Should Your Product or Startup Offer Free Trials? 

One of the most deflating aspects of launching a startup is the moment when you realize the difficulty of converting customers to your business. Unfortunately, this is not an uncommon feeling for many launching new businesses, products, and services. The numbers vary by sector, but in Canada, up to 20% of startups fail in the first year, and up to 60% fail within three years.

It’s a sobering statistic. Startups can fail for a variety of reasons, but the overarching one is bringing customers into your ecosystem. Getting them through the proverbial door is not always easy, however.  

More and more, businesses are leaning toward the idea of free trials as a means to bring customers in. Indeed, it’s not just unknown startups that do it; many established brands use free trials as a means to capture market share.

It’s often seen as key to capturing business in a highly competitive marketplace. Moreover, consumers are well aware of the free trial culture, so they may look for that as a deal breaker to treat with your product in the first place. Of course, we should also point out that there are drawbacks to offering free trials, which we will get to a little later. 

Audible has mastered the free trial concept

First, let’s look at an example of a business that has mastered the art of the free trial – Audible. The Amazon-owned audiobook platform should be studied by other businesses as an example of how to attract and retain customers. Initially, it does this by offering a free 30-day trial with a free audiobook thrown in.

Once the trial ends, you can sign up for Audible’s monthly subscription and avail yourself of its credits purchasing system to get a discount on future purchases. It works remarkably well, although we might add the caveat that Audible has had a stranglehold on the market for years, and it might soon see its business model disrupted by Spotify, which has added free audiobooks for premium subscribers. 

Nonetheless, what Audible does well is bring customers into its ecosystem. Once there, they become accustomed to the platform. Some will leave after the free trial, sure, but many will stay. Becoming accustomed to the platform is a key part of that. There are services that is even more critical. For example, if you were to use a collaboration app like Slack or Cisco Spark for your business, becoming accustomed to it and its uses is a key part of retention.

We can even point to online trading platforms that offer demo accounts so traders and investors can practice before investing real money as an example. These demo accounts can be a key component for new traders, as they allow them to simultaneously learn if they like the platform they are trading on and whether they have an appetite for online trading in general. 

Overall, here are some of the benefits of a free trial for your product or service:

  • Competitive advantage for your product over those not offering trials. 
  • Reduce sales and signup frictions. 
  • Build trust in your brand and services. 
  • Offer the opportunity for feedback and amendments. 

Costs of a free trial may mount up

On the reverse side, the fear is that you will be giving away the product for little gain. Some customers make an art of using free trials and have no intention of ever signing up for the real thing.

Moreover, offering the free trial itself can incur huge expenses without bringing in revenue. Still, if you do a cost-benefit analysis, you might consider that the free trial element is part of the marketing budget, and if you believe in your product, it might serve you well in the long run. 

Of course, there are many other strategies that touch up the free trial but do it in a different way. For instance, many newspaper groups will offer discounted subscription services for an extended period of time, perhaps up to a year. The Toronto Star does this in Canada, as does the New York Times.

The idea is that you pay a nominal subscription fee (The Star currently quotes $3.33 CAD per month), which will rise after a year. The goal is, as we stated earlier, to bring you into the ecosystem so that you are happy with using the product and comfortable with a debit coming out of your account. 

One of the other areas you can explore is the freemium model, which is a bit more aggressive. Normally, this means you will not give the trialist full access to all the features of your product and prompt them to pay if they wish to unlock more.

This works for some services and products, like website builders for example, but it can be a balancing act, and it might not work for every service. It could have the adverse effect of making your product look undesirable. 

In the end, there is no right or wrong answer. Some businesses, especially those that sell physical goods, may not be suitable for free trial periods, although there are always exceptions. Others, particularly online services, are now in a position where free trials are almost an expectation in the market. But it is worth exploring to see whether it is suitable for your startup. Weigh up the costs and opportunities, and if it feels right, it may be the factor that sets your business apart from your rivals. 

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