Free Trial, Freemium, or Demo Model?
Each business, product, service or industry can be very different, and there is no one fits all approach. These models don’t always work hand in hand or are suitable for a specific product or audience.
When deciding between a free trial, freemium, or demo model, you need to be extremely careful and consider many things.
First, let’s take a quick look at the different customer acquisition models to build the context around this report.
|Freemium||A freemium model is a customer acquisition model that provides access to part of a software product to prospects free of charge, without a time limit.|
|Free Trial||By definition, a free trial is a customer acquisition model that provides a partial or complete product to prospects free of charge for a limited time.|
|Demo Model||This can be done in a number of ways but ultimately they don’t trust or know the product, they want to see the big picture of how a new software tool can grow or help the business, if it can solve their problem and at what cost.|
Are you a Blue Ocean or Red Ocean Product?
Understanding the market your product competes in has so many factors to how you will acquire customers.
Blue Ocean Companies
Access untapped market space and create demand, so there is an opportunity for highly profitable growth.
In Blue Oceans, competition is irrelevant.
Yes, imitators arise, but experience shows there is a wide window of opportunity to stay ahead of imitators.
Red Ocean Companies
Try to outperform their rivals to grab a greater share of existing demand.
As the market space gets crowded, prospects for profits and growth reduce.
Products become commodities, and cut-throat competition turns the bloody ocean red.
To put it simply, if you’re competing in a red ocean, you’re fighting to capture existing demand, whereas, in a blue ocean, you’re creating demand.
If you’re creating demand, there’s often a heavy learning curve – you need to educate your market on why your new way of doing something is better.
If you start in a blue ocean with a completely no-touch, self-service model, people won’t understand how your product helps them and it will probably fail.
Operating in a blue ocean doesn’t necessarily rule out a self-service model. However, you need to ask yourself, how does this tie into your business model and marketing strategy?
What are the tradeoffs between freemium models and free trials?
Either way, the customer will need to learn how your product works.
While also trusting that it can handle their particular use case or solve the problem.
Suppose your product fails to perform as advertised on a free trial. Do you lose them before they understand the product and benefits?
This is where your need to ask yourself would a freemium model help this?
Is freemium a viable pricing strategy?
Freemium is considered more of a marketing strategy, not a revenue model. It is used in the hopes that the value the user can find in the premium tier will entice prospective customers to upgrade to the paid version.