Free trial vs Freemium: Find out which is best for your SaaS startup

In the new era of Product-Led Growth (PLG), sales-based models are giving way to more product-centric approaches. We need to look at two key concepts that have emerged in this landscape: free trials and the freemium model. These strategies are transforming the way SaaS companies achieve success, as they are becoming the foundation of business growth and strategy.

But what are the key differences between a free trial and a freemium model? In today’s post, we’ll discuss these differences, covering common metrics and analytics challenges.

What is PLG?

PLG, which stands for Product-Led Growth, is a business approach that puts the product at the centre of a SaaS (Software as a Service) company’s growth strategy. Rather than relying primarily on traditional sales and marketing, PLG is based on the idea that a great product can drive growth organically.

In short, PLG is about giving users a unique experience with your product from the start. This involves the emergence of freemium or free trial versions of your software, allowing users to try it out and experience its features before committing to pay for it. By giving them this opportunity to try before they buy, you can build trust, demonstrate the value of your product and attract more users.

Impact of the PLG on analysts

In the PLG world, the focus is on instant data monitoring. This means that analysts must learn to be efficient and fast in handling tools such as SQL or Python to generate visualisations and data distributions instantly. It’s as if they have to have a map ready to display very quickly.

Apart from that, PLG also brings with it the democratisation of data. Now, everyone from product managers to marketers has access to product analysis tools like Amplitude, Heap and Mixpanel. Data is at their fingertips and everyone is expected to adopt a data-driven approach. Of course, this also means that analysts can expect to receive requests for help when things don’t go as expected.

Now, let’s talk about testing and iteration. In the PLG world, a lot of emphasis is placed on improving the user experience from the very beginning. Analysts play a crucial role in creating and overseeing analytics for the onboarding process, payment updates, first calls to action and much more. They will work side by side with Product Managers. Their mission is to immerse analytics in the products and make it intuitive, accessible and intelligible to all.

In addition, remote configuration opens a new era of A/B testing. Now, analysts will be faced with a large number of tests and product changes that require flexibility and skill in order not to drown in the process. However, despite the challenges, the work of analysts in the PLG world has great rewards. Many PLG companies are scaling and growing rapidly, giving analysts the opportunity to advance quickly and see the impact of their work immediately.

Free Trial vs Freemium vs Reverse Trial

When it comes to acquiring customers for your SaaS startup, there are different models to consider: free trials, freemium and, more recently, the so-called “reverse trial”, which combines features of both approaches. Let’s take a look at how they differ.

Freemium: The free sample of the SaaS world

El modelo freemium te permite ofrecer una fracción de tu producto de forma gratuita, sin restricciones de tiempo. Por ejemplo, Grammarly, WordPress y Dropbox utilizan este enfoque.

The freemium model allows you to offer a fraction of your product for free, without time restrictions. For example, Grammarly, WordPress and Dropbox use this approach.

How does it work? You attract lots of users to try your product and, if they like it, they can choose to upgrade to a paid plan with additional features.

If you opt for freemium, you will need to focus on analysing the top of the funnel and user engagement. Segmenting them into groups according to their behaviour and activity will be essential to personalise your strategy and retain those who are about to abandon the product. You will start to get to know the Lapsers, Quitters, Zombies and Freeloaders. You will also need to identify the most used product features and optimise the user experience.

The main KPIs to watch in the freemium model include activation rates, daily/weekly/monthly retention, free to paid conversions and NPS (Net Promoter Score).

Free trial

In the free trial model, users have full access to all features of your product for a limited time, such as 14 days or 30 days. After the trial, customers disappear unless they convert to a paid subscription. Some companies using this approach are Amazon Prime, Audible and Photoshop.

The key KPIs in this model are the number of trials initiated and the conversion rate from trial to paid. As your customer base will be small and mainly composed of paying customers, you will be working with accurate and clean data.

Reverse test: The perfect combination

The reverse trial is a combination of both models. For a limited time, users have full access to all product features (free trial) and are then downgraded to a free plan if they do not convert to a paid subscription (freemium). Canva and Calendly are examples of companies that use this approach.

In this model, you will have to analyse all aspects of the product conversion and engagement funnel. Your work process may become chaotic, but high accuracy in the results is expected.

Conclusion

We have explored the differences between the most common customer acquisition models in the SaaS world: freemium, free trial and reverse trial. Each has its own advantages and challenges, and it is crucial to have the right tools in place to optimise their performance.

In a highly competitive environment, analysts play a critical role in the success of a SaaS startup. They need to navigate large volumes of data, identify patterns, understand user behaviour and make decisions based on accurate and timely information.

With NextScenario, you can get a complete view of the performance of your freemium product, evaluate the conversion rate of your free trials and optimise the user experience.

Don’t let analytical challenges hold you back. Drive your SaaS business to success with our SaaS metrics visualisation tool. Contact us and find out how you can accelerate your growth today!