Free trial vs freemium is a common question for subscription companies. I recently saw some advice given on how to make this choice - if you want revenue quickly, go with free trial and if you want users quickly, go with freemium.
This is bad advice. Framing the decision this way pits monetization vs growth, and as Elena Verna (Miro, SurveyMonkey, MongoDB) and Dan Hockenmaier (Basis One, Thumbtack) point out, thats a false choice. The question you need to answer when making monetization decisions is, what model will create the most long term healthy customers? It is not about what you get now. It is about what model helps you create the best for the long term.
An Example From HubSpot
In the first 9 or so years of HubSpot's life, the free trial was one of a few key lead touch points. It actually performed worse than the other touch points. Why? Because the friction to experience and understand the value prop was so high. Had the free trial been pushed, there might have been more free trials and customers, but they would not have retained as well. The thing that created the most long term healthy customers was getting someone on the phone and showing them the product in context of what they were trying to achieve. The price point of HubSpot and other aspects of the business supported this motion.
Over time, the company has shifted to more of a freemium model. But that transition has been in progress for at least 6 years. It took developing new products, developing new lower friction use cases on current products, new muscle on the team, new pricing, and much more.
How To Answer Monetization Model Questions
Answering the free trial vs freemium question (and any question on your monetization model) comes down to having deep hypotheses on:
Your use cases.
Your growth model.
Your costs to support the model.
You monetization model is one piece in a multi-piece puzzle, and trying to answer questions with out understanding the other pieces leads you to flying blind. When you understand all the pieces, you can answer important questions like:
What is the friction for my customer to experience and understand the value prop?
What model and experience get someone over that friction the best?
Where and when is it best to place the friction of my monetization model in my growth model?
What indirect value would free users provide over the long term?
Many more..
Monetization is a very hard thing to work on for many reasons. Get it right and it acts as a tailwind. Get it wrong, and it will be a strong headwind. With the shift in focus from user growth to revenue growth across the tech industry, I'm seeing more and more companies looking to answer these types of monetization questions, which is why we built a program for it at Reforge.
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