Blog Post

SaaS pricing - what about a freemium pricing model?

I wondered a bit more about freemium pricing models after writing the last post. Freemium is where part of your software as a service is offered for free. Users sign up, they use the application for free but then have to pay for more premium features.

Hubstaff looks fairly typical. They have a free first tier. You sign up, use the free service and then upgrade to one of the paid-for tiers.

Hubstaff Pricing

Another way to do it is to offer a free trial. You go after as many new registered users as possible and you try to get them to stay on at the end of the free trial as paying customers.

Project Manager is a good example. They have a nice simple pricing page with a 3 month free trial (on the most expensive plan).

Project Manage Free Trial

Apps can be part of a freemium model too. You could have a free app (iOS or Android or both) and charge for some premium features. They paid-for features could be part of the browser based SaaS application, but the app has some limited, free standalone features.

The challenge for any new SaaS startup that wants to go down the freemium route is how you get people off that free account and on to a paid plan. There is a real risk that you put a lot of effort into marketing your SaaS, only get a lot of users who don’t pay you anything. Conversion rates from free to paid-for can be extremely low.

It’s worth having another look at that Hubstaff pricing page. They really do want you to sign up to the $7/month/user plan. The free tier is there, but it’s only got two full features. I wonder how many new users start off on the free tier? It almost looks like it’s there only to catch the users who are close to paying, but just need a little bit more time to make the decision.

Should a small SaaS startup with a limited sales and marketing budget go down the freemium route? Maybe not. You need paying customers more than you need registered users - you’ve got to convince people that you’ve got something worth paying for. Going after registered users who don’t pay could be kicking that can down the road.

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