Free Trial vs. Paid Trial: Impact On ARPU

Free trials and paid trials are two common ways SaaS companies introduce their products to users, but they have different impacts on revenue:

  • Free Trials: Attract a high volume of users but often result in lower conversion rates (4-17%) and lower ARPU (Average Revenue Per User). They work best for simple products and self-serve sales models.
  • Paid Trials: Bring in fewer users but attract more serious prospects, leading to higher conversion rates and stronger ARPU. They are ideal for complex products and assisted sales models.

Quick Comparison

Aspect Free Trial Paid Trial
User Volume High Low
User Commitment Low High
Conversion Rates 4-17% Higher than free trials
ARPU Lower Higher
Resource Needs Higher (more onboarding) Lower (self-sufficient users)
Best Fit Simple products, B2C Complex products, B2B

Key takeaway: Free trials prioritize quantity, while paid trials focus on quality and revenue. The right choice depends on your product complexity, audience, and revenue goals.

How to Improve Conversion on Trial Offers

Differences Between Free Trials and Paid Trials

User Commitment and Intent

Free trials tend to bring in casual users, while paid trials attract those who are more serious. Why? Because paying – even a small amount – shows a willingness to invest. This higher level of commitment in paid trials often leads to better average revenue per user (ARPU).

Lead Quality and Conversion Rates

Free trials may bring in a large number of users, but the conversion rates are typically lower, ranging from 4-17%. On the other hand, paid trials bring in fewer users, but these users are often pre-qualified and more likely to convert. For example, Cooksmarts increased its conversion rates by asking for credit card details upfront. This approach filtered out less-engaged users and boosted engagement levels [4].

Trial Type Key Characteristics Typical Conversion Rate
Free Trial High volume, low commitment 4-17%
Paid Trial Fewer users, higher commitment Higher than free trials

Since paid trials focus on users who are already invested, they often lead to higher ARPU, even with fewer sign-ups.

Implementation and Resource Needs

Free trials usually require more resources to handle larger user volumes and varying levels of commitment. This can be particularly tricky for products that need complex setups [3]. Paid trials, however, are less resource-intensive. Users who have already paid tend to be more self-sufficient, which reduces the burden on support teams. By allocating resources more efficiently, paid trials can enhance user experience and improve conversion rates, indirectly boosting ARPU.

Effects of Free and Paid Trials on ARPU

Free Trials: Lots of Users, Less Revenue?

Free trials bring in a large number of users, but they often translate to less revenue per user. According to a study by Vimeo, while free trials can drive high user sign-ups, the customers they attract tend to generate lower revenue [5].

This comes down to conversion rates. With free trial conversions typically falling between 4-17%, companies need to manage a much larger user base to hit revenue goals. This often means investing more in user support and onboarding resources.

Free trials prioritize quantity over quality, whereas paid trials take a different route, focusing on maximizing ARPU through better user selection.

Paid trials excel in maintaining stronger ARPU by attracting users who are genuinely interested in the product. Companies like Ahrefs and Surfer SEO have shown how adopting a paid trial model can lead to consistent revenue growth while cutting down on support costs [1].

By charging for trials, businesses filter out casual users, resulting in higher-quality leads. This approach creates predictable revenue and minimizes marketing expenses, directly boosting ARPU. Paid trials also allow companies to stick to their pricing without relying on heavy discounts, appealing to users who see the product’s value and are more likely to stick around as loyal, high-paying customers [2].

Although paid trials might bring in fewer users initially, the ones who do sign up are more likely to stay longer and spend more. This makes paid trials especially effective for companies with complex offerings or those targeting professional audiences.

Choosing between free and paid trials ultimately comes down to aligning your trial strategy with your ARPU goals and long-term growth plans.

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Factors Affecting Trial Model Success

Product Complexity and Onboarding

When dealing with complex products, paid trials often bring in users who are committed to learning the platform. This allows companies to allocate onboarding resources more effectively, focusing on those who are genuinely interested [1].

Why do paid trials work well for complex products?

  • They attract users who are serious about investing time in understanding the product.
  • They allow companies to dedicate their onboarding efforts to high-potential prospects.

On the other hand, free trials are a better fit for simpler products with user-friendly interfaces. These trials let users experience the product’s value without requiring heavy onboarding efforts. While the complexity of your product plays a big role in choosing the right trial model, knowing your audience and understanding the market are just as important [3].

Audience and Market Characteristics

Your audience’s traits and your market position are crucial in selecting the best trial model.

Market Segment Optimal Trial Type Typical Conversion Rate
Enterprise B2B Paid Trial 18.6%
CRM Platforms Free Trial 29%
B2C Services Free Trial (opt-out) 48.8%

Take Netflix and Amazon Prime as examples. These companies show how free trials can dominate in B2C markets, achieving conversion rates of 93% and 73%, respectively [1][2]. Beyond audience and market factors, aligning your trial model with your sales strategy can greatly impact outcomes like ARPU (average revenue per user).

Sales Strategy: Self-Serve vs. Assisted

Your sales strategy ties together product complexity and audience needs, influencing the success of your trial model. For self-serve products, free trials work best by allowing users to explore independently. In contrast, paid trials are often better suited for assisted sales models, where personalized support justifies the cost [3].

Here’s how sales strategy impacts trial models:

  • Self-serve products: Automated onboarding and interactive guides make free trials effective.
  • Assisted sales models: Paid trials work well when they include personalized demos and support.
  • Hybrid approaches: Offering tiered trial options based on support levels can address diverse user needs.

Interestingly, opt-out trials (where users provide credit card details upfront) achieve higher conversion rates (48.8%) compared to opt-in trials (18.2%), according to First Page Sage data [1]. This suggests that adding a small barrier can actually boost trial success, regardless of your sales strategy.

Strategies to Improve ARPU Through Trials

Adjusting Trial Length and Limits

Fine-tuning how long a trial lasts can have a noticeable impact on ARPU. Research suggests that shorter trials – under 14 days – often push users to make decisions faster. On the other hand, longer trials might work better for more complex products that need extra time to demonstrate their value [3].

"With Inspire Planner, we chose a 30-day free trial. Even though our software is intuitive, our potential customers typically need more time" – Tim Koroteev from Inspire Planner [1]

It’s not just about trial length; how you structure the trial experience also matters when aiming to increase ARPU.

Offering Tiered Trial Options

A multi-tiered trial setup allows you to cater to different user needs while driving ARPU. According to Totango, asking for credit card details during free trials can double conversion rates, boosting them from 25% to 50% [2].

Key ways to structure trial tiers include:

  • Highlighting premium features and setting usage limits to nudge upgrades
  • Offering varying levels of support for smoother onboarding
  • Setting usage thresholds that encourage users to convert

To make these tiers work even better, automation and personalization can guide users through the trial process effectively.

Using Automation and Personalization

Automation and personalization can significantly improve trial conversions, which in turn boosts ARPU. For instance, welcome emails have been shown to achieve a 91.43% open rate and generate four times more engagement than standard email campaigns [2].

Adding targeted email sequences during trials has been shown to increase conversion rates by 20% [1]. Use automation for tasks like triggered onboarding, personalized walkthroughs, trial extensions, and celebrating milestones. These approaches keep users engaged and more likely to convert.

Conclusion: Selecting the Best Trial Model for SaaS

Key Takeaways

Choosing between free and paid trials plays a major role in shaping a SaaS company’s Average Revenue Per User (ARPU). Free trials are great for bringing in a larger number of users, while paid trials often attract more serious prospects who are willing to invest upfront.

The success of any trial model depends on how well it’s executed. Several factors influence how effective a trial can be:

  • Product and User Behavior: The complexity of your product helps determine the ideal trial length. At the same time, engagement levels and trial structure significantly affect conversion rates.
  • Market Fit: Your pricing strategy and target audience should align with your chosen trial approach.

For SaaS companies looking to fine-tune their trial strategies, expert advice can offer practical steps to boost ARPU.

Expert Guidance for Trial Success

Advisors like Artisan Strategies specialize in helping SaaS companies tackle these challenges. They offer customized solutions to improve trial performance and revenue, focusing on better customer activation and monetization.

To succeed, companies should prioritize:

  • Tracking key metrics, using data to make adjustments, and refining onboarding to quickly highlight the product’s value.

The right trial model strikes a balance between growing your user base, meeting revenue goals, and ensuring long-term success.

FAQs

How can I improve my ARPU?

Boosting ARPU involves refining trial structures, adjusting pricing strategies, and enhancing user engagement. Here’s how you can make these improvements:

Adjust Your Trial Structure

  • Many B2B SaaS businesses find that 14-day trials work best for driving conversions [1]. To attract serious leads, try extending trials based on user engagement levels.

Focus on User Experience

  • Guide users to their "Aha! Moment" as quickly as possible. Companies with conversion rates of 25% or higher excel at helping users experience value early in the trial [4].

Refine Pricing and Engagement Tactics

Different pricing models can directly influence ARPU:

  • Tiered trials: Offer limited features with clear upgrade options, leading to a 15-30% ARPU boost.
  • Paid trials: Models like Ahrefs’ $7 trial can increase ARPU by 20-25%.
  • Volume discounts: Encourage longer commitments with discounts, adding 10-15% to ARPU.

Leverage Engagement Insights

  • Monitor user behavior during trials to spot conversion signals.
  • Use targeted in-app notifications to encourage upgrades when users approach usage limits [2].
  • Set up automated communication sequences based on activity to maintain engagement.

Since 70-95% of SaaS revenue comes from upsells and renewals, keeping users engaged after the trial is essential for growing ARPU [1]. These strategies can help SaaS companies align their trial models with revenue goals, ensuring steady and scalable growth.

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