Deciding whether a free trial, freemium, or hybrid model will work best for your business is challenging — especially as choosing the wrong one could potentially dent your business’ performance.
In this course, you’ll learn:
Wes Bush:
Alrighty, so whenever you're thinking about how to identify your product-led model, it is more than just picking a model. Let's say, "Let's do a free trial or a freemium model because that's what everyone else is doing." The purpose of this section is really to help you build decision-making arm as it relates to making this big decision. So I want to really ask you, are you already planning on using a free trial, freemium, or maybe some sort of hybrid model that you've whipped up and you think it's going to be a good fit?
Wes Bush:
Let me know in Slack. I want to hear what's the model you want to be using or you're leaning towards. And so, the big thing is why is it so important to get the right model from the very beginning? A couple of reasons is well, one is kind of obvious. Well, it can help you grow faster. If you pick the right one, and your market resonates with it, they're going to respond and they're going to respond hopefully, ideally, with becoming happy paying customers because they found so much value out of it.
Wes Bush:
But there's a lot of considerations to make, and so if you pick the wrong model for you from the very beginning, many folks on your team are going to deem this whole product-led thing, it doesn't quite work. And so a lot of times when we think of what are the types of models I can make and choose for a product-led approach, there's so many different shades of product-led. There's even more than on this list.
Wes Bush:
But for instance, there's just the two we talked about, free trial, freemium, but you can mix and match. I don't want you to think it's just one or the other, because that is a very limiting belief. A lot of times as I go through some of the considerations you should make, some might actually be a better fit for you than the other. There's even Sandbox environments. I'll go through a couple of instances where that might make sense. Also, freemium with the free trial or free trial with freemium and also a usage-based free trial.
Wes Bush:
So let's dig into some of these considerations that you want to make. And before we do, I want to really just share why many people get this wrong. It's not because there's just a ton of different models you can choose. It's really because choosing a product-led model has a lot more to do with the rest of your business than just what you think. It's the old iceberg analogy, which is there's more to this decision than meets the eye. Picking the model is just what we see on the tip of the iceberg, free trial, freemium, but below the water, there's a ton to be discovered. There's your pricing strategy, there's your customer acquisition strategy, there is your onboarding approach, there's your upgrade strategy. There's so many things beyond just what we see on the top, whenever making this consideration.
Wes Bush:
And so the purpose of this next section is I'm going to give you a ton of questions to think about I'm going to talk through most of them, but if at any point you feel like, "Hey, Wes, this is too much. I'm a little overwhelmed with all the questions you're throwing at me." That's okay. Just click, pause. You got the control here, and that will help you just think through these. I want you to take your time as you go through this, don't try and rush at two times speed like myself, go through it and just power through all these questions. Take the time to go through them and think through this, because this is a big decision and it's one of those ones where you're going to start thinking, "Hey, we definitely want to get this one right." And I'm here to help you get this right. But that starts with making sure you understand all the considerations you need to make.
Wes Bush:
And so one of the first ones is who's your ideal customer? Are they tech savvy? Do they prefer talking to people? Whenever you think of how they typically interact, are they just talkers? Do they prefer demos? Whenever we think of that, or do they prefer something a little bit more self-serve and they like to get their hands dirty, they like to go into the product, see if it's a good fit.
Wes Bush:
If you think of developers, developer, like the developer market space, for a long time has been product-led. And when you think of developers, like the average developer, they don't like talking to sales. Product folks aren't too different in a lot of cases, obviously they're a little different, I'm doing huge generalizations here, which I don't like to do, but just trying to help drive the point home that depending on your ideal customer, they like to interact with people quite a bit differently.
Wes Bush:
All right, so how much handholding do you need to provide to customers to help them become successful? Do you have to book two, maybe four onboarding calls to help new customers walk through your product and get up to speed? Or could you just as easily automate that in some sort of in-app guidance where you show people exactly how to use your product and you could do it without holding their hands. And do you have more than 30 direct competitors? Is your space super competitive?
Wes Bush:
If you're realizing hey, out of those 30 direct competitors, I already have about five of them with the free trial model. Sometimes what other companies are thinking about is how could I create the most compelling customer acquisition model in my market? And a lot of the times, even if they have that free trial model, they're thinking hey, freemiums just this one step above, I'm actually giving it away for ever and people can access this value of the product. So it's a more powerful moat than a free trial model in a lot of cases.
Wes Bush:
And if you're still on the fence and thinking hey, I don't have product/market fit yet. That's okay, you might just mean maybe all of these models might not be the right fit. Maybe you should stay sales-led at this point. I'm still going back to if now is the right time to be product-led or not. If you're realizing you're still pre-product/market fit, then it might just mean you need to understand your buyer better before you start trying to automate your entire customer acquisition process, because timing is everything here.
Wes Bush:
And so another consideration you need to make along the lines of what models should you use for your business is how long does it take for people to experience the back of your product? If it's an extremely long time to value, well, maybe it's actually freemium. That is a controversial piece because initially even when I was writing the book on product-led growth, I was along the lines of hey, if your time to value is really long, maybe you shouldn't have any product-led models.
Wes Bush:
But since then, I've actually changed my perspective on this because there's some SAS products where maybe it's easy to set up, but in order to see the value of the product, the true value, the end user value, it takes months. And I'll give you an example. So Tetra, they are basically a company wiki. If you sign up, it is very easy for you to go in there, start writing documents for your company wiki, but the true value of a wiki for your company really starts paying off dividends in months, and maybe even in a year.
Wes Bush:
And so what they realized when they had a free trial was wait a minute, people aren't and actually able to get the full value out of this product. And so they decided to opt out for freemium. And since then, it's been such a powerful growth lever for their business because when people decide to pay, they fully know the value of the product. They're very comfortable with using the product, they've experienced the end user value there, but if it's just long and really hard for someone to use the value or get to the value of the product because your product is complex, that's a whole other story and can of worms.
Wes Bush:
The other thing too is what is your annual contract value for each customer? If it's really high, it may make more sense to have a hybrid approach. If it's really low, you just may want to forego sales altogether and just have your product do the majority of the selling. And so when we're looking at what is that range of if my annual contract value is over $10,000 per year or annually, it makes sense to have sales. There's no dry cut in the line, like this is when it makes sense, this is when it doesn't, but is something to think about.
Wes Bush:
If you have that higher annual contract value, would you be willing to have a low touch sales team really proactively going after people who are using the product, who have the potential to turn into these larger deals, and would you want to practically help them? That's a question I'm throwing at you and you need to consider well, if that's the case, if we do have that higher annual contract value, then yeah, it would make more sense to have some sort of hybrid approach where maybe it starts off with the free trial or a freemium model, but we're interacting with people as soon as they're getting value out of the product to help close those deals.
Wes Bush:
And so the big question here also comes down to regardless of what model you choose is what do you give away for free versus what do you put behind a pay wall? And so we're actually going to cover this in week five in a lot more depth around the monetization strategy, so bear with me on this one, but what's going to be great for you to think about right now as it relates to this is what would be convincing enough for us to give away for free that would help people fully understand the true value of our product without having to pay us right away. And if we can understand that piece, that'll help move us in the right direction and help us understand if a seven day free trial or let's say a three day free trial, someone just can't understand the value of the product, then maybe it should be longer, maybe it should be freemium or something else.
