3 min read

The case for free plans

The case for free plans

PROBLEM 

Most things in life are not free, yet most softwares out there have some kind of free offer allowing users to use a limited number of features.

This is very bad for a lot of reasons.

1 – What kind of people do I want to attract to my SaaS?

Users are used to get stuff for free. Now people EXPECT that software should be free, too. In addition, they want more and more. For example, even if my software has an entirely free plan I’m constantly asked in the chat if we have a trial for paid plans.

That means that I’m attracting a lot of cheap people who don’t want to invest in themselves or their business and just want to use the free resources for life.

2 – The cost of offering free features

Guess which users use the most of your resources? Free users, of course!

Most startups use free features and actually take a loss (they burn money) to attract potential users. This is OK if you are starting out and have the budget for it, or you cross sell a lot of things to ramp up your average sale value (like McDonald’s does).

Most of the time it’s very bad because it attracts people who are never going to buy.

Since free users are going to be the majority of your user base, that also means more support tickets coming from them, more server costs, costs to nurture them and more overhead in general. Instead, you should be focused on serving the customers who best support you the most. Also, the most of your resources should be routed to the paying customers.

3 – Perceived value of the business

A free plan will automatically discount your solution in the mind of a prospective buyer. That’s it.

4 – Supporting the work

A SaaS is a business. As such, it means it provides value to people who are working in/on it. For me, as an indie maker, it literally puts bread on my table. We need to tell this story to customers because they buy not only because they need a solution to their problems but also because they want to be part of a story, they want to be part of your journey.

To me, it’s ridiculous that people spend $20 on the most useless things, but they won’t spend $1 on something that can help them.

Thank God most people are not like this. There are a lot of people who just buy to support my vision and my work.

 

CASE STUDY 

As a case study, I’m opening my kimono and showing you the difference between a software which has a free plan (Angage) and a software that does not have a free plan (ScrapeBook). See the attached image for reference.

The comparison is straight forward. The “Monthly Recurring Revenue per user” is far more on ScrapeBook than Angage. That’s because Angage has 3,000 users but only ~70 of them are actual paying customers, whereas ScrapeBook has no free users to support.

 

THE SOLUTION 

1 – Cut the free plan

I’ll be experimenting with cutting off the free plan from Angage. Maybe I’ll offer a short trial as a way to still get visitors info.

2 – Work on the USP

Cutting the free plan means you now have to convince people to buy so your marketing and USP should be on-point.

I’m planning on redesigning the landing page with a better story and layout.

Hope you enjoyed this short rant!
Let me know in the comments what you would do if you were in my shoes 

 


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