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E231: The Pitfalls of the Freemium Model: Why a Free Trial is Superior for B2B SaaS

by Sean Boyce

Summary
In this episode, Sean discusses the importance of designing a proper business model for B2B SaaS from the beginning. He dives into the flaws of the freemium model and highlights why a free trial is a superior alternative. With insights from founder Brian Castle, Sean emphasizes the need to avoid giving away too much for free without achieving desirable conversions and profits. For those interested in bootstrapping and maintaining control over their business, he recommends free trials as an effective strategy.

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Key Points

  • Freemium models often lack a clear path to profitability and rely on a massive user base for monetization.
  • Brian Casel’s experience with freemium led him to abandon it in favor of payment and free trial options for his communication tool product.
  • Offering everything for free without seeing conversions can be detrimental to revenue and growth.
  • Freemium models require unlimited time and potentially unlimited funds, making them unsustainable for many businesses.
  • The goal of freemium is to monopolize the market, but this approach is risky without additional funding.
  • For bootstrapped businesses, free trials offer lower exposure and allow costs to be included in customer acquisition expenses.
  • Free trials provide a fixed period or limited capacity for testing product viability and conversion rates.
Quotes
  • “With the freemium model, (the promise is) you’re gonna get a wave after wave of users… but there’s a huge missing piece in the middle.” (Sean)
  • “You might be stuck in a situation where you’re giving a ton of everything away for free and people are not converting.” (Sean)