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Trade-offs between freemium and free trial business models
Freemium is oriented towards user growth, whereas free trial is oriented towards revenue.
- Acquisition — Free trial products have higher conversion from website visitor to signup, translating into faster and more efficient top-of-funnel growth.
- Conversion — Free trial products have 2-3x higher free-to-paid conversion because they create urgency to make a purchase decision.
- Time-to-value — Freemium products give users more time to use the product, share it with their team, and form a habit.
- Time-to-purchase — Free trial products have faster conversion as users buy upon trial expiration.
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Use reverse trials to get the benefits of both freemium and free trial
In a reverse trial new users start with a time-limited trial of your paid features. At the end of the trial, they can either buy or downgrade to the free tier.
This lets you pursue both acquisition (more people get to experience the product) and conversion (more people convert to the paid plan) goals.
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Reverse trials need a compelling reason to work
Reverse trials rely on loss aversion to work: people are twice as likely to buy if they stand to lose something than if they are to gain something.
So to make the most out of reverse trials your paid plan must be compelling enough to justify the purchase at the end of the trial.
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Decide which features should be in the free and paid plans
The free plan should have features that enable and accelerate top-of-funnel user growth. You can identify these by drawing lines around your most adopted core features.
The paid plan should have features that generate value for your user personas, such as:
- Moat features: High switching cost or powerful network effects
- Sticky features: Once a user starts using this feature, they pay more to use more
- Sophistication features: Deeper, more complex feature usage
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Reverse trials are a good middle ground between freemium and free trial models
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