As someone who helps companies price their products, I’ve always been wary when I hear things like “we’re going to give our product away and worry about monetization later.”
Monetization is, of course, critical to the long-term viability of any startup. Founders who’ve struggled to fundraise are 3x more likely than their peers to say they monetized too late and 2x more likely to say they picked the wrong business model.
Yet 2020 proved to be the year when a free offering became an essential survival strategy.
SaaS companies quickly adapted to the COVID-19 pandemic by making their products available for free or at a steep discount. But then they realized that doing so had a real and positive impact for their business.
It wasn't altruism from companies with strong balance sheets. Pluralsight said their #FreeApril campaign was "by far our most successful campaign we've ever had," bringing in 1M+ new sign-ups. Atlassian said that free is building “a big base of customers and potential customers underneath our business.” It’s making it easier for existing Atlassian customers to try a 2nd (or 3rd) product - no need to ask an admin for approval. Atlassian is able to look at active usage rates to gain confidence that paid conversion will happen in time.
It wasn't just for traditional PLG or SMB companies. Appian Corporation, which sells new deals for $100k+, introduced a free trial. They realized that more and more of a purchase process happens before a prospect ever talks to sales. The product becomes an important marketing and sales tool. Nutanix, formerly known for their hardware, launched a Test Drive to “build your clouds your way in a few clicks." They're going down the route of "zero touch self-service for prospective customers." The result: "conversion ratios have been much higher."
It wasn't just about selling to individuals. While most free offerings are tailored to the end user, the goal is to go from user > team > company as fast as possible. JFrog said they've seen "thousands of registrations choosing JFrog, starting as users and then entering the sales funnel."
Here’s why I believe that free offerings are here to stay:
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