Freemium vs Free Trial: Which is Right for You

Choosing between a freemium vs free trial model is a huge decision for Product Leaders, and it’s usually one that can leave you tossing and turning at night. Both of these SaaS pricing models are popular – look one way, you’ll see many companies killing it with their freemium model, look another, and you’ll find other businesses driving success with a free trial approach. All this does is complicate the choice. Both look like great options on paper, so which should you use for your approach? 

That’s what we’re here to find out. Much like everything in Product Management, the best choice between freemium vs free trial depends on your product. It’s a personal choice, and finding the answer requires you to ask some important questions about your product, its position in the market, and your product’s value proposition. 

So, in the red corner, we have freemium models. In the blue corner, free trial. Who’s your champion going to be? Let the fight begin.

What’s the difference between freemium vs free trial? 

To be honest with you, quite a lot actually. Just because they both have ‘free’ in their name doesn’t mean you should treat these concepts as the same. Sure, they’re two ways to attract users to come and try out your product without needing to spend any money upfront, but that’s where the similarities end. These approaches are pretty much polar opposites.

Each approach suits a different type of product, works best in conflicting markets, and even the way they work is a complete 180 from each other. Let’s dig deeper. 

What is freemium? 

Freemium is a pricing model where you give users unlimited, free access to your product, forever. Till the day the sun explodes and engulfs the earth. The catch here is that the version your users can access has limitations. Some features may not be accessible, there may be a product usage cap, or there could be a storage limit in place. These restrictions are there to build incentives for users to upgrade and convert to the paid version of the product, where they can access advanced features. 

With the freemium approach, you’re giving users the chance to try out your product without any friction. There’s no commitment, and no payment details taken – they’re free to get a taste and decide if they want to try the full course.

The actions you let users make on a freemium plan should still allow them to experience the core value of your product and reach a wow moment, but you need to strike the right balance. Offer too much for free, and users will find no reason to pay and upgrade. They’ll be like that guy you let sleep on your couch during college – they’ll get comfortable with your leftover pizza and do what they can to stay there forever, reluctant to change. 

You’ll find that many of the companies that use freemium are in the B2C sphere and offer a relatively simple product to use and understand. We’ll go into why in a bit more detail later. 

What is a free trial? 

A free trial is where you give trial users free access to your product for a certain time limit, usually 7, 14, or 30 days. Unlike freemium models, users on a free trial often get complete access to the advanced features of your product. They can try all your features and enjoy the complete experience of your product with no limitations – except time.

When a free trial ends after a period of time, the user loses access to the product, with all the progress made in the application gone unless they purchase a paid plan. Think of it like an access-all-areas ticket at a concert, but you have to leave at 10 pm halfway through the headline set. Sure, you can check out backstage and get front-row views, but you’re thrown out just before it reaches the peak. Wouldn’t that leave you wanting more?

To break things down further, there are two types of free trials: an opt-in free trial and an opt-out. In an opt-in version, you don’t need to to give credit card information, unless you decide to pay at the end of the trial. For opt-out, you give your card information at the start and need to cancel to avoid being charged. Otherwise, you’ll become a paid member automatically.

By allowing users to explore your complete product, you’ll let them see the full potential of what you offer. This, alongside the time pressure, can build incentives and increase conversion rates to the fully paid plan. 

Free trials are often used by B2B businesses that have more complicated products, but can still work in B2C. This allows users to fully get to grips with how all the features of the product work. Many free trials will include a product tour and an onboarding experience to educate users on the product and showcase how it can benefit their specific needs. 

Are there alternatives to freemium vs free trial? 

Yes, there’s a middle ground! Like if freemium and free trial had a baby. 

Let me introduce the reverse trial. Here’s a growing trend to stop the freemium vs free trial battle and embrace them both through the reverse trial model. 

This is where instead of forcing a user to lose access to the product after a trial, they’re bumped down to a freemium version of the product, allowing them to remain an active user and continue to experience the product, albeit a reduced version. Learn more about the reverse trial in our glossary post. 

What are the advantages of freemium vs free trial? 

Both of these pricing models come with their unique advantages over the other. They’re popular for a reason. To help you make the call between them, it’s useful to understand how these advantages play into what you need from your pricing models. We lay out the advantages below:

Advantages of freemium models

• Lower barrier to entry: Users don’t have to part with any money or even add payment details when signing up for freemium, creating a frictionless barrier to entry. It makes it super easy for users to try your product, helping to grow your adoption rate.
  
• User engagement: Allowing unlimited access to a basic version of your product can help you build a higher active user rate, helping you retain users and lower customer churn. You can also market to these users over time to convince them to become paying customers. 
  
• Boosts brand awareness: Freemium models are great for businesses targeting a larger user base, as the cost-free approach typically attracts more people. This can enhance brand visibility, making this approach great for products that have a better user experience when there’s more users. 
  
• Customer feedback: The sizable user base that you can generate with a freemium approach gives you access to a larger set of customer feedback data that you can use to iterate and improve your product. This qualitative data fuels continuous discovery. 

Advantages of a free trial 

• Full product experience: Free trials allow users to access the complete feature set of a product, helping them understand its full value and capabilities. This comprehensive experience can lead to more informed purchasing decisions. You’re showing all your cards instead of half the pack.
  
• Promotes urgency: The limited time frame of a free trial creates a sense of urgency, encouraging users to explore the product quickly and prompting them to consider upgrading before the trial expires.
  
• Higher conversion: Users who have experienced the full functionality of the product have a higher likelihood of conversion. This translates in the data, as free trials have a conversion rate of 10-25%, while freemium models sit at around 5%.
  
• Better customer education: By having access to everything the product offers, customers can learn more about the product. During the trial period, companies can provide educational resources, such as onboarding materials or tutorials, to help users maximize their experience and better understand the product’s benefits.

What are the disadvantages of freemium vs free trial? 

Gosh, freemium and free trial look great, don’t they? Well, despite the awesome benefits of each, they also have some drawbacks that you’re going to have to consider when working out which one is best for your product. Here are the not-so-good things about each. 

Disadvantages of freemium

• The majority of your users aren’t paying: While freemium models can attract lots of users, the reality is that the majority will stay on your free version and fail to upgrade to paid. This means that most of your users aren’t going to be impacting sales figures.
  
• Support costs: Supporting a large base of free users can strain resources, especially if the product requires significant customer support or maintenance. If your paying customers don’t cover maintenance costs, things may not work out on a freemium model.
  
• Feature limitations: If the freemium version of your product has overly restrictive, limited features, this partial access may frustrate users and annoy them to the point of leaving, instead of convincing them to upgrade. 

Disadvantages of free trial

• Short-term engagement: Users may only engage with your product during the trial period and then disappear afterward, leading to low conversion rates if they don’t see immediate value.
  
• Pressure to convert: The time-limited nature of free trials can create pressure on users, which may lead to a negative user experience if they feel rushed or overwhelmed.
  
• Churn risk: Users who don’t convert at the end of the trial may not return, contributing to high churn rates if they aren’t led to see the value in the product.

How do you choose between freemium vs free trial? 

The best way to choose between freemium vs free trial is to put your product under the microscope and ask some tough questions about it. By understanding your product, its limitations, and the type of people you’re trying to get to buy it, you can better decide which one of these options will suit you.
But what to ask? Well to help simplify the choice, we’ve distilled all the factors you need to consider into six key questions to ask yourself, and what those answers mean 👇:

Let’s explain the reasoning behind these questions a bit more shall we? 

1. What types of users are you targeting? 

The type of user you’re after will impact the pricing model that best suits you between freemium vs free trial. 

See, an overserved market is one that has a lot of choice with many established players knocking about. Your product’s goal is to disrupt, often with a cheaper, more user-friendly alternative. In this case, a freemium product is the best option as it allows users to experience what you offer without committing, giving you a chance to build loyal customers and steal some market share. 

If you’re in an underserved market, where users have fewer choices and your product fills an untapped niche, then a free trial option will work great. You’ll be giving these desperate, hungry prospective customers an opportunity to explore a product that they’ve been crying out for – for free. 

If you have a universal product that’s targeting everyone and has universal appeal, then you’re in luck, as both of these strategies can work. To narrow things down, you’re going to have to think about the other questions.

2. How complex is the product to use? 

A pick-up-and-play product needs a different approach to a product with a learning curve. 

If your product is simple to understand, freemium is the better option. Users don’t have to wrestle with the UI to understand your product, making it easier to grasp the value of your product early, and making them likely to use it for the long term. 

A more complex product will benefit from a free trial, where users can be guided to understand how the product works and functions through more bespoke tutorials. 

3. Can you afford to have free users? 

Freemium is not cheap. You need the cash to be able to sustain a whole host of free users, where only a few of them will convert to the paid tier. It’s kind of like being a shark covered with leeches. You need to be strong enough to not pass out from blood loss. With freemium, you’ll have things like technical infrastructure, customer support, and overall operations to pay for. 

If you can’t afford a hoard for free users, a free trial may be best. You may attract a lower user base, but you’ll be able to convert more into paying customers.

4. Will the user have enough incentive to pay for full access? 

If you’re offering freemium, you need to think about whether your premium product offers enough of an upgrade to get people to pay up. If you’re targeting users with simpler product needs, you run the risk of them sticking with your freemium version, content with what they can get. 

For example, if you’re a Project Management tool and offer a freemium plan that allows users to add a limited number of tasks, you might find that some freelance users or small teams never exceed that cap. They’re content sticking to the free tier, as it fully meets their needs, leaving them with no incentive to upgrade.

If you think you can’t offer enough of an incentive to get people to upgrade, consider a free trial model instead. 

5. How many users can you target? 

Market size plays a critical role in deciding between freemium vs free trial models. Freemium tends to require a much larger total addressable market (TAM) because of the lower conversion rates. 

Free trial models, on the other hand, are more efficient for companies targeting a smaller total addressable market, and more specific audiences, as they attract higher-quality leads who are more likely to convert at the end of the trial.

6. How fast is your product’s time to value? 

The speed at which users see value in your product can guide your choice between freemium and free trial. If your product provides immediate benefits, a free trial can push users to make quick purchasing decisions. The limited time frame creates urgency, encouraging users to evaluate and commit before the trial expires. This works well for products with clear, instant value, like design tools or email marketing platforms.

On the flip side, if your product’s value builds gradually over time, freemium might be a better fit. Freemium allows users to explore the product at their own pace, making it ideal for tools that require more engagement before the benefits become clear. 

For example, a productivity app may take time to integrate into daily workflows, and a freemium approach can nurture that long-term relationship, giving users time to discover the need for premium features.

How do you convert users to paying customers on freemium vs free trial? 

Both freemium and the free trial are good ways to get free users. But free users aren’t customers. They’re like tadpoles in a frog farm – you can only really count them when they grow arms and legs. So how do you turn those users into potential customers? 

Well, that’s the ultimate challenge for Product people, and the approach you take is actually pretty different depending on which approach you go for. 

Converting users from freemium 

Freemium users can easily enjoy your product forever. There’s no immediate urgency for them to think bigger and upgrade, especially if your freemium plan provides all that they need. Here, you’re kind of wedded into playing the long game, and getting users interested through gradual engagement. 

This usually involves a lot of Product Marketing. With freemium users, you can track how they use your product through data driven Product Management and gain insight into the premium features they’ll be the most interested in. Here, you can then showcase these through demos and various marketing channels as part of your market strategy. 

By learning how your different audience segments are using your product, you can create personalized messaging that highlights how your premium features will address their pain points. 

You should also make sure that you have robust Customer Support systems in place. With freemium, users go at their own pace to explore your product. You need to ensure that you have guides and customer service touchpoints to help them out if they get stuck. With this customer support, you can further create a compelling argument for an upgrade.

Converting users from free trial

The limited period of a free trial helps to create urgency, and it’s this urgency that drives more conversions. This is the main reason why free trials have a much higher conversion rate. 

Product Managers should play into this urgency, and use it to help customers explore the product quickly, reducing the time to value. One successful tactic that companies use is to gamify their free trials, rewarding users with more time or more features the more they complete important actions that bring them closer to the user activation point. 

We do something like this at ProdPad. We have a pretty short free trial period as standard. It’s enough for users to understand ProdPad, but many love it so much that they want more time. Well, what if there’s a way to give you more? By using the product in meaningful ways, users can add days to their trial period, rewarding exploration while allowing us to make sure that trialists experience the nitty-gritty of ProdPad. Want to see how our free trial works firsthand? Sign-up below. You’ve got nothing to lose. 

When is it right to have neither freemium nor free trial?

We’ve spent so much time focused on freemium vs free trial, we’ve not stopped to think ‘Do I need either?’ Well, there are situations where you shouldn’t really bother with freemium OR a free trial. Scenarios where having nothing might be best.

What does this situation look like? Here are some times when neither freemium nor a free trial is the best option for you. 

Your product is too complicated

We’ve said that a complex product with a learning curve is best suited to a free trial over freemium, but sometimes a product can be too complex even for that. Although you can build tours and guides with onboarding software, free trials are still self-guided. If a user can’t work things out, they won’t see the value of your product and go elsewhere. 

Intricate SaaS solutions like enterprise software that need specialized configuration will need much more handholding than a free trial can provide Here, an in-person demo or discovery session is the best bet as you’re able to provide a customized experience and show off the specific features that best suit the user. 

You’re better off targeting qualified leads

If you’ve got a high-value product, you may get more joy with a targeted approach instead of trying to convert a large number of free users. Sometimes you don’t want to cast your net far and wide and catch multiple types of fish. Sometimes you’re looking for one specific whale that needs a more deliberate hunting method. 

Instead of putting resources into a freemium or free trial approach, you can instead target customers who better align with your ideal customer profile (ICP)  and are more relevant to your value proposition, through an account-based marketing strategy and an enterprise Sales motion. 

You can’t sustain a free model

If you need cash now, neither freemium nor the free trial is going to be a worthwhile method. With freemium, you need to be able to sustain a large number of unpaid users for a while, with only a few of them converting. This can work over time, but if you haven’t got the cash flow to play the long game, this isn’t best. 

Free trials are a bit more short-term, but you still need to support multiple free users for stretches of time without a guarantee of a conversion. This can be too much of a strain for many businesses to handle. 

You also need to think about your technical capabilities. Can your product and Customer Support team handle a large number of free users and guarantee a good level of service? If not, stay away from either option. 

Your product requires stakeholder buy-in 

If you have an expensive or complex product, it can be tough to convert free users into paying customers who are on a freemium or a free trial. If you’re in the B2B space, it’s unlikely that a single person is responsible for okaying the purchase of a product. There may well be a string of decision-makers that need to be navigated. 

This need for buy-in can make free trials and freemium ineffective, as not all of these people are going to experience the product and see the value through this initial interaction.

In this situation, you’re better served offering direct consultations and customized demos. 

Freemium vs free trial: Knockout

By now, you should have a firm idea of if you’re best suited to use freemium or a free trial, or if you need to consider different product pricing strategies for your product. 

Both freemium and the free trial lend themselves to product-led growth, where the product is doing the selling, but you’ll have to work out which works best for your situation. 

Freemium might be the best option if you need to nurture long-term engagement and gradually reveal the full value of your product. But if your product has instant value and you want to encourage fast conversions, a free trial with a clear expiration can drive results. 

Ready to see how a well-designed free trial works in action? Explore ProdPad’s own free trial, designed to showcase value to Product Managers like you. Try it for yourself and see how we can help.