Time Limited Trials Suck

If you're in the business of building tech, especially software platforms, you know the blood, sweat, and dollars that go into it.

You find a legit prospect, make them aware you exist, and then pour more into educating them about the problem and your solution. You've finally got them to sign up, and they're starting to invest their time into learning your system.

Let's talk about the hoops your prospect jumps through:

1. Experimenting: They're just getting their feet wet, figuring out how your solution feels and fits.
2. Changing Habits: This is where you want them to instinctively reach for your solution, not their old ways or doing nothing.
3. Overhauling Operations: Especially in B2B, after the early adopters get it, it's time for the whole business to morph their processes around your product.

But then, bam! Whether it's 7 days, 30 days, or 3 months, no matter where your prospect happens to be in this cycle, if they haven't paid up, you're booting them out. Gone.

It doesn't matter if they got side-tracked, took a holiday, or whatever. If they're not converted in your arbitrary timeframe, they're out.

What does this do? If they're not fully onboarded by your deadline, you've just trashed all your effort and their time. It's like you've invited someone to a party, got them excited, and then slammed the door in their face because they didn't show up in the first half-hour.

Now, here's a personal take: If a product has a time limit on the trial, I'm checking out the competition first. Why? Because I know I need time to explore and integrate it into my working day properly, without the pressure of a countdown.

Sometimes time limited trials are warranted, you provide massive obvious single value, your a very high volume appeal so millions are trialling, and there are always some people who will procrastinate, just give them a nudge.

For just about every other platform, time-limited trials suck. They disrespect the prospect's time and your own investment.

There's got to be a smarter way to do this.

What are some better models?

Freemium.

Offer base Value for free, forever, possibly to a limited number of people, possibly to everyone. There is usually a promotion point beyond which people should start paying for the solution.

• Greater functionality. There are usually bigger and better things people want to do once they have started using an application, these are great points to start charging for.
• Greater volume of usage. The more users from an individual company, the more likely they are to keep using a platform, at some point their usage is at a point that they can see the value of the solution. Slack did this very well by limiting the history on messages, 10,000 past messages, seems huge when you start, it extends back for 6 months. Once your entire team is doing 1000-2000 messages a day on average, you find the notes you left for yourself on a project disappearing, its time to pay.
• More users. One of Atlassian's best moves was $10 per user per month for the first 10 users, then the price climbed dramatically, but by then, you were hooked. Enabling 1, 3 or even 10 users to embed your product as part of their daily operations is a key part of your sales funnel that you shouldn’t sacrifice for a small early sale.

A platform we are building at the moment allows as many users a the company needs, this allows it to spread with the organisation, we then charge for a key native metric.

Users as the product.

This is a 0 friction to adoption and retention of users and it has been used a lot to grow very large customer bases.

I don’t like this model as much, though in some instances it can work very well. Its the model you know from Facebook, LinkedIn etc. Collect as many users as you can and sell their attention, access to them, their data, their activity (tagging photos) or whatever to third party interested in paying for them.

The main problems with this model

1. it creates a divide between the best interests of the user and the interests of the platform provider, often they are in conflict. To make more money the platform needs to get people to behave in ways that are counter to their best interests.
2. You need very deep pockets, when the internet started there was only 1 or 2 choices so it was easy and fast to get mass adoption. Today you need to go all in, for a long time in order to get to a "critical mass" of users before third parties are going to consider paying you at any sort of scale.

Advertising.

Once you have a lot of users you can show them ads, ideally highly context specific and highly targeted so that every ad the user sees is exactly what they want and need. The more you stray from this ideal, the lower people will value your solution and will move on.

LinkedIn is a prime example of this, they know exactly who the senior decision makers are, so the value of an Ad is much higher to B2B customers than Facebook.

The problem with advertising is that it is already a saturated market, its very hard to get highly targeted content, most users still don’t want to see it or be hassled by it. Even if the ad is perfect for them, their reaction is "ugh, I hate ads".

Transaction fees.

For multisided marketplaces or deeper multisided applications the point where your users transact is often the point to add your margin.

If you’re reasonable and providing value as part of a natural workflow, then this works well. If its a contrived or enforced workflow then people tend to try and work around you or move on.

Uber and AirBnB are both key examples where they remove the friction from a transaction and then make a margin for facilitating the transaction.

The long term problem for your platform is that, the very next transaction can be with a competitor, not with you. Its hard to get "stickiness".

Service provision.

Again for multisided market places the subscription can be split between the platform and the provider of the service. Netflix does this by paying for content from third parties to show.

One of our platforms takes the money from the customer and pays 80% to the provider for doing the work. The platform also automates a large amount of the work the provider has to do so that it is primarily their knowledge provide is providing, not their effort. This retains the stickiness as we are part of the suppliers business operation not just a connector to the customer.

When has the wrong pricing model caused issues?

Not thinking about a pricing model

Trello, while a hugely successful tool in terms of adoption and repeat usage, failed to provide enough value in the early paying model. For many years they had a few premium fringe functions like custom photo backgrounds and "stickers" which were nice to haves, not must have to improve. They eventually developed enough premium value with team based boards and integrations that just forced mid sized teams into paying for it to simplify their lives.

Twitter had this issue as well, from an actual profitability point of view they never actually made a return on the value they created. Their Valuation and Elon buying them kinda saved them but they didn’t really have a good strong financial base to build from. Now Elon has to work out a different way, which is hard given the prior expectations that have been set.

Going in too early

Many platforms that fail to gain traction because their pricing model and asking for credit card details before the customer has "bought in" through understanding, exploration and critically behavioural change.

The platforms are perfectly fine as far as the technology and the benefit provided, they fail simply because the pricing was too big a friction, too early on in the adoption process.

Not prioritizing the user

The obvious candidates I've talked about already, free is very low friction and gets lots of users, but it causes platform to start treating the user like a product, not like the customer. Facebook and others have very bad reputations and very questionable conduct when it comes to their users, this is primarily because, in order to make money, they have to.

The other models I've seen is where the founders haven't prioritised the customer and users:

1. Where the founders think they should claw back their investment in the first 2-3 sales, rather than the first 10 or 100 sales. This gouging typically makes the majority of prospects pull back and stay away.
2. Where the founders haven't considered "at what point does the customer see a return on their investment?". Typically they choose a "charging metric" which is simply part of the operation rather than a "key point of value". For example, if the customer is about to earn $1000 from your platform, its probably reasonable for you to take your share (10-20% is good if you've added value beyond just entering a credit card, it not, then its more like 2-4%). However if you try charging for "generate some possible answer", and they may need to do that 3 or 20 times before they get the result they can charge for, then they will likely walk away.

The charging metric for a few of our platforms is something the customer can on-sell to their client, rather than reaching into their own budget, this makes it a much easier sell as it is a single line item on a much larger bill. This allows us to charge higher fees as its not our customers problem.

Choosing the wrong metric

Many platforms don’t consider the pricing model properly, they just pick the default one, per User per Month OR advertising are the ones I’ve seen the most. While both can be valid choices, often the platform isn’t suited.

Per user per month. IF the platform requires lots of staff at a business to use the platform, then it can be a great choice, if however all staff can share 1 or 2 licenses it can limit your revenue and you have to sell a lot more to make what you were expecting.

Also if many users becomes too expensive, you cause companies to ask "does this person need access?" and to try and limit the usage. In this instance, you limit your penetration into the organisation and increase the likelihood of the customer not realising the Value of your platform and being replaced or dropped.

A previous client struggled to understand the "web scale" drivers and costs that matter. They insisted on charging for things like storage when the storage requirements of the solution were negligible. It took some real world conversations with clients to convince them to choose different pricing metrics.

What should you look for?

Choosing the right pricing and revenue model for your platform is critical as you scale out your business.

1. What is the reason that someone will try it? Often there is a carrot, something that is annoying them.
2. What is the reason they will adopt it? There is a bigger picture beyond the carrot that makes them stay around.
3. What is the reason they will never leave? What makes them sticky to your solution, typically its deeper than the original carrot?
4. What enables the users to spread it within the organisation with the least friction? Internal word of mouth is the best way to spread an application, second best is a requirement in the operation that needs the next person, in their role, to participate.
5. What enables it to spread outside the organisation with the least friction? Referral programs don’t work, it needs to be a natural part of the platforms operation, can you design the platform appropriately?
6. What enables the company to get the highest value return from using your platform?
7. What enables the users behaviour to change and entrench it into the user and customers operating rhythm?

The more of these questions you can answer convincingly while still answering the key "can we be profitable using this model?".

Its a balancing act but the clearer you can be answering these questions, the easier your solution will slide into daily operation with your prospective customers and the longer it will be simply part of their operating procedure.

Secondary revenue models.

Often with cloud systems there is more than one revenue model open to you, if you plan well both can happen, just be careful to be fair to the customers.

One of our platforms uses a primary revenue model to "get to scale" which provides a good cashflow before we have enough users to meet "critical mass". Once we achieve "critical mass" we then have a secondary revenue stream that is much better for all parties, but doesn't work at small scale.

Finally

Ultimately, keep your interests inline with your customers and users if you want long term success.

Especially with B2B platforms, the more you can align your offering to the way you customer does business, including how, when and what they pay for, you will become part of their "business as usual" behaviour and will last for years, or in some of our clients cases, decades.