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E182: Freemium Model vs Free Trial: Which is Better for Your B2B SaaS?

by Sean Boyce

Sean discusses the pros and cons of the freemium model in B2B SaaS and why he prefers a free trial to a free tier. While the freemium model can help form a habit with users and has a low barrier to entry, it also comes with risks such as users not converting to paid plans and undermining the value of the product.

Key Points

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  • Freemium model creates a tiered system with free access and paid upgrades
  • Freemium model helps form a habit with users, but also comes with risks
  • Free trials offer a limited period of use before requiring payment
  • Understanding activation points is crucial for setting up a successful freemium model
  • Converting users from free to paid plans is difficult
  • Freemium models can inadvertently devalue the product
  • A free tier can be a safer option than a freemium model
  • “Getting them to switch from how they used to solve it to how they solve it with our product is harder than probably most of us think.”
  • “And the freemium can really help you do that with a very low barrier to entry for your users and customers.”
  • “It is insanely difficult to convert someone who is expecting a product to be free then to become a paid user of something.”
  • “That’s why it’s really difficult to start out with a free product and then at a later date try to monetize it.”
  • “Takeaway here is to better understand what a freemium model is and compare and contrast those differences with instead of free tier for gaining access to your B2B SaaS.”
  • “And also, in my personal opinion, why I don’t love the freemium model, it’s got limited application and I think too much risk and why I strongly prefer you to consider just offering a free tier instead.”
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