Should SaaS products offer free trials?
While it is well understood that great self-service products grow faster, many startups start with a high-touch sales and onboarding experience. Why build a slick onboarding experience for an unproven product, after all? As these startups mature, though, startup leaders realise they could grow much faster with a self-service experience, which becomes a product development priority.
The onboarding experience for each software product sits somewhere on a spectrum between self-service and high touch:
- Users of a self-service product can trial, configure, and purchase the product independently without assistance.
- Users of a high-touch product need assistance at every step. They evaluate the product through a live demonstration, pay for professional configuration services, and purchase it through negotiations with a sales team.
A self-service experience, including a free trial or freemium plan, is a cost-effective way to sell a product that is capable of selling itself. It’s cost-effective because you need fewer sales and onboarding employees per deal if customers can do it all themselves. Growth without the bottlenecks that come with any required 1:1 interaction between their team and their customers is the primary reason startup leaders want to move towards a self-service experience. Before doing this, it’s important to consider whether your product is ready.
At the start of the customer journey for your product, your goal is to convince prospects that your product is the best solution to their problems. Consider this goal when deciding whether to move towards a self-service experience. Would a free trial and/or a self-service product configuration experience do a better job of selling your product?
For some products, the answer is yes. These products solve a big problem for a big market. Their solution is differentiated, easy to understand, and easy to configure. The pathway from the discovery of the product to receiving value from the product is clear and simple. For other products, this is not at all the case. A self-service onboarding experience, and even free trials, can make your product harder to sell. If your product doesn’t speak for itself, you might need a sales team to speak for it. I’ve even seen startups move away from self-service experiences to achieve better growth results.
While there are no strict rules that determine whether a self-service experience is right for you, the following prompts may help:
- Consider how valuable each sale is (i.e., Average Revenue per Account) to your business. The more valuable each sale is, the more you can afford to invest in sales and onboarding.
- If your pricing model will require you to have thousands of customers to achieve $10m in ARR, you’re building a high-volume SaaS startup. SaaS products that depend on high-volume sales should be as self-service as possible.
- If your pricing model will require you to have just a few hundred customers or less to achieve $10m in ARR, you’re building a low-volume/enterprise SaaS startup. A more high-touch approach might be acceptable.
- Consider how challenging it is for users to receive value from your product.
- Products like Slack deliver value very early in the customer journey. You simply invite your colleagues and start collaborating. A high-touch experience will only slow these products down. You should offer a self-service trial.
- Products like Salesforce require a tonne of configuration to deliver value. Most users are not capable of doing this configuration themselves. For these products, a free trial is more likely to scare customers off. They should instead lead with a 1:1 demo.
- Some products sit in the middle. They can deliver some value quickly but require more configuration to deliver all of the value they can deliver.
All startups should strive to be as self-serviceable as possible. When tackling this problem, I recommend reviewing the customer journey for your product in its entirety. Where are the biggest bottlenecks? If growth quintupled, what would break first? The biggest bottleneck is rarely free trial signup. For example, it doesn’t make sense to offer a free trial when configuration is next to impossible because it is a bigger bottleneck. Keep doing demos for new sales and instead improve the configuration process. When users can self-service their way through configuration, offer a trial to get them to that step.
While a full self-service experience might not make sense for your product, you should always be improving the onboarding experience for your app because this is one of the easiest ways for others to disrupt your startup. A product that can grow faster than yours, even if it has fewer features, can rapidly take market share from you. Small competitors who grow quickly are more likely to disrupt you than large competitors who move slowly. Functionality moats may shield enterprise SaaS startups from these competitive pressures for longer, but these pressures eventually catch up to everybody.
If you’re struggling to find a path towards a self-service model, reconsider who you’re selling to. Stripe, for example, requires a lot of work to set up — usually, the customer must write some code. Despite this complexity, Stripe grows through a self-service experience by targeting developers and has optimised its marketing and onboarding experience almost exclusively for this audience. Similarly, many ERP, CMS, and ecommerce platform products grow by targeting professional services companies who can sell and service products for them.
27 November, 2022
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