Why free plans DO work

I frequently argue with Matt (the other UsabilityHub co-founder). More often than not it is for recreation, but occasionally we also argue about things that matter, like business decisions. Neither of us are business minded, neither of us have an MBA and this is the first time either of us have run a business. Still, I figure that makes us at least as qualified to have an opinion as anyone else. Our current topic of argument is the merits of free plans. With UsabilityHub we have a very big "free" user base.  For every 15 sign ups we get, only 1 or 2 will be for a paid account. On any given day, around two-thirds of our tests are created by "free" users. Our freemium model also means that around half of our support queries are from "free" users.

The current trend in the web product world is to ditch free or hide free . I read a great article on the topic yesterday. Ruben Gamez from Bidsketch makes some great points on why free doesn't work. Some companies are dropping free altogether (like his) and report upwards of 800% increases in revenue. Others demote their free plan to a teeny weeny little link beneath their regular plans in the hope of encouraging more users to select a premium plan. If you're going to have a free plan, be proud of it. Don't hide it. That just comes off as being sneaky. If you believe free is the way to go, have the balls to stand behind it. Free plans can work. Free plans DO work. Ditching your free plan will  most definitely NOT guarantee you an increase in sales. In fact, it may well be the worst thing you ever do.

For us, our biggest fans are our free users. Our paid users aren't nearly as vocal about our products as our non-paid ones. I've not once seen a Tweet saying, "hey everyone, look at this great $50 a month product", yet we frequently have blog posts, articles and tweets telling the world to check out our free product. "Free" puts us in direct contrast with every single one of our competitors. But that's not even the best part. Our free users ARE our product. Our usability testing is conducted by the same people that other companies don't want the hassle of dealing with. Our competitors charge hundreds of dollars per usability test, and thousands per year and yet you have to bring your own testers! You get given the tools, but you still have to source your own results. Madness! We leverage the goodwill of our community and in return give them free usability tests. It's a win-win-win situation, and we all know that is the best possible outcome.

It's easy to say that we're in a special position in this regard, but that's because we put ourselves here.  We created Fivesecondtest and our other UsabilityHub products from the ground up with this model in mind. Our free product isn't a demo or an artificially restricted version. It operates with a completely different dynamic, with a completely different set of users in mind. We don't expect our free users to upgrade. Think about it; If your project management tool works great for free with one 1 project, and I only have one project, then I will never ever buy your product. EVER. End of story.  To me, this is obvious. If you're doing freemium like this, then you're missing the point. Ok, so we know our free people will never upgrade. But rather than seeing them as a burden, we can actually leverage them. We can get value beyond dollars and cents. For example, if you're so concerned about offering support to free users, why are you doing it? Set up a forum for self-support. Let your free users help each other. You never need answer another support email again! You'll find that they're more than capable with very little input from you. Solve a problem once, don't spend every day of your life re-writing the same emails.

Free users are also a great marketing tool. You don't need 100,000 users to get value from word-of-mouth marketing. Make it part of your product. For our free users to get results more quickly, we ask that they tweet their tests, or post them to facebook, or even email them. By sharing their tests to 10 of their friends, not only do we not have to provide results for that test, but those new testers will go on to do even more tests. They may even sign up themselves and become a new customer. If they don't it doesn't matter, they've already performed a valuable service. Nearly half of our traffic comes Twitter and Facebook. That's word-of-mouth working wonders.

Just don't tack on these features as an afterthought, make it part of your product. Make it a tool for your free users. Make them want to advertise your product. Make them sing for their supper. But even if these methods don't work for you. If you've got a business that definitely cannot leverage it's user base, there are still options. The best option is one where the end-user doesn't even get to choose to upgrade or downgrade. They're simply on whatever plan their usage dictates. Chargify is a perfect example of this (we love Chargify btw). You don't pay a cent until you start doing 50 transactions a month. This low entry point has seen them pick up over 2300 signups in the half year that they've been out of beta. The best thing about it is that every one of their customers WANTS to pay them more money. If you're on the $749 a month plan, that means you have over 5000 paying subscribers. Who wouldn't want to pay $749 a month for that?

Rather than not offering a free product at all, why not make every customer a free customer and adjust your pricing so that they start paying you only when they start becoming a burden? Free is still a great way to get new customers. But you have to smart about it. There is no point offering your premium product for free and expecting people to want to pay you. Shareware doesn't work, and your product is not Shareware. Take the option away from the user. Either the free version is all they need and all they will ever need, or they absolutely must have your paid version no matter what. You can't have both. If your user can exercise choice between free and paid, you've done it wrong. Users will nearly always choose free, even if it means more hassle. If you're offering your customers these choices, you're doing it wrong:

  • Can I live with 5Gb for free instead of paying for 10Gb? WRONG!
  • Can I live with managing 5 clients at a time or do I need to pay for 15? WRONG!
  • Can I live with only 1 person having access or do I need to pay for 3? WRONG!

If a user is making that decision, they'll more than likely make do with the lesser option. You can't stop that behaviour. The best thing you can do is just accept that your free users will always be free users, and target them appropriately. Make your free product a product designed for free use. Don't use your free plans as a means to get users to upgrade unless your product is something which the user simply has no choice but to upgrade at some point (like Chargify).

Focus on gaining value from your free users and stop trying to get them to pay; they never will. I agree when Ruben says to stop blindly copying others. That's a great rule no matter whose blog you're reading this week. This week's "7 ways to riches" is always going to be different to next week's. Rather than blindly following this week's guru, stop and have a think about what works for YOUR product. I want you to put a little bit of thought into making real use of your free users, rather than seeing them simply as an upgrade path or a burden. Whilst it's true that a free user will most likely never upgrade, there are still plenty of ways free users can actually ADD value to your business, you just need to find them.

7 responses
Great article thanks for taking the time to lay out your thoughts. I'm not sure I followed at the very end though. Could you give examples on how to do it (those three examples) right? Thanks.
The main takeaway from this I think is that Free!=Trial. If you want to offer a trial, offer a 30 day trial. Limiting the usefulness of your app assumes either a) people will need more, and b) they'll be willing to pay for more than what they're getting for free. That's a big assumption. Worse than that, on a free plan they're less committed to your product BECAUSE you've restricted their usage. You're actively combating the need for them to upgrade by ensuring they have a lower reliance on your software. Rather than find ways to take advantage of your product, they're going to be busy finding ways to keep under 5Gb.

So what to do instead? Well there are plenty of options. Rather than finding ways to get the free user to pay, offer a distinctly different experience. Don't limit their usage of your apps, but perhaps limit other things such as export/import options, or features only applicable to "power users". Or go down the route of Open Source software, give it away for free, let people get hooked, and then charge them for support and training.

The point is there is plenty of ways to make money beyond putting artificial constraints on your software that actively prevent people getting hooked on your tools!

Our method is to ask free users to "do tests to earn tests". They can create as many tests as they like, and collect as many results as they like, but their means of achieving that is a totally different experience to that of a paid user.

Get creative!

I completely agree with this - thanks for putting this forward so clearly.

I'm launching a new skill testing service for screening candidates for programming jobs, and I didn't want to turn away any programmers who weren't necessarily interested in screening or interviewing anyone at the moment. I figured a lot of programmers would be interested in trying the tests themselves, regardless of any present or future use for it, and word of mouth in the community could get it into the hands of prospective customers much better than I could with any paid advertising.

So I had to support 'free' users and I used an inherent feature of any skill test to differentiate between free and paid use. Tests are useful (to screen candidates) only while their content (test problems) are secret. Over time, enough people take them that the content is as good as publicly known. At that point the test problems are only good on the honour system, which isn't much use to screen candidates.

So the way I do it with my service is this: premium users get access to tests with secret test problems (the norm for any skill test), free users get access to tests with 'open' test problems. New test problems go into the secret or private pool, and as they get older they are moved to the open pool.

Thanks for the post!

Hi Karan,

That's the exact kind of thinking I'm trying to encourage. What you have is essentially "left overs" which would otherwise be discarded. Why throw them away when you can use them as part of your sample product! Great thinking! Even better, you're not diluting the secrecy of your questions on people just testing it out. I think that is a really good solution.

Great stuff, and thanks for sharing!

Alan, thanks for the encouragement!

As you say, to not waste any 'outed' problems was exactly the point. There is no way to prevent problems from being openly disclosed at some point and rather than being discussed elsewhere on the web, I figured I'd feature each open problem in a detailed blogpost on the product's blog, and invite a debate right there. (That also gets me SEO benefits, have to admit.)

This is a great post! It's an interesting take on the whole thing. I like the scrapy mindset regarding the way you make use out of free users. I still think that in many cases the value gained by free users can't translate to enough resources to provide kick-ass support without paying a price in some other important area of the business. But of course, the correct answer is to always test because what works best is often a surprise.
I totally support the "freemium" model you guys have adopted.

I think you'll drive a lot more volume this way and work out the kinks much faster than if you just charged for the service.

Have you ever considered linking this up to Amazon's Mturk for premium accounts?

PS. Go Melbourne...