At the heart of the SaaS Sales Funnel, free trials are often misunderstood by most vendors. Learn how to get it right to grow your Business…
Most SaaS software have a free trial in order to let the user try the product for free. It allows users to see the value of the service and to influence their buying decision. Free trial is a lead generation technique that can be very powerful for SaaS software.
Free trials may be one of the most misunderstood concept by SaaS providers. Maybe it’s because most softwares provide one, so should you, obviously! However, be careful to avoid the main issues that relates with free trials.
What’s the purpose of a free trial? Should you have one? How to convert free trials into paid users? How long should your free trial be? Should you ask for credit card references? Is there any alternative?
Wanna improve your Conversion Rates? I published an Email Course to help you Master your SaaS Free Trial.
If you want a quick overview of the article’s content, have a look at that presentation:
What is a free trial?
Free trial allows users to use the service for free, during a limited period of time. They can use the service, benefit from all the features, for free. Traditional software vendors fail to understand this concept. Why should users benefit from the service for free?
Free trials allow you to demonstrate your value to your customers. They will be able to understand how your software can help improve their lives and decide to buy it or not.
Free trials are part of the SaaS sales funnel; users visit your website, discover your service, sign-up for a free trial. They may use it, and only afterwards, they may buy it.
Sometimes, Entrepreneurs look at free trials as a compulsory stage which all their customers have to go through. Free trial is a lead generation technique allowing you to engage with prospects. It’s the perfect stage to sell them your solution.
You must look at free trial as a hook, a way to get leads in order to engage them and to convert them over time to paying customers.
Totango ran a study around Free Trial, Freemium and Pricing Benchmark. Here are the most interesting numbers:
- Sample of 550 B2B SaaS Companies
- 44% offer a Free Online Trial
- 41% offer a 30-day free trial
- 18% offer a 2-week free trial
- 41% list pricing on their site
Against all odds, we see that 56% did not offer a free trial, but why is that? Free Trial is only one part of the customer acquisition toolset and doesn’t always make sense.
Should you have one?
Most SaaS Entrepreneurs will include a free trial directly inside their process. However, it’s not obvious, you shouldn’t have a free trial if it doesn’t make sense. So, do you need a free trial?
Consider your sales funnel (remember, the free trial lies inside the sales funnel). Does it make sense to have a free trial inside it?
Think about who are your Customers. Who are you targeting? Maybe they’re not used to this kind of self-service sales.
Look at big corporations, although they’re not advocates of SaaS, they’re still using some software. Would they signup for a free trial? One of their employee could. Would you sell them your product on a no-touch sales cycle? Probably not!
Secondly, look at the price of your service. If you charge 2k$ per month, you may convert more customers by having a salesforce that can sell the service directly to them.
Finally, can your product “sell itself”? Will prospect be able to see the true value of your service by themselves? There is plenty of ways to show value to customers, however, they may not be able to see it immediately during a free trial.
If you sell a high-priced product, difficult to understand for users and which requires a lot of work in the implementation phase, sending users straight to your product, might not be the perfect solution.
The main aim of free trial is to Activate users, to create usage and demonstrate value. If your free trial can’t do that, you probably shouldn’t have one.
Peter Cohen wrote a great article on this subject: Free trials don’t always make sense.
Analytics & Optimization
The primary thing is to have your funnel fully covered in your Analytics. You have to trace your users from the moment they arrive on your website, to the moment they pay (& retain).
Once you have your funnel fully covered, you can start to optimize it. Everything in this article are only general thoughts, they may not be applicable to every business. You’re the only person capable of testing & tweaking your funnel.
Try to test and optimize your whole funnel. Whether you need or not a free trial is something you can test. You can also test your pricing, the duration of your trial and many more.
Be careful: your metric here is not how many people convert from free trial to paid user. Your metric should be around Activation (Usage) & Revenue (LTV, MRR, ARR, etc…).
You can also optimize your funnel with the AARRR / Pirate Metrics as a way to measure your funnel from top to bottom. The most important is that you consider both Activation & Revenue.
If you don’t really know if you should have a free trial or not, the best thing you can do is to try several approaches and to select the one that works best.
How to convert users to customers?
David Skok wrote an article called “Growth Hacking Free Trials: Time to Wow! is the key to success” where he goes into much details into what I’m about to explain.
What makes people go from Free Trial to Paid User? People are willing to buy products (whatever the price) when they see the value of it. If they see that your product can help them save time / money in their everyday lives, they’ll buy it.
The question now, is how can you show the value to users during a free trial? People should experience your Core Product Values (CPVs). CPVs can also be called CCAs and can be defined
CCAs are a set of story-driven actions defined by falsifiable hypotheses that, when completed as a set during the trial, lead to conversion. – Lincoln Murphy
Basically CCAs are a set of actions users are doing that demonstrates the value of your service (leading to converting them from Free User to Paid Users)
Once you know your CPV, you have to push users inside your free trial to execute those actions. How do we do that?
- In-App tutorial
- Email Marketing: either Drip or Transactional
- Every touch-point able to drive actions
CPV are part of a bigger picture, the Onboarding Process. Users inside your free trial are the perfect prospect to become paying customers. However, you have to engage them.
User Onboarding is a website where you can read more about this subject. One inspiring thing there is that you can look at teardown of several online SaaS software.
What Length for my Free Trial?
Duration is one of the main variable inside your free trial. Totango’s study show that trial can last for various length (1 week, 60 days, 6 month…). So, how can you choose?
The article “Why Your Free Trials Are Way Too Long“, from Close.io show some strong arguments:
- People don’t try something for a full month
- Keeping the trial short increase the odds that customers will try the product
- The shortest the trial, the shortest the sales cycle
Although those arguments are irrefutable, I have to say that the problem isn’t that simple. During free trial, people should execute the CPV as we said before.
If you have an accounting software, maybe your customer will only make invoices once a month. So what happens if your trial ends right before this date? If your target market is CEOs, maybe they’re too busy to try your product right now?
There is no right or wrong answer to the question of duration. The best is to test it or to analyze the behavior of your users. Maybe on your application, everybody experience CPVs during their first day…
If you want more information about the duration, I recommend you to read the following: 14 vs 30 day trials. Which should you use? What factors determine the choice?. You can read there an answer from Jim Gray:
Free trial should be long enough to accomplish activation, and long enough to persuade pre-trial customers that they will adequately be able to evaluate it (given complexity of product, complexity of corresponding business process, number of stakeholders…).
Which means that length isn’t really something that makes sense to mess with outside of an analysis of your onboarding process. What sort of product is it? What concerns do customers have? What behaviors signal activation or lead to the customer extracting value?
One answer to the question of the duration, may also be the creation of a freemium model with very limited ressources. People can therefore use your product for free but will be limited if they want to go any further.
Don’t forget to create scarcity during the free trial to engage people and to make them come back to your application. You can for instance send them message telling them they only have a few days left.
Should I ask for a credit card?
Most Entrepreneurs think that asking the credit card upfront decreases the conversion rate. They are right.
However, we have to consider the bigger picture. Maybe, people who aren’t willing to enter their credit card details, aren’t willing to buy the product?
People who enter their payment details are more qualified prospects.
If you do ask for the credit card, be sure to have a very self-explanatory website which demonstrates clearly the value of your service. I often see SaaS companies asking for the credit card even before you can understand the service.
Once again, there is no straight answer, you should test it on your funnel and see which alternative works best. You’re probably more likely to use the software if you already added your payment details.
One alternative can be to split your form in 2 steps in which customers will only input their payment details at the end. ConvertKit followed that strategy and explains the design process in their post Designing a SaaS app create account screen.
Once you have their contact information, you send a message to people who didn’t complete the 2nd step. This strategy is also used by axosoft, I received a mail like this:
I noticed you were almost done creating your OnTime account and were held up. Was there any particular reason?
If you’ve run into problems or questions, please let me know, but if it was a credit card related issue, let me help you bypass that with this:
Use this link for full access to all five OnTime components – no credit card required and free for 30 days.
Asking for a credit card is up to you. However, make sure you test the different approaches in order to make sure you’re not leaving money on the table.
When considering a free trial, you also need to understand its impact over your cashflow. If you give customers 30 days of full usage, you’ll only start to recover the CAC after that period.
You’re probably not going to make money over the first few months (payback period), however…
You might need the cash depending on your development stage.
If you’re only getting started, you should consider demoing your product to people and once they understand your value proposition, push them towards a paid subscription.
In other words, not having a free trial can help you to overcome potential cashflow issues. However, make sure that it’s not decreasing your Conversion Rates, otherwise, you’re loosing money…
The Free Trial is the perfect moment to implement Customer Success. In order to do so you need to develop a deep understanding of your users and what they’re trying to achieve.
Once you understand your users, you can start to adapt your Onboarding & Marketing Activities towards them.
For instance, if your software is multi-usage, you could segment your Customer Base and adapt your Marketing to each of them. Your software should help them to better perform at a specific job. You need to show them how.
Intercom did this very successfully by segmenting their software by job:
Users did not convert?
It’s impossible to get 100% of people to convert from free trial to paid users. So, what can you do with users who did not convert?
It doesn’t mean that they are not interested about the service. They may not be ready to buy right now.
Users that don’t convert are almost as important as users who convert, so be sure to contact them personally in order to learn more about their motivations.
In order to convert them later, continue to engage them to make the sale later. You could do this in many ways including:
- Lead Nurturing: building long-term relationship with leads in order to convert them later (The Definitive Guide to Lead Nurturing)
- Email Marketing: adding those users to your mailing list to keep them engaged and rehearse your message
- Retargeting: allows you to target specific users through online advertising
Users that did not convert are not yet ready to convert, however, they may convert later. Don’t let them down at this point, they’re still prospects.
Are Free Trials really free?
No. Both Customers & Vendors will have to invest something at every stage of the free trial.
Customers will invest time and resources to use your product. Vendors will give away a small part of their infrastructure.
During the free trial, users should be able to perceive your value without investing too much resources.
If each lead has to spend 30 hours & $10,000 to implement your product, the free trial won’t be very successful.
Try to reduce to a bare minimum the resources that they have to invest to get value from your trial and you’ll convert more users.
Alternatives to Free Trial?
If you don’t think a free trial is right for your business, that’s okay. It’s not the only way to acquire customers.
If it doesn’t, there are still alternatives to free trial.
Many companies are now choosing demo scheduling over free trials. The main idea being to get in touch directly with the consumer to understand their needs and pitch your product.
Demos done by your sales team can greatly enhance your performance. You’ll be able to show your leads exactly what they want to see and create a personal connection with them.
Many demos happen 1:1. However, some companies choose to do demos through webinars and interactive videos. This allow you to demo your product to many customers all at once.
Although adding a small human-touch can greatly increase your CAC, you might convert much more people than with a free trial.
Pay close attention to the way you structure your sales process. If you sell a product at $10 / month, doing demos will kill your profitability.
You want to start with demos? Make sure to read The Ultimate Product Demo Guide which outlines all the information you need to get started.
You could ask money to your customers in order to trial your software. It becomes the same things as asking the credit card upfront.
However, you could easily charge a fewer amount on the first month in order to encourage people to try out and hopefully experience CPVs.
As mentioned in the “Should I ask for a Credit Card?” section, having “paid users” straight from day 1 will increase the likelihood that they try your software.
Besides Paid Trials, you could give their money back to customers who aren’t successful with your product. This will lower barriers to entry and get more people to your software.
Free trials can be complicated. If you want to improve your conversion rate, I’ve created a free email course for you: Master your SaaS Free Trial.
To conclude, try to better understand your customers and the sales cycle. Does it make sense to offer them a free trial? In many case, it will, but you’ve to test this hypothesis on your particular business.
Don’t focus on small tweaks if you’re really looking to make a change. Focus on big, bold changes that can truly impact your funnel and your customers.
Bottom line, free trials may be useful in your business. However, you have to try and tweak your sales funnel if you want to be successful in SaaS.
I’m Pierre Lechelle and I’ve been working in the tech ecosystem building businesses for about 10 years. I’m now focused on helping MadKudu to reach $100M in ARR. Connect with me on LinkedIn.