the product for a few days. Thereafter, a notification is forwarded to ask them to upgrade to premium.

Other than time, certain psychological aspects play a significant role in the success of the freemium model and free trials. We share with you some of the most important psychological factors regarding freemium & free trials that you need to know for your subscription business.

User Attraction

When we talk about the customer psyche behind the success of the freemium, the first and foremost factor is customer attraction. For example, many brands and companies offer sales and earn more than they usually do on normal days. Every year, the Balck Friday sales create new records of sales. The marketing and advertising teams of many brands have created this thinking in the consumers’ mind that the right time to shop comes when sales are being offered, resultantly they buy more than they need from sales.

Freemiums create a similar effect on product users. When anything is offered for free, users get attracted to it. ‘’There is no harm in giving it a try.” That’s what they believe but here comes another psychological factor – the reciprocation effect.

Also Read: SaaS Free Trial vs. SaaS Freemium—An Ultimate Exploration of the Option That Drives More Paying Customers and How!

Reciprocation Effect

The Freemium model is sometimes defined as free to paid version strategy because the reciprocation effect demands users to convert to customers. Before we go into the depth of this psychological effect, you need to understand its basics. For example, someone gives you a gift and you like it. You will automatically start thinking about gifting something back to him. This thought that emerges in your subconscious is called the reciprocation effect.

Analysts who design the freemium policies of a subscription business always work on these psychological factors to bring maximum customers on board.

Habit Formation

Businesses working on the recurring billing model are miscellaneous. For example, software developed for gaming are designed in a way that gamers develop a habit of using these software recurrently. Even if developers offer freemium, at some stage they notify users to turn to the subscriptions to play further. Only then one can proceed to play the game.

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If you are planning to go for such a subscription business, you must offer paid subscriptions at a point where the user is already habitual to use your SaaS product.

Also Read: Optimize your Freemium Subscriptions Conversion Rate and Business Health with SubscriptionFlow

Designing An Addiction

Next to developing the habit of using software, SaaS companies work on designing the addiction. Dopamine is the hormone responsible for making human beings motivated. Software developers work hard on the look & feel of their product that user becomes habitual of using these attractive and easy-to-use software. The phase next to habit is addiction, and a rise in the level of dopamine in the human body makes him too motivated and become addicted to us the software. For example, gamers are motived to play more, and those who play more have a higher domine level. They unknowingly become addicted to a SaaS product.

Companies offering SaaS services and products make strategies to use the human psyche for their business gains. For example, developers developing and offering subscriptions for gamers always add the factor of unpredictability in their games to motivate their subscribers to renew subscriptions.

Reinforcement

In psychology, reinforcement learning is the concept based on the fact that certain stimuli train the human mind to show a certain response at certain times. For example, many SaaS services companies offer freemium but they keep offering their premium users certain perks and gifts. It is their strategy to improve customer experience, but it also leaves a psychological effect. Premium users expect services providers to reward them from time to time because that’s what services providers teach their users. Other than subscription billing businesses gaming software also use this strategy in their own way.

They offer rewards on different points throughout the game. The user keeps playing, even he gets paid subscriptions because he is tuned to get rewards by reinforcement learning.

Also Read: What is Customer Success and why do You Need it for Your Subscription Business Model to Succeed?

Time Constraints

Though the strategy of offering time-limited offers work, you must not overuse them. Even you have to be cautious while deciding the time frame for your free trial. Many tech entrepreneurs who launch subscription billing products are advised to keep their trial period short. People are indeed attracted to try to use free SaaS products, but it is also an undeniable fact that people do not want to pay for products with longer trial periods. Whether you offer features and services for a short time (artificial time constraints) or unlimited freemiums, be careful because one mistake can affect your business.

Also Read: This is How Subscription Billing Automation is a Game Changer for Subscription Businesses

In compact analysis, many psychological factors are there behind the freemium or the free trial model. Your accounting and marketing teams are the key players to decide not only the pricing strategy but the price itself. You can work on your pricing strategy by using the psychological factors mentioned above. Nevertheless, you cannot neglect the mathematical and analytical grounds for your pricing model. You need an all-inclusive approach to increase your recurring revenue.

You can contact team SubscriptionFlow anytime to discuss your freemium model. We have consultants, developers, and support team on board to cater to the demands of the customers. Feel free to discuss your pricing model with us!