If you are launching a service on the Internet, there is always the temptation to offer a free plan to entice the public.
You think people will love it – and want to upgrade to a normal plan with full features. This is a big mistake. If a person is completely satisfied with the free tariff, then he will stay on it forever!
And it will demand from you reliable service, new functions and make claims. The less the user pays, the more noise he raises in social networks and the more support he requires. Negative reviews come from free users, not from paid ones (this is quite logical if you think about it).
British developer Guido Zuidhof is so tired of such users that he launched a special website No Free Plan, on which he poured out all his pain about this.
Guido’s main argument is that free users are expensive…
Free plan price
At first glance, it seems that there are some pluses in the free plan. You spend almost no resources offering a purely symbolic volume of services that costs you almost nothing in terms of server power. This is an attractive “candy” for users, which they swallow – and eventually switch to a paid plan.
But in reality, each free plan has a specific price. It is measured in your time and effort.
We’ve already mentioned that people on the cheapest fares are the most annoying. Who do you think the most support requests will come from: from ten large corporate clients with a subscription for $ 100 per month or from a thousand users, each of whom is on a tariff for $ 1 (including schoolchildren, students)? Obviously, in the first group there are more highly qualified specialists and professional IT departments who ask fewer stupid questions.
Although in terms of money this is exactly the same amount, in the second case, gray hair will cover your whiskey much faster, Guido Zuidhof is sure.
Therefore, he offers the most effective, albeit counterintuitive, way out – to raise prices.
There is really a lot of noise from free users. For example, they may require the developer to include some features from the paid plans in the free version. And if the developer refuses, they may be outraged, write negative reviews about the product, and so on. It really hurts the business.
Experience has shown that most free users never move to paying customers. Regardless of how good your product is and what problem it solves, these people are more likely to find another free alternative than pay even $ 1. Some categorically do not accept a paid subscription – either the person does not have money, or he cannot rationally justify even the lowest price for himself for what he considers free. That is, it is a kind of insurmountable psychological barrier.
As a result, free plans are too expensive.
Nothing is free
It’s clear where the misconception about the effectiveness of free plans comes from. We can see that the largest Internet companies – Google and Facebook – do not charge any fees for the basic set of services. Although Google has many paid services, for the general public, everything is free. Both Google Drive and Gmail have a free limit that suits almost everyone.
And the startup YouTube has never charged a fee for watching videos either.
But it is important to understand that these companies are the exception to the rule! It’s very hard to work on the freemium model, and few people succeed without a powerful pumping of investments. All risks must be carefully calculated.
Hubstaff employee tracking service almost bankrupt with such a free tariff
Before offering a free service left and right, growing your user base exponentially, you need to think about a business model. This is a problem not only for SaaS, but also for online media that want to keep a free subscription. For example, a few years ago Gigaom closed – a popular and high-quality website with technical news and analytics. One of the best representatives of IT journalism could not survive on the freemium model.
What are the alternatives?
Trial subscription works great. Especially as in the version of Netflix – when, along with the free trial period, an agreement is concluded for further paid service, so that after 30 days the invoice is automatically issued. In theory, the user has the right to cancel the subscription at any time, although in practice many people forget to do this or are lazy – this is not entirely fair, but legal in many countries. Well, most are really happy with the paid service Netflix – and get used to the comfort.
In addition, it works here distorting a choice – the tendency to retroactively attribute positive qualities to an object or action that a person has chosen. That is, the main thing is to get a person to agree to a free trial and explain that the choice is always can be canceled – well, then this cognitive distortion comes into force. The main trick of the trial periods.
The trial period is effective even without dark patterns. The limit can be set by time (30 days) or by the volume of services (in gigabytes of traffic, minutes of viewing, etc.).
If you offer a trial period without specifying billing information, then this further reduces the barrier. For example, in this case, an employee of a large corporation will not be afraid to try the service, who otherwise would not have received the approval of the boss to enter payment details.
There is an option to provide a free service not to everyone, but for really good projects, open source developments, educational institutions, research journalists, public organizations, etc. Applicants fill out a questionnaire and talk about their merits – and why they deserve to receive a free tariff.
You choose the really worthy ones who you like.
Now the service will not have a crowd of loud freeloaders, but a very intelligent, intelligent and grateful audience. You will be proud to provide free services to such good people, it is good for your image, reputation and karma.
There is no snobbery here, the service developer has every right to be as selective as he wants.
True, there are also certain overheads here. Applicants will try to contact you, write letters and call you, explain their wonderful side or find out the details of how to get a free plan.
Another filtering option is to take payment card data in advance with invoicing if the user has gone beyond the free limit, similar to Google Cloud. Thus, a part of users who are basically never ready to pay for anything is cut off, and insurance against excessive use of the service works.
Some users do not want to subscribe to a paid service because they are burdened by the need to make monthly payments. This paid subscription seems to hang over them as an eternal obligation, reminding of itself every month. It is psychologically easier for such people to pay once – and buy a lifetime license or a server with a one-time payment, as is the case with our eternal servers.
For example, it can be a purely symbolic payment of $ 1 – and then the same free tariff plan “forever”. Or a limited set of services, as in the free plan, but for a minimal amount.
This is not a full-fledged subscription to the service, but a kind of intermediate option between the “eternal trial period” and a normal paid subscription. By analogy with “freemium” (freemium) it can be called “chipium” (cheapium).
It is important to precisely negotiate the terms of such a subscription. Obviously, in our time, no one can guarantee eternal service. Therefore, you need to set a minimum service life (at least 1-6 months), and if it closes earlier, the money will be returned. It is recommended to indicate the possibility of closing the account in case of inactivity (for six months or more), as well as various benefits for subscribers.
Concept author No Free Plan says he was motivated to create the site by reading numerous community discussions Indie hackerswhere founders of small online companies and independent businesses communicate. Typically, these are single developers who launch a paid service, SaaS, utility, game, or mobile application – or several such services, earning income as a sole proprietor.
The most difficult thing for these individual developers is to serve the army of free users demanding attention.
The problem with open source maintainers
This problem is well known in the Open Source community. Maintainers of open source projects work for free – and quickly burn out in this job, faced with a lot of complaints from disgruntled users.
Not everyone can handle this pressure. Some people freak out and just delete their repositories, as habrauser fafhrd91, the author of the Actix Web web server, did. After criticizing his professional skills, the author refused to further support the project (the repository was still restored and transferred to another maintainer).
“There is no more joy from work. You might want to leave, but you can’t because of a sense of responsibility for your code, the community, and the people who use your software, ”writes the GNOME Calendar maintainer. “Unfortunately, being a free software maintainer can be bad for your psychological and emotional health.”
In February 2021, a mentally unstable user threatened with reprisal to the author of the open source curl program for errors in the code that led to financial losses.
By offering a free plan, you run the risk of facing the same problems that maintainers in the open source community suffer from. Do not repeat the mistakes of others, writes Guido Zuidhof.
Benefits of free plans
Of course, his opinion is extremely subjective. Guido himself launched two simple indie services and to date has not earned another thousand dollars. That is, he has not yet accumulated enough experience to draw such conclusions and objectively assess the benefits of free tariffs.
At the same time, we see that many companies are offering this option. Trello, Jira, Slack, Asana, Dropbox have free eternal plans. Millions of professionals use these services for free, and then recommend them to companies where they come to work – and they buy a paid subscription. Links to Dropbox are flying around the internet like viral marketing. Thus, the cost of free tariffs here is repaid many times over.
The only question is, is this an industry standard or an exception to the rule?
The model really works in Internet startups, whose main goal is to build an audience as quickly as possible, even if it is at a loss (investors will pay the costs). These losses will pay off in the future. And we, as ordinary users, are happy to enjoy a free service of excellent quality, without ads.
This is a model for future unicorns.
But it’s also true that a free plan doesn’t always translate into sales. If you inadvertently put something useful in a free tariff, then you run the risk of getting paid when millions of users from Southeast Asia fly in. Then 95% of your traffic will be generated by free users who will never pay a cent, but rather find another free alternative.
There are probably product categories for which the free plan is better suited: these are work tools aimed at corporate clients. In other cases, it is a double-edged sword that can do more harm than good.
Oftentimes, the cost of a free plan simply doesn’t pay off. You need to carefully calculate your costs and the conversion rate at which these costs will be compensated. A free plan is a tricky thing.
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