How Startups Can Maximize Conversions With Free-Tier Pricing
Done right, free tiers can act like quicksand to keep customers with you
Don’t put a free tier or free trial on your website arbitrarily. You’ll lose a ton of money.
I’ve seen and even built too many of these money-wasting free-tier offerings, and they can come from first-time founders and multi-million-dollar companies alike. These free tiers and trials fail the company for a lot of different reasons, but mostly because they never bring the customer prospect closer to recognizing the value of the product. In some cases, the free tier even pushes the prospect away from conversion.
It’s an easy mistake to make. Conventional wisdom tells entrepreneurs that if their product and business model is something brand new, customer prospects are going to need time and education to figure out how to make themselves successful with it. So why not open the doors and let them kick the tires?
Sure, that’s logical. But in a lot of cases, I’ve found that it’s harder to convert a prospect from free to paid than it is to convert a prospect from nothing to paid.
What I’ve learned is: If you’re going to have a free tier or free trial, you have to make it work like quicksand in the customer funnel. That is, keep customers stuck. In a good way.
What’s a Quicksand Free Tier?
Recently, I wrote a post about the goals of a free tier, which takes a more mechanical look at the function, limits and purpose of that tier or trial. You don’t have to read that post if you’re up to speed on what you want to offer for free. This post is a more subjective look at how that free tier should work in order to do what it’s supposed to: Maximize conversions.
Not long after that, I was talking with a colleague serial founder when the conversation wandered over to free-tier offerings, both in her business and my own, and we got into a theoretical discussion about free-tier conversions. The theory we were playing with was that it’s easy to set up the front end of a free tier or free trial, but it’s much more difficult to tie the back end of that free tier to conversions.