Why are we ditching the Freemium model?

At Reditus , we have decided to drop our Freemium model and start a free trial model on August 1st. In this article, I will explain how we came to the decision, as I know many B2B SaaS founders also struggle with this.

Before we dive in, I will quickly explain the two different models. If you already know them, you can just skip this part. This is specifically for people new to B2B SaaS or need clarification on these models.

Freemium model for SaaS

What does Freemium mean

Freemium is a pricing model that allows a user to access the basic features of a B2B SaaS product for free. In contrast, premium features (or higher usage) are only available for paying customers. The model often attracts users by providing software without initial cost, hoping they will see the value and eventually upgrade to a paid version.

• Freemium example

A B2B SaaS company might offer accounting software where users can create and manage invoices for free. Still, premium features like automated invoicing, advanced reporting, or integration with other software are only available for paying customers.

• Freemium model benefits

As the Freemium models lower the barrier for entry, it will allow you to gain more users to try the product without committing financially upfront. This often leads to a more extensive user base, which can be great for getting customer feedback, brand awareness, and a network effect.

• Freemium pricing

In a freemium pricing model, the software's basic usage is free, but advanced features or additional usage will cost. Pricing for these premium features can vary widely, depending on the functionality they provide and the value they offer users.

Free Trial Model for SaaS

• What is a Free Trial model?

A Free Trial model is a pricing strategy allowing users to use the full product for a limited period, often 7, 14, or 30 days. During this time, users can explore and understand the full range of functionalities and benefits of the SaaS.

• Why offer a free trial

Free trials are offered to demonstrate the product's total value and convince users of its worth. It is a risk-free way for businesses to test the software and see how it can benefit them before purchasing.

• Free Trial benefits

A free trial model's benefits include showcasing the product's full potential rather than just basic features. This can help attract users who are seriously interested in the product and are more likely to convert into paying customers. It also allows potential customers to determine if the software meets their needs and expectations.

• Free trial pricing

After the free trial period ends, users are expected to pay to continue using the service. Pricing can be based on factors such as the number of users, data usage, or level of functionality required. In B2B SaaS, the pricing often comes in tiers, with each tier offering more advanced features or services.

Why did we choose the freemium model?

As mentioned above, a freemium model removes the barrier to joining your platform. Users can experience the value themselves without worrying that they must pay immediately. Our goal was to allow any B2B SaaS company to quickly set up an affiliate program and invite their affiliates to the program.

The most significant benefit we envisioned was that all the affiliates who joined their program would also see the other programs in the Reditus Marketplace. This would make it a win-win for both of us, as the network would kick in for our platform.

It still sounds like a good plan, as it could create a nice growth loop & increase our brand awareness. This has also been one of the reasons we have quickly grown our database of B2B SaaS affiliates to 12.000+.

This is what we used to offer to free users:

• Unlimited # of affiliates or users
• Basic features to set up & manage an affiliate program
• Landing page + sign-up page for their affiliate program
• $1.000k Monthly Recurring Revenue generated via affiliates ($12k ARR)
• Live Chat support

It has been an outstanding deal for B2B SaaS companies, as they would earn a lot before paying us.

Why is Reditus moving away from the Freemium model?

We combined a freemium model with value-based pricing, making it a no-brainer to start with Reditus. This has been our big advantage but has also become our bottleneck. Let me explain.

The free plan has attracted companies that don’t fit our ICP, from Yoga Studios and people selling courses to hardware companies. This is one of the biggest challenges of having a freemium model. We avoided this as much as possible by using B2B SaaS terminology all over our site and onboarding.

With any free plan, you will attract companies with a small or even no budget. These are often early-stage companies that don’t have (many) paying clients and a network to tap into.

These two things combined also make it almost impossible to make affiliate marketing work; add to that mix, they don’t have the resources to recruit affiliates. We had quite a few cases where companies would expect affiliates to drive them paid clients when the founders were unable to sell themselves ??

If you can't sell your SaaS yourself, how do you expect someone else to do it for you?

The number of unqualified sign-ups also created internal challenges, from pushing new features/changes to supporting these users.

The main challenges we faced with the Freemium model:

• Not attracting our ICP
• Low conversion rates; free to paid.
• We were considered to be too cheap to be good
• Feature requests which were unrelated to our ICP
• A high number of support tickets from non-ICP clients
• Extra operational costs associated with the free services
• It is harder to push new features to SaaS clients due to the high number of free users

As we have been able to grow our network of B2B SaaS affiliates quickly, you could still say this might still be worth it. So, we wrote down our assumptions and what we think are the advantages and disadvantages of the Freemium model.

My most significant assumption was that it would allow us to grow the affiliate network quickly, as free users would invite their affiliates. This happened; however, when we dug deeper into the data, we found that they needed to make a lot more money compared to affiliates who were invited by a paid customer.

This makes sense when you think about it; as a paid client, it was often more related to our ICP, which meant they would have bigger brand awareness, better conversion rates, more resources available, etc.

By looking at the data behind our assumptions, we have decided to switch away from the Freemium model fully ??

How to switch from the Freemium to a Free trial model

We are in the middle of this transition right now, so if I missed anything, ping me ?? > Joran Hofman .

What are we going to do to make this change possible:

• Inform our users about this upcoming change (before we have built the mechanism).
• We have already deleted the free plan from our pricing + plans page. To avoid setting false expectations for new website visitors / sign-ups coming to Reditus.
• We updated our site to no longer mention the free plan; as we have mentioned quite a bit, it is still ongoing (as we keep finding new places where we mention it ??)
• We are building the ‘lock mechanism’ for the free users and notifying them how long of a trial they still have left when signing up.
• We will let everyone know well in advance. They will receive four emails, and their accounts will be locked on September 1st.
• We also combined it with moving to the new version of Paddle (Paddle Billing), which allows us to update the app based on the plan purchased.
• Offer a (very) generous offer to our current free users to upgrade to a paid subscription, running until the 1st of August.
• Re-structured our pricing plans based on the 'hamburger menu' method thanks Wolter Rebergen , for helping us with this ??

Our next steps

• Ensure we informed/spoke to all active users before changing their accounts.
• Implement the lock mechanism + connect the payment processor to it
• Change all onboarding emails + last checks on the website.
• Delete all 'in-active free accounts' after the 1st of September
• Drive some core app changes when we have a lot fewer accounts/edge cases to worry about
• Change all review site listings
• Launch a new homepage which represents our value a lot more (showcasing our B2B SaaS focus and the fast-growing Network of B2B SaaS affiliates we have)

Let me know if you have any thoughts on this topic, we missed anything or you would do anything differently ??