When should you offer your product for free? Or should you never? 🤷‍♂️

Question

For the first time, I'm launching a B2B product. This product is a SaaS sales solution for a niche industry. We've always capped our free beta users at 15, for feedback cycles in my previous B2C launches. 

However, this product a much higher ticket item and the value itself has significant ROI immediately. 

I want to charge off the bat. But I'm not sure that's the right move right out of the gates (leaning prob not). I'm curious to hear from other makers who have launched B2B SaaS products and their thoughts about getting their first 1-3 users / customers (institutional level).

Should the same methodology apply? (i.e. exchange feedback for payment)


Appreciate any insight! 🙏

Austin Marks · Accepted Answer

@arseniyw @alex_papageorge If possible, maybe even running some A/B tests where you charge some people at a discounted rate vs offering it for free for a limited time.

Austin Marks · Answer

I know a lot of B2B CEOs are very against ever offering their product/service completely for free. That being said I think there is some value is offering a heavily discounted early adopter option!

Alex Papageorge · Answer

@sanaz_bidad Thanks! I'll check it out

Alex Papageorge · Answer

@arseniyw ❤️ that idea. I'm a big appsumo fan too so I'm familiar with the website. Out of curiosity, I'll check out appsumo (great idea), but do you know any similar websites?

Alex Papageorge · Answer

@austinmeta I like the discounted rate, good idea. Similar to @arseniyw , I prefer the idea of some kind of payment instead of just outright free. I feel there's another level of validation of the idea/product with a payment in exchange for value.

Alex Papageorge · Answer

Super GREAT thinking @sanaz_bidad.

Tough question though, because there's a balance right... The product we're offering could (honestly - not just saying this) bring $50,000+ return to anyone using the tool, but I can't price it that high... So where's the balance? I'm typically a subscriber to the YC pricing strategy of identifying a starting point (based on data + value) and adjust the price by 5% -/+ to see where that breaking point is.

Aaron O'Leary · Answer

Definitely think there are reasons why. Offering to an early-stage startup is a great way to get an early customer later down the line once they make revenue

Noy · Answer

It depends. For my E-book Start With A Side-Project I'm delivering great value for what I ask for, so I decided to charge for it. Now it's even on AppSumo https://appsumo.com/marketplace-start-with-a-side-project/ 
If your goal is to build an audience and this is not the main product on your line, then consider giving away for free. If you don't plan ahead with upselling another product and your product delivers, then consider charging.

Mr Ethar Alali · Answer

I've launched both, but for others mostly. Where I have launched it for my own company, it's been SME's which are a bit more like people than institutions. So I'll draw on the former experience.

Obviously, you've not mentioned your target avatar, so I don't want to over-generalise. Though in general [!], B2B and B2C SaaS markets are _radically_ different. To the point you should probably throw out everything you know about B2C SaaS and think back 10 to 15 years and imagine selling to people then. As many still don't understand SaaS and in the public sector, often have no way of buying SaaS services as it doesn't fit into a standard, recognisable procurement model for them.

* B2C requires very significant effort and your chances of getting paid users is very small. Meaning you need hundreds of thousands, or even millions of free users before enough people start to pay for you to have a viable business. However, as we probably both know, many firms use freemium levels to sell insight or ads to commercial enterprises. Effectively securitising the free offering through the value of the resulting usage data. So it's free to use, but not "incomeless"

* B2B SaaS is a completely different space, because they care about the job they need to do. So people are much more nervous about IP and commercial sensitivity, than the B2C market on the whole. Especially if it accesses their own customers (which is the value in any business).

A Freemium model doesn't work as well to go from zero to a very high number at the best if times and although the resistances are different in institutions (finance departments and GRC versus an individual person), there is a similar frictional issue trying to convince people to pay for something they've had for free, especially for a very long time. Though there is still an "addiction" that can be "exploited" if you have full, unique positions (like YouTube, since they've moved from ads at the beginning, to an ad in the middle and now several times in a 5 minute vid which makes the vids unwatchable - all to get you to buy YouTube Premium via taking their one month free).

What all this means is institutions should be approached from the perspective that you are shaping high-ticket products just for them, as if they are your *only* customer. So limiting users to X searches/requests doesn't prove the model scales, which this is a risky strategy to get through their IT teams. You'd be better off with a 1, 2 or 3 month, fully functional trial, with a view to a longer term discount if they take it on. Plus, it allows you to do things you wouldn't normally see.

Example:

Recently, we worked to build a reserve power system which works in this space. The first thing I told the client was to take this mock-up and go sell that to the institution. They came back with enough money to finish that portion of the project and leave a little spare. So they started their startup with funds! It wasn't loss making at any time in year 1. There was no need to build a product, give it away for free and then try to find a way to monetise the freemium. That same institution then bought several instances of the high-ticket items on the SaaS models. Overall, it was a solid strategy.

Arseniy · Answer

@alex_papageorge I don't know how much exposure it provides, but I think https://startup.deals/ does something comparable.

Ben Brausen · Answer

It's certainly a challenge. By offering it for free (or even a reduced rate) you risk devaluing the product. Unless people find a HUGE value in the product, they're unlikely to go from paying nothing to paying something for it, even if the price is very low. Look at how many will find a free app to do the job of a 99¢ app, despite the fact it does it only 50% as well.

I'd suggest reading up plenty on pricing strategy, especially with regard to B2B.

Arseniy · Answer

Consider an appsumo-style offering, i.e. a heavily discounted, but lifetime subscription to your services which has some refundable period.

Sanaz Bidad · Answer

Dear @alex_papageorge 
I recommended this article for you https://www.linkedin.com/pulse/why-you-shouldnt-give-away-your-product-free-dave-bailey/

Sanaz Bidad · Answer

Intellectually, I understood that people don't value free products as much as paid ones and that charging for my product would force the issue: is this product valuable or not?

Rather than starting with your product, start with your customer. How much will your client spend to solve their problem?
It’s worth ‘pricing the need’ before starting product development. This will help you quickly eliminate high-touch products that would be too expensive to operate and identify cheaper product ideas that clients can afford.

Alex Papageorge · Answer

@arseniyw Good call. Thanks a lot!

When should you offer your product for free? Or should you never? 🤷‍♂️

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