The freemium dilemma.

Figuring out your sales and pricing model is always taxing. In the glamorous world of SaaS, it seems even more challenging because you want to weigh revenue generation with ease of customer acquisition. So before we came up with our initial pricing model for Talu we decided to consult with other SaaS CEOs to get their take.

We needed to know what people were willing to pay for, and our feedback was dependent upon getting consumers into our product for free as fast as possible. This would allow us to keep our customer acquisition costs to a minimum while simultaneously growing a group of product “evangelists.”

We found offering a product for free to all users was not syncing well with our “bootstrap” mentality. The more users we comped, the more it cost us in expenses (processing power, customer service, data storage, etc.). To date, we have financed Talu personally, so this “free” thing was not looking so good to our bank account.

Our challenge, like many start-ups before us, became figuring out if having a large base of freemium users was beneficial to our sales and marketing efforts and, additionally, if it outweighed the costs of servicing these free users.

The dilemma for us now was reconciling with our business philosophies, which were founded in bootstrapping, and charging a fair price for the value of our product. We didn’t want our business philosophies to cloud our judgement, but we also didn’t want to go against our beliefs.

For now we came up with the following:

Free Period

Well, let’s restate: Offer a Free Period for Beta Users
Why? Because we love you. But also, this allows us to get feedback immediately while still managing our costs. This allowed us to get our software to market sooner as we didn’t have to build some of the payment and account functionality to support these customers.

Offer a Full Demo of Our Product Right on the Marketing Site

This is a killer concept we learned from Baremetrics; we loved how they “ate their own dog food.” No trial for them! They put everything right out there and even had the cajones to put in their real data.

Offer a Free Trial

We decided to offer a limited free trial so users could see the product with their data before committing. We figured we didn’t want to give something away for free indefinitely, but we wanted to make it easy for users to try our product. Like a very respectful first date.

We are currently transitioning from our free beta period to free trial model. We hope our initial pricing and sales model works for now, but we are pretty sure we will learn a lot from our users and have to tweak a few things once we get started. As always, we will share our experience with you here. Stay tuned!