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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, the key insight is that any entry-level offer should be designed with clear segmentation and upgrade pathways in mind.
Here’s the breakdown:
• Rather than simply hand out an extended free trial—which may lead to a low conversion rate—you might consider a discounted starter plan if it’s structured carefully. In our book, we discuss the importance of targeting different segments with tailored approaches. For early-stage startups or smaller customers, a well-designed, lower-cost tier can boost adoption while still maintaining a clear path for upgrading to full-paying plans.
• The book emphasizes the need to “segment the customer base and vary the approach” so that you aren’t simply discounting across the board. For instance, if you create a discounted starter plan, it should come with strings attached—think of it as an “on-ramp” that comes with commitments like a longer-term subscription or a bundled add-on that enhances the likelihood of upgrading in the future.
• On the other hand, as our book highlights through examples like Amplitude’s approach, an extended free trial might attract a broad market but often suffers from poor conversion to paid plans. If your goal is to ensure that early users eventually become full-paying customers, designing your entry point around a lower-cost tier that has built-in incentives for moving up is usually the more effective long-term strategy.
In summary, as outlined in Price to Scale, rather than defaulting to an extended free trial that might reduce revenue without solid conversion guarantees, it’s typically better to create a capped discounted starter plan that clearly aligns with your overall pricing strategy and customer segmentation. This approach both hooks early users and positions them for growth into higher-value tiers.