Inside Retool’s new free plan 💰
The gist: how to test and launch new pricing
Welcome back to the sixth edition (!) of The Gist by Growth Unhinged, real-world growth tactics you can actually use. So far you’ve 😍 editions about free-to-paid conversion including:
Usage paywalls for your free and/or paid plans
Smart trials to drive free-to-paid conversion at scale
This time let’s take a (baby) step back.
How do you design, test, and launch free plans in the first place?
It’s an important question because product-led companies almost universally allow prospective users to try-before-they-buy, delivering value before capturing value. But many free plans fall flat and fail to live up to expectations. User growth may never materialize – but cannibalization certainly can.
Retool, which allows folks to make custom internal tools, introduced their new free plan in July 2022 alongside announcing a $45 million fundraise at a $3.2 billion valuation. By all accounts the free plan has been a big win for Retool.
It wouldn’t have happened without this critical step 👇
👋 Hi, I’m Kyle from OpenView and welcome to my newsletter, Growth Unhinged. Every week I explore the playbooks behind the fastest growing startups from Airtable to Zapier. Join 19,000+ founders, investors and practitioners for an unorthodox take on how to scale faster.
The gist
Prepare a go-to-market (GTM) plan when launching new plans – and free plans in particular – to maximize your chance of success.
Why you should care
Introducing a free plan comes at considerable time, expense, and risk. There are many potential failure modes that could cause it to backfire. Of course, we naturally think about product-related failure modes like:
The free product is too complex for new users to self-onboard without a sales rep
The free product gives too much away for free, leading to cannibalization of paid plans
The free product doesn’t give enough away for free, attracting the wrong audience or setting up churn issues down the line
One failure mode you might not have fully considered: you didn’t maximize your chance of success out of the gate with thoughtful personas, positioning, acquisition campaigns, and launch plans.
Retool makes for a great case-in-point. The stakes for Retool were high as the company had raised a Series C2 at a $3.2 billion valuation and had seen more than 500,000 business apps built on its platform since it was founded in 2017.
They had a strong hypothesis that a free plan would have a positive impact on both the company and its customers – but the results weren’t panning out as expected.
As Head of Business Operations Ali Benslimane told me, the company tested two versions of a freemium plan in different markets – neither of which was a runaway success.
It wasn’t until the public launch that Retool realized the importance of product marketing and a comprehensive go-to-market (GTM) plan. The public launch of freemium has far outperformed either of the experiments, which Ali chalks up to a better website, more excitement around the launch, and better positioning of the features. “You can have the best product, but if you don’t have marketing around it it’s useless,” Ali admitted.
Tell me more
Most modern SaaS companies start in the cloud and move to on-premise later. Not Retool. Founded in 2017, Retool was built with a notion that developers would want access to both self-hosted (VPC) and cloud-hosted offerings. “If we want to be the software that people use for their most critical projects, we need to offer both cloud and self hosting,” stressed Kevin Garcia, Retool’s Head of Product Marketing.
With that context, Retool doesn’t see itself as a canonical PLG company, at least not from the start; Retool’s early success was heavily sales-driven. They did apply some product-led techniques, though, in order to give developers a taste of the product before asking them to pay.
Pulling up an old version of Retool’s pricing page from April 2022, a couple of things stand out.
There was a freemium offering, but it was quite limited. Developers could build unlimited apps, but only in the creator view. In other words, they couldn’t see how end users would react to it or collaborate with prospective end users.
There was a separate free trial offering; however, it was restricted to just two weeks. In Retool’s experience, that wasn’t enough time for the average user to build something useful.
The team had a hypothesis that there had to be a better way to leverage freemium and free trial offerings as part of its GTM strategy. They were optimizing for a few different factors:
Make Retool as open and accessible as possible to support Retool’s vision of the future of software development
Attract a big pool of users at the ‘base of the pyramid’ who are using Retool’s products regularly (North Star metric: # of active customers)
Provide a smoother ramp from free to paid plans
This hypothesis led to a couple of different experiment iterations, for instance giving a certain number of app building blocks for free versus allowing a certain number of users for free. Retool tested these experiments in two different countries (Canada and India), and monitored the data. They also instituted a feedback loop with customers of the free plans in order to determine if they were seeing enough value in the free product.
“After reviewing the initial results in early May, we didn’t find any evidence that either experiment had significantly moved the needle on our goals,” confided Garcia.
All of this research led Retool to launch a modified third version. The new free plan includes an even more generous set of product features, an unlimited number of applications, and unlimited collaboration – but a cap of up to 5 users for free. This allowed Retool to show the true value–and full capabilities–of the product, not just a sampling.
Retool’s free plan launch has exceeded the team’s initial expectations and the results of their earlier tests.
Why: great product marketing.
Garcia took us behind the scenes into what their winning GTM plan looked like (see below).
Step 1 - Defining the target audiences
Retool had two key audiences in mind for this update.
Audience 1: Developers who are looking for a free way to build apps, but don’t know Retool
Audience 2: Developers who know Retool, but need to be introduced to our new Free plan
They wanted the launch strategy to optimize everything for these specific audiences: final pricing, messaging, user journeys, etc.
Step 2 - Aligning on a strategy to reach these audiences
The Retool team knew that developers were looking for a free way to build apps. The challenge was reaching the right developers at the right time in a cost effective and scalable way. This included honing the best marketing channels (ex: Twitter ads, developer newsletters) and winning offers.
Audience 1 strategy
Who they are: Developers at startups looking for a free way to build apps, but don’t know Retool
Sub audiences:
Those who don’t know that Retool exists (goal: create demand)
Those who are actively looking for a new tool (goal: capture demand)
Channels:
Demand creation: Twitter ads, developer newsletters
Demand capture: Emails to Google ads based on keywords, SEO backlinks
Offers:
Demand creation: Updated pricing page and new blog post (lessons learned are an attractive blog topic for startups that look up to Retool)
Demand capture: Updated pricing page
Audience 2 strategy
Who they are: Developers who know Retool, but need to be introduced to our new free plan
Sub audiences:
Developers evaluating Retool (goal: conversion)
Existing free plan customers (goal: evangelism)
Churned customers (goal: win them back)
Channels:
Conversion: Homepage update, web banners, email
Evangelism: Email
Win them back: Email
Offers:
Conversion: Updated pricing page
Evangelism: Their free Retool experience just got upgraded!
Win them back: A new experience more aligned to their needs
What else you should know
Our team at OpenView released the 2nd State of Usage-Based Pricing report. Three out of five SaaS companies now have some form of usage-based pricing, up from 45% in 2021. But the real trend is toward more complex, hybrid pricing models that combine usage-based pricing alongside subscriptions. Grab your copy.
Rob Litterst is back with his newsletter
, which breaks down SaaS pricing strategies. It's a must-read for anyone working on subscription products. (The latest edition covered Notion's pricing change.)SaaStr’s Jason Lemkin gets real about PLG being the answer to near-term profitability.
Have you seen Canva’s product velocity lately? It’s crazy… and Blake Bartlett has got you covered in this viral PLG123 video.
What tool or tools, did they use (sorry to be confusing), when triggering the Paywalls and handling the upsells? Did they build on top of Stripe?