Hey friend 👋
Here are some of my favorite reads from the past few weeks again. Hope you enjoy these summaries!
- Trial or Freemium? Get the best of both with a Reverse Trial
- The problem with user "engagement"
- How Blinkist increased conversions by 23% by solving their biggest customer complaint
- Quick reads: Figma vs Adobe, Data-based ICP for B2B SaaS, Carrying capacity in single player SaaS
#1 Trial or Freemium? Get the best of both with a Reverse Trial
We're currently in the process of implementing Reverse trial on top of our Freemium. If anyone has done the same before, let me know what kind of impact it had on your numbers 🙏
Companies considering a free trial model and a freemium plan don’t need to choose. A reverse trial gives you the best of both while minimizing the downsides.
When to choose Freemium?
Freemium means offering a version of your product for free, forever. Users will never have to pay for the limited product version to keep using it.
- Freemium plan brings in more product usage and feeds your growth loops so you can invest more in your product and less in marketing
- Lower cost of acquisition due to frictionless entry
- Allows users to build a habit of using your product early on in the customer journey and on their timeline
- It forces you to understand what customers are willing to pay versus using time as a bandaid.
- Having a non-paying user base allows you to capturing users in adjacent markets to inform your future monetization models and use case expansion, building network effects, widespread brand advocacy, driving indirect monetization by monetizing users your free users acquire for you, and so on.
- Freemium struggles to drive monetization awareness and have lower paid conversion rates – typically around ~5% from the free plan to a paid plan.
- Users on a free plan often lack awareness of your paid features or how they could benefit from them. It can also be hard to differentiate the free and paid plans: too many features on the free plan, and customers will never have a reason to pay.
When to choose Trials?
In trial, users get full product access – including the features they might be willing to pay for. There are two types of trials: credit card and free.
- Both trials encourage conversions with urgency to pay: when the trial ends, your customer will have a choice to pay, given they've realized the value of your product.
- Trial companies can have conversion rates up to 80%
- A trial might not be long enough for users to derive value from more advanced features.
- In B2B companies, trials favor smaller businesses and discriminates against larger enterprises
- Time-bound stop to further usage at the end of a trial results in a more limited, paying-only user base, and low usage can prevent widespread brand advocacy.
Get the best of both with a Reverse Trial
Reverse trials combine the two strategies to drive paid conversions and product usage simultaneously and amplifies product usage, boosts conversions, and reinforces growth loops.
A reverse trial puts customers in a freemium experience with a timed free trial with access to paid capabilities which reverts to a traditional freemium product after the free trial ends. They get to try-before-you-buy paid functionality without harsh time limitations to prohibit further, lower complexity usage.
- The trial portion of your user journey gets customers to use paid features instead of only building habits with free features. You shorten the time it takes for a user to get familiar with and consistently use your product, so you’re landing them earlier in their customer journeys. Users who don’t convert at the end of the trial understand what they’re missing, so they may upgrade later when needed.
- You can restart the trial for free users to continue driving conversions and refamiliarize users with paid features that they might be ready for later
- You grow brand affinity and advocacy with users who stay on the free plan and gain indirect monetization with those they share the product with.
#2 The problem with user "engagement"
Disclaimer: I don't 100% agree with everything in this essay but it's surely an interesting take on the user engagement paradigm we're seeing in SaaS.
The problem with artificial user "engagement"
- More often than not, user "engagement" is actually is a thinly veiled proxy for user entrapment – whether intentional on the part of software designers or not. The problem is that many (especially VC-backed, fast-growing) companies end up trying to “engage” their users at any cost, just to increase their numbers.
- In many cases, software is specifically designed to regularly, forcibly, and artificially attract user attention for increasing “engagement” – even when it's not necessary for what the user is trying to get done. As a result, what a user does on the screen may not matter at all as long as they are doing something and staying “engaged”.
Enter user disengagement
Zerodha is an online platform to invest in stocks, derivatives, mutual funds, and more. They developed their product using the user disengagement philosophy.
User disengagement is not the act of forcing users out of software. Instead, it means that instead focusing increasing user screen time, they focused on on utility and meaning for the end user, e.g.:
- Zerodha's focused fully on building product that's good enough for their users to recommend to their peers (rather than pushing the message in marketing channels). Not so surprisingly, their main growth channel is WoM.
- Zerodha's revenue comes from financial transactions executed via their end-user software, but they chose not to push users into transacting: no promotional or marketing e-mails, SMSes, or notifications are sent. Push notifications are used very conservatively, and never to bring users back to our apps in order to “engage” them. There are no annoying “rate this app” or “tell your friends” popups.
- In addition, Zerodha does not try to "re-engage" inactive users (or even track them!), doesn't offer discounts for new users (who are trying to make the big decision of choosing a financial services provider and should make the decision based on their needs, not an external incentive), and so on.
What does meaningful disengagement look like?
Some examples of direct, but meaningful disengagement:
- Zerodha charges a small fee to sign up. This friction causes users without a strong intent to do financial investments to drop off, but users who find utility in the product will come and stay on of their own volition. The mere act of signing up does not create a user.
- The Nudge system that is integrated across their investment apps actively discourages (and sometimes blocks) users from trades deemed risky, at the cost of foregoing the revenue we earn per trade. This is because a user who makes a loss doing a risky financial investment wouldn't remain a user much longer.
- The Kill Switch feature allows users to instantly lock themselves out of being able to execute trades for a set period as a part of personal financial risk management. Turns out, a significant number of users find this extremely useful.
#3 How Blinkist increased conversions by 23% by solving their biggest customer complaint
Blinkist offers users a 7-day trial for the premium plan. If the user doesn’t cancel during their trial, at the end of the 7 days they will be charged for a premium subscription.
Identifying the challenge
- Blinkist found out their users were unhappy when they forgot to cancel their trial and were charged at the end.
- However, if they removed charging people at the end of the trial, users might forget to stay subscribed – a tradeoff that would be a huge disadvantage for the company.
Figuring out the problem
- Based on customer service reports and feedback, their top complaint was users forgetting to cancel during their trial and being charged.
- From product use data they found that most users who did sign up to the trial, would cancel their trial on the first day. A survey confirmed that the top reason people cancelled early was because they had a fear of forgetting to cancel later and being charged.
Designing initial solution
- Blinkist came up with the hypothesis that we could increase trial sign-ups by being more transparent on they subscription screen. iOS makes users to opt-in to notifications themselves, so they had to create an opt-in screen right after trial registration, with an option to be reminded before the end of their trial. This lets them know Blinkist “has their back” and they don’t have to cancel right away or set a reminder on their own to avoid forgetting to cancel.
- They also decided to add push and email notifications to their users to let them know when they are going to be charged. The users who tapped “Remind me” a notification 2 days before their trial ending, telling them their trial was ending.
- Blinkist first validated their solution with user testing. Users now felt that they were “in control of the process”, and that it was really clear to them when they would be charged. They were also happy to be able to cancel whenever they want.
- They then ran an AB test to validate the hypothesis that these changes would increase conversion.
Results and learnings
- As expected, the new subscription screen increased trial sign-ups by 23%
- They also saw that 4% fewer users cancelled during their trial (thanks to both being reminded about the app and having trust on Blinkist)
- Complaints were also decreased by 55% (the goal was 10%)!
#4 Quick reads
Adobe vs. Figma
I'm not surprised that Adobe is acquiring Figma for $20B, nor that Wall Street doesn't understand it and $ADBE stock is down more than $20B today. It's a smart move for Adobe because it's nearly impossible to make legacy software applications multi-user collaborative. Thread: 🧵
September 15th 2022
Carrying capacity in single player SaaS
My cofounder @homsiT and I are increasingly being asked for advice on how to build a *sustainable* consumer saas business. Let me share some thoughts on the single most important concept we wish we knew before starting @readwise. It's called 📈 CARRYING CAPACITY 📈
October 8th 2022
Creating a data-based ICP for B2B SaaS (case study)
Shameless plug: this one is by yours truly, but I figured you might find it useful. Please also leave your best tips in the comments 👇
That's it for this week. I'd love to know what was your favorite read this week!
P.p.p.s. Connect with me on LinkedIn and Twitter! (Warning: I mainly post memes and rants about marketing, but if that's your jam, let's be friends. I'm also Head of Growth at an EdTech startup and a freelance consultant for B2B SaaS startups, but honestly, I'm more into shitposting than personal branding.)