What Happened After SaaS Companies Introduced Free Offerings Last Year
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Various companies introduced freemium or free trial offerings to boost user engagement and conversion rates. These initiatives led to significant increases in sign-ups and new paying customers, contributing positively to business growth. Companies noted the importance of these strategies in enhancing their customer base and revenue pipeline.
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Introduced a free tier in July
• Introduced a generous perpetual free tier for developers in July
2020.
• Free tier includes 100 GB of data per month. This replaced
products that developers would have previously paid for.
• Result = 10x the number of developers are actively using the
product within that level of usage; saw modest downshift in
revenue from those who’d otherwise be paying; up to 1,000 free
to PAYG customers as of February.
• KPIs = Free tier adoption; developer engagement; revenue
cannibalization; conversion to PAYG customers.
• “We’re really encouraged by the early signs of success with
[the] free tier… in the first few months, we are seeing 10
times the number of developers actively engaging with the
platform at those previous couple of thousand dollar spend
level.” – CPO Bill Staples
Source: https://www.fool.com/earnings/call-transcripts/2021/02/05/new-relic-newr-q3-2021-earnings-call-transcript/](https://image.slidesharecdn.com/saasfreeofferings2020-210224222043/85/What-Happened-After-SaaS-Companies-Introduced-Free-Offerings-Last-Year-17-320.jpg)
What Happened After SaaS Companies Introduced Free Offerings Last Year
- 1. Freemium – Websites + Marketing Freemium – 10 users free, all products Freemium – Free community edition Lower price – 50% discount for Starter Suite Freemium – Free for teams Free trial – 14 days Free trial – Free April Freemium – Video meetings Free trial – Up to 90 days Freemium – Free for up to 5 users Freemium – Free tier Freemium – Free for teams
- 3. Introduced freemium in 2020 • Tested freemium as a small-scale experiment in Spring 2020 for their Websites + Marketing product. product. • Have since increased the experiment to 50% of US visitors. • Result = Millions of new sign-ups, higher than expected conversion. • KPIs = sign-ups, 7-day conversion, 90-day conversion rates. • Freemium is a “tailwind to our business for years to come.” – CEO Aman Bhutani Source: https://seekingalpha.com/article/4405547-godaddy-inc-gddy-ceo-aman-bhutani-on-q4-2020-results-earnings-call-transcript
- 5. Added free tiers for all products in Fall 2019 • The products are “always free for 10 users” • Now any user at an existing customer can sign up for a free version – they don’t need admin approval to get started. • Result = higher TOFU, longer tail of conversion, conversion, net revenue headwind for the fiscal fiscal year. • KPIs = sign-ups, active usage, adoption of new products among existing customers. • Free is building “a big base of customers and potential customers underneath our business.” – CEO Mike Cannon-Brookes Source: https://seekingalpha.com/article/4401891-atlassian-corporation-plc-team-ceo-scott-farquhar-on-q2-2021-results-earnings-call-transcript?part=single
- 7. Launched free community offering in Q3 2020 • The free product includes an unlimited number of of users and repositories, but with limited storage (2 (2 GB) and CI/CD minutes (2,000). • Goal was to create a a friction-free way for users to to evaluate JFrog products before purchase. • Result = big increase in registrations, free sales pipeline. • KPIs = new registrations, sales funnel influence, conversion from free to paid, enterprise-scale subscriptions originating from the free offering. • “We continue to see rapid adoption of this free version… thousands of registrations choosing JFrog, starting as users and then entering the sales funnel.” – CEO Shlomi Ben Haim Source: https://www.fool.com/earnings/call-transcripts/2021/02/12/jfrog-ltd-frog-q4-2020-earnings-call-transcript/
- 9. 10 Launched a 14-day free trial • Despite an average new deal size of $100,000+, Appian launched a 14-day free trial in 2020. • The goal is to put the best foot forward during the “hidden” part of the sale before a customer would usually contact Appian. • Result = some influence on pipeline; appears to be too early to tell. • KPIs = sign-ups, pipeline development • “I think it was a really good step and… we’ve experienced some good pipeline development as a result of our free trial… I think it suits our situation pretty well even though you might not have expected it from an enterprise software vendor.” – CEO Matt Calkins Source: https://seekingalpha.com/article/4407317-appian-corporations-appn-ceo-matt-calkins-on-q4-2020-results-earnings-call-transcript
- 11. Increased free trial length from 14 days to 90 days in the pandemic • During the height of the pandemic, Shopify increased increased their free trial length. They’ve since moved moved it back to 14 days. • When the trial was extended, Shopify saw a “dramatic” increase in merchants coming to the platform; however, that slowed toward the end of the the offer period. • Result = Acted like a promotion – increased sign-ups; ups; conversion rates were high quality; likely slowed slowed down free to paid conversion. • KPIs = Sign-ups, free to paid conversion. • “We will selectively deploy it going forward. We think generally the 14 day free trial is working well.” – CFO Amy Shapero Source: https://www.fool.com/earnings/call-transcripts/2021/02/17/shopify-shop-q4-2020-earnings-call-transcript/
- 12. Offered free access to its platform during the month of April • Ran Free April as a campaign at the height of the pandemic. It generated more than 1 million new user user sign-ups (for context, they had 1.3M total paying B2B users when they launched it.) • Despite the free month, were able to maintain B2C B2C billings and improve revenue year-over-year. year. Meanwhile, it generated pipeline for the B2B B2B offerings at a very low cost per acquisition. • Result = Higher demand for the product, more B2B B2B pipeline, low cost of acquisition from free leads. leads. • KPIs = Sign-ups, individual engagement,. B2B pipeline generation, CAC payback. • “It’s by far been our most successful campaign that we’ve ever had.” – CFO James Budge Source: https://www.fool.com/earnings/call-transcripts/2020/07/30/pluralsight-inc-ps-q2-2020-earnings-call-transcrip.aspx
- 13. 14 Reduced the price of its Starter Growth Suite to $50/month • The price was slashed by >50% from $113/month to $50/month. • The idea was to offer small customers all the tools they need to grow. • Result = record new customer growth, from 3-4k per quarter to 8-9k per quarter. • KPIs = new paid sign-ups, usage rates, retention rates, upgrade rates. • “And boy, that’s done really well. We’re very happy with what’s going on here. Customers are signing up. They’re being retained nicely. They’re upgrading.” – CEO Brian Halligan Source: https://www.fool.com/earnings/call-transcripts/2020/11/06/hubspot-inc-hubs-q3-2020-earnings-call-transcript/
- 15. 16 Made Cloudflare free for teams • Launched Cloudflare for Teams in January and made it free for any business from March until September 1. • Claimed that “thousands of companies ranging from small businesses to Fortune 500” took the offer; saw 75% free to paid conversion on the product. Decided to extend the free offer for small orgs and small teams. • Result = Added 10,000 paying customers in Q4 2020, almost as many as they had in all of 2019 • KPIs = Free sign-ups; free to paid conversion • “The acceleration in paying customer growth was primarily driven by increased new product adoption from free to paying customers.” – CFO Thomas Seifer Source: https://seekingalpha.com/article/4405572-cloudflare-inc-net-ceo-matthew-prince-on-q4-2020-results-earnings-call-transcript
- 17. 18 Introduced a free tier in July • Introduced a generous perpetual free tier for developers in July 2020. • Free tier includes 100 GB of data per month. This replaced products that developers would have previously paid for. • Result = 10x the number of developers are actively using the product within that level of usage; saw modest downshift in revenue from those who’d otherwise be paying; up to 1,000 free to PAYG customers as of February. • KPIs = Free tier adoption; developer engagement; revenue cannibalization; conversion to PAYG customers. • “We’re really encouraged by the early signs of success with [the] free tier… in the first few months, we are seeing 10 times the number of developers actively engaging with the platform at those previous couple of thousand dollar spend level.” – CPO Bill Staples Source: https://www.fool.com/earnings/call-transcripts/2021/02/05/new-relic-newr-q3-2021-earnings-call-transcript/
- 19. 20 Introduced a free tier • Introduced a free plan in September 2020. This is meant for small teams of 5 or fewer. • Highlighted that they have strong gross margins, giving them room to experiment with freemium. Freemium helps build the brand and expand their reach. • Result = Still in the early days (<2 months of data until the earnings call); claim that they’re seeing “really good conversion rates so far.” • KPIs = Free account sign-ups; free to paid conversion; brand awareness. • “Our new free offering has been well received and the number of companies benefiting from our platform, both paid and free, grew by more than 18% over the prior year.” – CFO Howard Wilson Source: https://www.fool.com/earnings/call-transcripts/2020/12/04/pagerduty-inc-pd-q3-2021-earnings-call-transcript/