Should You Charge Users in SaaS?

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JASON LEMKIN

Almost always — yes.

My top 50 biggest mistakes include not charging at all for our first few months.

Free “customers”, usually, are a total waste of time — and in fact worse than that:

  • First, you usually don’t get enough of them in B2B. So free isn’t a great user acquisition channel. Freemium usually doesn’t work in SaaS because the top of the funnel isn’t big enough, and the viral effects are slow / limited.
  • Second, they waste your resources. You have to treat them like paying customers, but they aren’t.
  • Third, and by far most importantly — they give you terrible feedback. Free customers want stuff that free users want. They want different features, different integrations, different everything than paying customers. So you lose big here. They are usually Worse Than Zero. Because they take you on the wrong paths.

Freemium sometimes works — if it’s a product everyone can use, that ideally, has a viral component.

This is rare in SaaS, however.

So 98/100, I’d take 5 paying customers over 5,000 “free” users. 98/100, those 5,000 free users won’t even turn into 5 paying customers. And they’ll suck up so much time.

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Published on January 4, 2017
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