Freemium vs Free Trial Compared - Pros, Cons, What to Choose

July 31, 2022

Let's start with facts: It is almost impossible to use a freemium model for B2B SaaS companies.

That's because they are usually higher priced than B2C products, and don't apply to the general public, so the are more complicating.

So when you offer a free version of your product, it just doesn't sell.

So what do you do?

Howdo you decideon a go-to-market strategy?

I will explain.

But before, let's dig into the definitions of the Free Trial and the Freemium approach, and talk about the prod and cons of each method.

Withour further ado, let us begin with:

What Is a Free Trial Model?

Using a Free Trial Model is giving away a part of your product (sometimes. even the whole product) for free for a limited period of time. This free-trial period usually lasts 7, 14, or 30 days. The purpose of adopting a free-trial strategy is building a customer base that has tested your product, and is ready to purchase it without the time limit.

According to Wesley Bush, there are two kinds of free-trial customer acquisition models:

  1. The opt-in model
  2. The opt-out model.

☞ The opt-in model allows people to sign up for the 15/30-day trial without giving their credit card information.

And this is the one mdoel that every user absolutely loves.

☞ The opt-out model requires the user to put in their credit card information even before the 14-day free trial period - or however long yours is.

Unless you are Netflix, this approcah will only cause your support or sales team to get in contact with angry customers who "forgot to opt out and want a refund" every month, again and again.

As for the opt-in model, it actually allows you to build an early trust with potential customers

In other words, the opt-in model is in, and the opt-out model is out.

So when should you use a free trial model?

  • If you have a high-cost product that is not too complicated,
  • If your customer base is narrow,
  • If you target highly specific customers,
  • If you target executives,
  • If your expenses are high,
  • If our Customer Acquisition Cost (CAC) is high,
  • If you are new in the market and can only afford a free user for a limited time.
  • Basically, if it is the product that is premium, and not the features, you should go with a free-trial model.

Pros of the Free Trial Model 

  • You can even offer the whole product for free to attract picky customers.
  • You can gather higher qualified lieads compared to freemium signups.
  • You won't have to spend a lot of money to sustain free users.

Cons of the Free Trial Model

  • You might get fewer signups compared to freemium.
  • You might end up having fewer organic referral sources.
  • Your sales reps will still have to convince potential customers to convert during and after the free trial.

What Is a Freemium Model?

Freemium offering is another customer acquisition model in which you offer a part of the product for free. The free perios doesn't have a time limit. Instead, freemium products restrict access to some features, or simply limits the premium product.

While the cons of offering a freemium plan are much stronger, it is also risky.

Here is why:

☞ If you don't implement the strategy correctly, it can be the reason of your failure.

That's because the strategy is extremely difficult to implement.

In fact, Rob Walling once said:

"Freemium is like a Samurai sword: unless you're a master at using it, you can cut your arm off."

There is one more thing to know before you decide to implement this strategy.

And that is that there are more than one way to offer freemium plans.

Here are the most common practices:

  • Limiting features: You could allow people to access every feature until a certain point, whether this point is usage or inclusiveness (such as editing apps with premium filters).
  • Limiting feature usage: You could make some features inavailable in the free version of your product while granting full or partial access to others.
  • Ad limitations: Just like YouTube, you could offer most things for free while asking for an upgrade to enjoy the content without being spammed by ads.
  • Cross-selling platforms: Like iTunes, you could offer the whole product for free while requiring a purchase in other platforms, like iCloud.

Pros of the Freemium Model 

  • It provides you the benefit of priority if your customers don't have freemium plans.
  • The freemium strategy is a highly beneficial customer acquisition strategy as well.
  • It makes it easier to identify your ideal customer profile and move accordingly.
  • Even if freemium users don't convert, they can become an organic referral source and contribute to your mouth marketing strategy.

Cons of the Freemium Model

  • The maintenance cost of free users might become a burden if you fail to implement this method correctly.
  • If not planned well, freemium users can require more in-product marketing efforts to become paying customers.
  • Unless your volume of usage is very high and CAC is low, you might have a hard time getting to the expected ROI.

So Which One Should You Choose?

There is no absolute way of saying one model is better than the other, because what works for the most might not work for you, or vice versa.

In order to decide, ask yourself these questions:

  • Who is your target audience? Executives or end-users?
  • How much is your average customer acquisition cost?
  • How much will it cost to sustain a free account each year?
  • How big is your target audience?
  • How many competitors do you have?
  • Where do you stand in terms of pricing compared to your competitors?
  • How difficult is it to get onboard with your product?

After answering all these questions, if you think that you can handle the pressure of maintaining a freemium model, go on ahead and enjoy the benefits.

But keep in mind that neither freemium nor free trial is perfect or fail-proof, so don't be afraid to change marketing strategies after failing one.

P.s: there is actually a third option that worked like wonders for HubSpot, as Dharmesh Shah says.