This is a common question when getting any software company off the ground.
A free product or freemium model can be a great way to get some initial traction and drive early adopters to your site… but, do you actually want them?
It depends. It depends on what type of users you are trying to attract and if free users will ever convert to paid.
For most B2B companies, I would likely say no.
My company, a social media marketing tool, is sort of in that in-between area. Our target audience is SMBs or agencies, but it’s still a very useful tool for individuals trying to grow a personal brand or bloggers for example.
When we first launched, we offered the product for free and things went south pretty quickly.
The ego-stroke of having a few hundred users on a 2 month old product was fantastic, but that was about the only thing.
It really breaks down into three questions:
- Will any of the free users convert?
- Is their product feedback relevant for the direction of your company?
- Will they detract from the experience of other users?
1. Will Free Users Convert?
This is a tough question that will likely require testing. You can speculate, but without running an actual test, it is after all, just speculation.
2. Is Their Product Feedback Relevant?
Are the free users your target demographic? Are they who you eventually want to be selling to?
In our case, the answer was no. Our target demographic is marketing directors and agency owners. The free users, as we quickly found out, were mostly self-promoters.
After attracting the right customers, our feature requests now are the ability to export analytics and a client portal; back then, they were auto-dm, auto-follow, etc…
Taking the wrong advice or feedback can lead you down a rabbit hole that leads to a feature-full product that no one wants to buy.
3. Will The Experience Worsen
This one is important and I think often overlooked.
How do free users affect the experience of your paid users? In most cases, where your customers don’t interact, it’s likely neutral, but for us it was negative.
We attracted the wrong users that used our software to broadcast spam at the upper API limits.
This lead to our API access getting revoked, multiple times.
There’s nothing worse than waking up to an urgent email at 4am telling you that you can no longer use Facebook’s API, and you have paying enterprise customers with posts scheduled for later that day.
Mitigations would take days. Emailing abusive users was a pain and became adult babysitting.
Free users ended up creating a bad experience for me, as the founder, and a bad experience for my paying customers.
After asking myself these three questions, it was clear that our business model had to change. We removed the free plan and replaced it with an affordable $5/mo plan for individuals that are actually motivated to grow their company on social media and not just flood the network with ads.
Not having hundreds of free users to worry about, we focused our efforts on maturing the product and adding many more enterprise features.
So if you’re stuck in this dilemma, wondering if you should offer your product for free, ask yourself these three questions.