OnStartups

Selling Software: Why Free Trials Aren't

Posted by Dharmesh Shah on September 22, 2006 in sales marketing startup pricing trial 26 Comments


Some time ago, I wrote an article titled “Startup Tips for Enterprise Software Pricing”.  If you’re selling software to big companies, it’s likely worth a quick read.  When writing the article, I left a note to myself that I should revisit the issue of free trials and pilot projects.  I’ll look at pilot projects (for larger deals) next week, but this time, will explore the free trial a bit more.

Software Startups And The Free Trial
 
  1. Shifting Customer Risk:  One of the biggest motivations for offering a free trial to your product is the obvious one.  It reduces the risk for the customer to determine if your software meets their needs.  The idea is get more prospective customers to try your product, with the hope that this generates more sales.  There’s really nothing to argue here.  A free trial, in many categories of software is almost a requirement.   What you are trying to do is reduce the cost to the customer so that the potential benefit of your product outweighs the total cost of trying out your product.  But, it’s not that simple.  Simply making a “free trial” (for some period of time) available is not always sufficient to overcome this barrier.    We’ll look at reasons why.

  1. Time To Actual Enjoyment:  Often the actual price of your software is only a fraction of the actual cost a customer incurs to try your product.  Lets say you are charging $499 for some business application.  You give away a free trial of your product (downloadable via the web, of course).  However, it takes 4+ hours for them to download, register/activate, learn and play with your product before they can get to see the enjoyment/benefit they were promised.  In this case, the customer is spending more (in terms of time) than the cost of your product.  Just because you have a free trial doesn’t mean the customer is not taking risk.  The free trial is not always “free” from a customer’s perspective.

  1. Your Cost To Deliver Enjoyment:  In order to get customers to enjoy your product, how much of your company/s time/resources will be consumed (on average)?  Chances are, to deliver a great “free trial” experience (and increase the odds that more customers buy), you’re going to have to expend resources. Some of the cost is upfront (designing the “trial experience” from end to end) and some of it is after a customer has committed to try (like making support available).  Obviously, you should try and drive this cost as low as possible – but be careful that in doing so, you are not decreasing the odds dramatically that more customers will buy.  Offering free, human support to your trial customers may cost you money, but not doing so may prevent many customers from actually reaching that point of actual enjoyment.

  1. Intrusion Risk:  In today’s world of malware of all sorts, including both intentional malware (spyware, viruses etc.) and unintentional malware (the product uninstallation doesn’t work and hoses the customer system sometimes) customers are often weary of installing anything.  Technical folks don’t worry about this as much (because we have our ways of protecting ourselves and getting ourselves out of a mess if its necessary).  But, normal users don’t have this degree of confidence.  As such, if they suspect that your free trial may fall into one of the malware categories, there is a “cost” to them for taking that risk.  So, you need to make it abundantly clear to them that this is a low risk.  Ways to do this are to make them aware that installation (and uninstallation) will only take minutes.  That there are actually people working in your company (so if they do have problems, you’ll help them out).  Put yourself in the customer’s shoes and think of ways to ease their mind on this risk.    (Of course, if you have a product that doesn’t require installing any bits on the customer’s computer, that takes away a lot of this headache).

  1. Lock-In Risk:  Many of the free trials out there are “limited” versions of products.  I’ve actually worked with trial versions of products that didn’t allow “saving” a user’s work.  What I would do here is to make your trial “full featured”.  To really win over the customer, also provide a way to “get their data out” (even after the trial has expired).  For example, if you’re providing some email campaign management or other database-centric application (hosted or installed), make it easy for the customers to get their work out of your software (even if they decide not to become a customer).  This creates goodwill. 

  1. Price Ambiguity:  If you are going to offer a free trial, you really need to make your pricing transparent.  Don’t hide behind sales reps and pricing proposals sent to customers after they have tried the software.  Potential customers will be worried that if they try your software, if it does actually work and bring value for them, they’re going to fall in love with it and perhaps the price still doesn’t fit.  In fact, by being closed about your pricing, many customers will assume (sometimes rightly) that the free trial is just to lure them in, get them to fall in love with the product and then be “sold” when you, the software company have the most leverage.   This is the old car dealers trick (“I’m sure we can work out a price that’s just right for you, but why not take this baby for a test drive and first see if you like it.”)


Overall, I’m a big fan of the free trial.  It puts a lot of pressure on you to deliver value since you are assuming a large portion of risk.  An incidental benefit of the free trial (other than more customers) is that it will likely make your product experience better.  If your product sucks and nobody can figure out how to enjoy it, the free trial will make that painfully obvious very early in the game.  You won’t get many “conversions” to paying customers.