Welcome at the londonbusinessblog.com Exchange, a weekly newsletter about startups and markets. It is inspired by the daily londonbusinessblog.com+ column from which it takes its name. Every Saturday in your inbox? Register here.
The recent OpenView-Chargebee 2022 Report had SaaS benchmarks as a focus, but also touched upon in passing on a topic I was curious about: reverse trials, a pricing model that offers SaaS companies a middle ground between freemium and free trials. Let’s investigate. — Anna
A binary choice?
As more SaaS companies adopt product-driven growth (PLG), a sales method where user conversions are driven by the product itself rather than a sales force, founders often face a pricing model dilemma. If their startup opts for a freemium model, most users will never get a taste of the premium features reserved for paying users. But if the company offers a free trial with a limited time, users who don’t become customers at the end of that period may be gone forever.
There are many other pros and cons to freemium and free trials.
As OpenView partner Kyle Poyar told me, “For example, freemium models drive more acquisition and signups for your product, while free trials have fewer signups but a higher conversion rate from free to paid.”
As a result, founders often think they are faced with a binary choice, Poyar said. in a interviewAirtable head of growth Lauryn Isford told him that these two choices are often seen as prioritizing user growth (with freemium) or revenue growth (with free trials).
However, Poyar doesn’t think that freemium vs. free trials is the only alternative. For companies to “get the best of both worlds,” he and OpenView argue for the inverse pilot model exemplified by Airtable. But what are reverse trials about, and are they for everyone?