Product Management 101: Freemium

Everyone likes getting something for free. Even SaaS platform customers enjoy experiencing a product’s value at little to no cost. That’s why free product trials and freemium plans are becoming more and more prevalent in the software space.

What does “freemium” mean?

“Freemium” or “free” refers to a no-cost version of a product that also has a paid version.

Are there different types of freemium products?

Yes, a free or freemium product can take several different forms. Three of the most popular are free trials, free plans, and product tours.

Free trials

Just about everyone is familiar with the idea of a free trial. In fact, you’ve probably signed up for several free product trials over the past few years. A free trial gives the user the full functionality of the paid product, but for a limited time. This time period generally ranges from a week to a month. The more complex the product, the longer the trial should be to ensure the user uncovers the value in using it. At the end of the trial period, the user is prompted to sign up for the paid plan. Ideally, they’ll have enjoyed the trial so much that they’re willing to pay to keep the product. The free trial freemium method is a particularly strong “converter,” with free users becoming paid users at a rate twice that of free plans.

Free plans

When someone says “freemium,” this is usually the set up that they mean. A free plan or freemium product is free indefinitely. However, it is also limited in terms of functionality, usage/seats, and/or customer support. Often, certain valuable features are behind a paywall. And generally, your use of the free plan has to fit within a constricted scope. For instance, your monthly active users (MAU) might need to be below a certain cap in order for the free version to apply.

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A self-guided product tour allows users to explore your application without ever really accessing it or needing to sign up. It’s a low-commitment way to show what your tool offers. You might even create multiple tours that showcase different areas of your product. In addition, you can combine a product tour with a prompt to sign up for a free trial or free plan.

What are the benefits of offering a freemium product or pricing option?

Letting your product itself “do the selling” is the cornerstone of product-led growth. Rather than relying on sales-led demos, you instead allow potential customers to experience the product for themselves — no conversations with other humans required. This reduces friction and lets users explore the application at their own pace and with a focus on their own specific needs. And as free trials and freemium offerings grow in popularity, customers are beginning to expect them as an option. If they come to your site and see that they have to speak with a salesperson before trying the product, they may simply move on.

What are some best practices for freemium products?

To get the most out of your free trial or freemium offering and drive conversions to paid, you need to make it easy to upgrade. As a user approaches the end of their trial period, prompt them early and often to switch to the paid plan. Emphasize that they don’t want to experience any gaps in access.

For a free plan, focus on “a-ha moments,” or those specific experiences within your product that make users truly grasp how this tool can help them do their jobs better. Where possible, use in-app messaging to guide them to these features or workflows. If these specific features, or extensions of them, are only available in the paid version, encourage the user to upgrade. Also, if a customer begins to reach or exceed the usage limit of the free plan, reach out to them and ask them to upgrade.

Recommended reading

“The Definitive Way to Convert Your Free Users to a Paid Plan” by Preetam Nath

If you currently offer a freemium version of your product, here are some tips for driving conversions from free to paid.

“PM Podcasters on Free Trials, Freemium Plans, and More” by Natalie Doan-Dunnum

Listen to product people from companies like Headspace, Hubspot, Hotjar, and OpenView Venture Partners discuss their own philosophies regarding freemium products and how best to manage them.

Little Known Ways To Convert Free Trial Users Into Premium Customers” by Wes Bush

So, you’ve got a number of active users on your freemium platform and they seem to be discovering your product’s a-ha moments. How do you get them to make the switch from free user to paying customer?

“The Many Forms of Free: Product Tours, Free Trials, Freemium Products, and More” by Sara Estes

In theory, “free” has a straightforward definition. However, there are several forms of free products, including freemium, free trials, etc. This article breaks down the various varieties of free product offerings, plus their pros and cons.

“How to Build a Freemium Product That Actually Works” by Duru Kahyaoglu

Developing a freemium product is a big job — and a big risk. Here’s how to build one that actually delivers value to your target user segment(s).