Seems like a good business model of future if you keep your self in touch with you customers
Thanks for your great post with very interesting material.
Quick personal feedback:
You did a great work already and I give you only negative points which is I think the most useful.
- Red checks for the pro plus plan look really weird to me because red means "no" so it's confusing and unusual
- I feel that the price difference between your 2 plans is too small in regard of the difference in services. You offer not only more data but phone support with is an expensive feature and really great for users
- It seems that you use dark print for your "preferred" plan and grey for the free and pro ones. Another option I like is to have dark printing for all paying plans and to identify the preferred ones in a more global way like making it a little bit bigger or framing it differently.
A last point. The optimal number of plans is a difficult question. You may also consider having 3 paid plans. A first one a little bit cheaper corresponding to your pro plan, a second with more data but no phone support and a third one with even more data and phone support to make it more premium. Just a thought. I know that usually simpler is better.
Good luck and thanks again for sharing your findings
Worth noting Basecamp have since killed their Free Plan on the new Basecamp.
They also rounded their pricing ($20, $50, $100, $150) and extended their free trial to 45 days.
All of this points to a more mature brand who don't necessarily need volume with the Free Plan, and ongoing optimizations to a more simple offering. (where many of these other sites fail).
All products & audiences are different, so you're right in listening, learning and optimizing over time.
Thanks for sharing this wonderful insight on a topic that is rarely discussed. I read somewhere about the psychology of pricing businesses use all the time. For example when large retailers want to sell a certain brand of TV, they price and display it in between a lower and a higher priced model. The consumers generally have a hard time deciding on the best value and they often perceive the middle tier as the best value for money. You should also look at ConstantContact pricing model. Good luck and stay flexible.
Great to see your thought process as you looked at various Freemium offers and determined what you liked, what you didn't like.
I too looked at the Intuit pricing page and found it incredibly confusing.
One issue though is that the metrics for these Freemium apps are not known -- what is their conversion rate and how is it measured? What are their costs to support the free users? How big is their target market and their user base? The reason these issues are important is that Freemium may make perfect sense in a market that has 100s of millions of potential users, if the marginal cost to support a free user is near zero, but no sense in a market that has hundreds of thousands of users where the free users cost real money to support that cannot be fully covered by the paid user conversions.
Sadly, these statistics are not generally available as far as I know.
The rumor mill says that many Freemium app vendors are stuck in the 1/2% to 2% range and struggling to be profitable. Of course not all vendors have the goal to be profitable but rather are focused on gaining market share and traction.
BTW for those of you in the Silicon Valley/SFBay area we are running a Freemium Meetup on the 2nd Thursday of the month. All are welcome to come.
Thank you for sharing your findings Rishi!
I do aggree with Pascal, the red colour is a 'no no' for me as well. I understand what you wanted to do there, but maybe try a different, more neutral colour. Orange? - Just a thought.
The free plan looks viable and a good option to start with for completely new customers who just want to see what you guys are all about. So all in all, seems you are on the right track:) Best of luck!!!
Hi - Good insight and examples.
My suggestion is never miss an opportunity to appeal to the triune (reptilian) brain.
The limbic system is responsible for emotion, motivation, behavior, etc.
The most common technique for the appeal is to show attractive people doing real stuff. The Intuit page gets it, but then falls down with a rather murky offering.
People are far more likely to convert is they have an emotional tie to the experience.
Achieve this with some great photo stock. Madison Avenue uses the reliable pair of babies and bikinis, of course. Makes sense to show exactly what you want people to do (like Intuit).
Bottom line? Reflexive response from the triune brain will improve paid conversion across-the-board. -j
Great analysis and well written article. One trend I noticed throughout your analysis is the amazing free offers (dropbox and mailchimp) structure their plans to encourage the customer to try it, use it and eventually hit a threshold (storage space, subscriber list) that causes them to upgrade. This is very different from the companies that are segmenting customers based on a profile (# of users, features, additional support requirements, etc.)
Deciding which one is best for your company comes from knowing who your customer is and understanding how/why they use your product. From there you should be able to slice up the plans and maximize the # of paid users.
One last thing to consider, is there something novel you can give away for free that is unmatched by all of your competitors? Think back to when Gmail launched and was offering 1Gb of free storage space with every account. Always a great way to break through the clutter and get people talking about your product.
Best of luck and I hope to read a follow up post down the road about how things turn out.
Great analysis and great examples. On the question of prices increasing or decreasing as you read left to right, Lincoln Murphy explains why they should decrease
You did not mention Google Drive in it. Any reasons?
Great analysis! Here are my answers to your questions:
How generous should our Free plan be?
-> As generous a Free plan should be. Give them an incentive to look at your product and know a bit about it. Give them a chance to try it. Does not mean give them access to full product.
What limits should we place on it?
-> Time limit of 30 days, if it's applicable. Most users are busy and they may not get a chance to even look at the product if you put a time limit of under 30 days.
We need our free plan to be something amazing so people will sign up. However we don't want it to be so amazing that they don't ever need to upgrade.
-> Exactly! Give them a sneak peak and incentive to try it out. And you can do that for asking them to try it out free for XYZ time. So if you have 10 features in your product, offer 3-4 features for free so that they know what your product is about and how it works and how it can benefit them.
Hope this helps.
This is fantastic Rishi. I'm going through the same exercise with my start-up.
A couple of thoughts:
- Have you considered a 30-day trial period? One that includes real-time analytics? My thinking here is that this forces engagement as/when the account hits that 30-day mark, which you can treat in a couple of ways. Either you can let it go (if the data says that's the right thing to do) or you can reach out to offer an extension or even a little support/guidance.
- Is it necessary to offer a free trial at the Pro and ProPlus levels?
- Is there an opportunity for "enterprise" customers, the services/features of which would go above/beyond the three tiers you've defined at this point?
Nicely done and thanks for sharing.
Freemium? I'm just hearing this word for the first time. But i pick your idea and analysis. You truly seem to understand your prospect. Nice one
Hello, thanks for this great article.
I'm not sure placing the highest price on the left is a good thing, because I think you'll lose some people that read too fast and that think you product is too expensive....
The standard is free to expensive from left to right, I think it's better.
The dropbox aproach is very interesting to gain new customer in a viral way .
Nice compilation. I'm in the process of making pricing page for my startup. My SaaS targets enterprise customers as well. How to deal with enterprise customers in SaaS model? Do they use our credit-card recurring billing system or they prefer someother mode of payment?
I like your detailed review of online pricing.
I personally always have a problem deciding between free and paid version. One of our free software utility is downloaded by more than 10,000 users but never able to convert it in paid version.
Recently we are in the process of launching an Online ERP for trading business. In start we are planning to give its trial version also but when we analyzed this option we feel following issues
1. It’s a complete ERP hosted on Windows server and using Microsoft SQL Server hosted at Rackspace. So we need to pay money to keep the server online
2. We are keeping separate database of each client, so we need to provide separate database even for free users
3. In our case we had one more issue of data security so we are offering complete solution that they can host on their server.
I feel a company which is not funded by outside and supporting its product from its resources it’s an expense. So we took other way
1. We are providing fully working demo version
2. We are trying to provide as much documentation as possible including video.
Let me know what your views are and how we can make our offer better.
Thanks & regards,
Hi, great article. And actually we did the same: Looking how others are doing. But to make the highest prices left, we'll consider now. It would be really nice if I get some feedback on http://tingl.com/en/plans_and_pricing
BR, Erich tingl live chat and click to call contact button | Plans
"what is free has no value"...
you said you were going to put the highest pricing on the left going down towards the right but the picture at the end has the opposite, why?
Fascinating article, especially the tip from Wufoo about placing the highest price on the left.
I was wondering if that would still be as effective with less pricing options - let's say with three rather than five?
A hunch tells me not, but it's just a hunch.