What should you give away for free, and what should you reserve for your paying customers?
If you offer any free membership or sign-up option, you’ve probably battled with this question on more than one occasion. Balancing free user growth and monetization is difficult, especially when deciding which features to give away for free and which to keep for paying customers.
At Vidyard, we launched free and entry-level Pro offerings, which meant moving the entire company to a product-led growth model. Thankfully, the decision paid off, and we now have 2.8 million users. How did we decide what to give away for free and what to gate for our initial launch? And, how can this help you to make the right decision regarding your free vs. paid offers?
In this post, I walk you through our decision-making process around the initial launch and how we continue to expand on our offerings today. You’ll also learn how to do a simple exercise to help you and your team make confident decisions going forward.
Give your free users real value
When considering moving to a product-led growth model, one of the most common issues from organizations that were once sales-led, is the fear that existing paying customers will switch to the free offering. This would mean losing a part of the current paying user base.
At Vidyard, we already had a feature-rich enterprise solution. We had to decide whether we wanted to limit usage or features. Following a lot of research, we decided to offer unlimited videos with a streamlined set of features.
We came to this decision for two main reasons:
1. Users must see the value of the product as soon as possible. Providing users with a streamlined first experience with limited distractions and no barriers meant they could reach the “aha moment” faster.
2. Your free product must have sustained value so that users will keep using the product. If the majority or a large portion of users drop off, that’s a massive sign that the original free product wasn’t good enough.
The Simple Question You Need to Ask
We went through all of our features and decided which ones we would give away for free and which ones to gate. We knew we wanted to keep things as simple as possible for the user. So, we asked ourselves one simple question, and we highly recommend that you do the same…
When someone uses your product for the first time, what problem are they trying to solve?
Your answer to this question will help you decide which features you need to include for free and which features should come with a price tag. When deciding on packaging it is often helpful to consider your product’s pricing page. Usually, you’ll have at least three different levels each with their own summary.
The first tier is usually the free option. The next level is a paid version of the product, and the tier after that is a higher-priced option. Think about the descriptions beneath these tiers and consider the words carefully. Can you come up with one sentence that describes what problem each of your offerings solves for people? Or, do the descriptions leave people guessing?
Your description should be brief but informative. It should highlight who each tier is meant for, and how one differs from the other. Use this as a guiding light when determining your packaging and people will sign-up to the tier that will help solve their problem.
When considering which features to include in which tier, remember that the features should decrease the amount of friction a user experiences when engaging with your product. For us, users join Vidyard to create, upload, and share videos.
When someone signs up for Vidyard for the first time we want to ensure they can share a video as fast as possible. This is why we knew that the trimming feature needed to be included in the free product. People needed to trim their videos to remove mistakes or unwanted clips, removing the need to record a second video. Trim decreased the amount of time it took an individual to share an idea with video and therefore was given for free.
However, we also had to think about which features to include in our Pro product. Why should people upgrade to the paid version when the free version is already pretty great? We set out to talk to our customers. We wanted to see what value they were willing to pay for, and we found that many of the people we spoke to would pay for the Pro product if it helped them drive a business goal. We decided to reserve features such as customization of logos and branding and CTA’s.
Why you should measure value
Now that you have your product, packaging, and messaging aligned - how do you confirm it is working? How do you know when you need to adjust or experiment?
Most businesses measure activation and retention rates, which is excellent. However, it’s harder to measure value, and for us, we wanted to make sure that users received value from using our product.
Our free option’s primary value is getting a video (or a message) out as fast as possible. We measured the time it takes for that to happen. Measuring value enabled us to see that the features we included in our free and paid offers delivered what we promised.
The value of your product might be different, but I encourage you to figure out what the value of your free and paid offerings are and use that when making your packaging decisions.