Ask HN: Does a 60 Day Free Trial Ever Boost Signups? We are using a 14 day free trial for our SaaS but I was wondering if a 60 Day free trial would be more appropriate to boost our numbers after reading about a couple of BigCorp doing this (Google). Can share your thoughts ? |
One benefit of a shorter trial is that it lets you iterate fast - if your trial period is just 7 days, you could make a change and see its result in 7 days.
The first strategy (Freemium) is only appropriate for a very very small segment of saas applications. This model relies on huge network effects (aka your product becomes more valueable as more people use it -- think Dropbox) and often times 1% of the paid users cover the cost of the product. Most companies that follow the Freemium model often burn cash very quickly and rely on VC money to stay alive in the first 5 years of operations. This is not a recommended strategy for most Saas products and should be avoided unless there is clear evidence that your product benefits from the network effect and that it is more valuable to monetize later on. The other situation where this strategy might be appropriate is if you think that there is a high probability that your users will convert to paid customers in the near future.
The second strategy (Paid subscription with a short trial) is the most common strategy of Saas products. The reasoning behind this strategy is that it gives the users a way to evaluate the software at a very low risk for a limited amount of time. If the user finds value in the software, then they would convert to purchasing it. For most Saas applications, there is almost no difference between 14 days, 21 days, or 30 days of free trial. So optimizing for the time period of the short subscription is usually not the best use of your time.
The third strategy is the paid subscription with a long trial period. This strategy is applicable for big business applications where it may take a very long time to train and get everyone onboard the software. This strategy should be used in the case where the number of users for the software within an organization is very large (100s to 1000s). The risk of using this strategy over the paid subscription with short trial is that you give the users too long consider the purchasing decision. By giving them 2 months, some users might forget about the software and why they were looking for it in the first place. A situation where this strategy is ideal is when there is a very high cost of switching to alternatives. For example, AWS offers 1 year of free tier EC2 because they know that once you start using their product, it would be relatively difficult (time consuming) to move your web product to App Engine or Rackspace.
The fourth strategy is the money back guarantee. This is effective in separating the people who truly want your software from the people who are just shopping around and it makes the buying decision very close to the beginning of the experience. The risk of this strategy is that some people may be reluctant to give you their credit card information at the beginning unless your product is very known.
TLDR: there are four different types of strategies that you can use in this situation. For more established companies who have well known brand recognition, I would recommend using the money back guarantee. For most saas companies, a subscription with a short trial period is the recommended strategy unless there is evidence to suggest that a longer trial period would be more suitable for your software.
And finally there is one last thing to consider. Certain markets have existing expectations for pricing and pricing strategies which you really have no choice but to follow. The example that comes to mind is the database as a service market. Both Parse and Firebase (as well as any other saas company in this segment) offer users an unlimited time free trial. They expect to make their money after the user's data usage increases which would naturally convert them to paid users.
One last comment before I go. Remember that "strategy is choosing what not to do". Out of these four strategies, you will need to determine which bucket your product fits in and use the appropriate strategy.
Your conversion rate depends on the marketing channels that you use to bring your users to your landing page and how relevant your product offering is for the customers. You should track the conversion rate of your different marketing channels to optimize your marketing spending mix (e.g., spending on X brings Y number of leads per month with Z percentage of them converting). Different marketing channels and marketing campaigns can bring in radically different results so you should focus your spending on the ones that bring the most bang for your buck.
The more money you spend on marketing, the lower your conversion becomes. This is due to the fact that over time, you start getting lower quality leads to your website. This is analogous to mining in less resource rich areas. As a company, your goal is not to maximize your conversion rate (the effectiveness of your spending) but rather to maximize your profits. If you think carefully, it may make sense that the conversion rate (effectiveness of your spending) can decrease while your profit increases. You can find more about this argument in the economic concept of marginal vs. average cost.
For SAAS products, the most important metrics are: Life Time Value, Acquisition Cost, and Churn Rate. You just need to make sure that your (LTV - Acquistion Cost) > Profit + Costs and that your churn rate is not unreasonably too high. A high churn rate (>5% annually) limits the potential growth of your company in the long term.