Should You Charge Users in SaaS?

Almost always — you should at least have a paid edition.  Even if you are going freemium.

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

Free “customers” for many SaaS apps can be a waste of a fair amount of time and energy — and in fact worse than that:

  • First, you usually don’t get that many free users in B2B. Yes, it worked for Slack and Zoom.  But most of us are a touch more enterprise — and less viral.  We just don’t ever get millions of free users at the top of our funnels.  So free isn’t a big enough user acquisition channel. Freemium can be harder in SaaS because the top of the funnel isn’t big enough, and the viral effects are slower / more limited.
  • Second, free customers can burn through a lot of your resources. You have to treat them like paying customers, but they aren’t.
  • Third, and by far most importantly — they can give you the wrong feedback. Free customers want stuff that free users want. They want different features, different integrations, different everything than paying customers. So you have to be careful to triage their feedback.

Freemium sometimes works — if it’s a product everyone can use, that ideally, has a viral component.  Again, Slack and Zoom.  And when it works at scale, when million and millions and millions will use your product every single day — well that’s magic.

This is rare in SaaS, however.  More of us end up getting to $100m+ ARR on the back of solution sales and a bit more enterprise strategy.

So 98/100 in SaaS, I’d take 5 paying customers over 5,000 “free” users and 0 paying customers. 98/100, those 5,000 free users won’t even turn into 5 paying customers. And they’ll suck up so much time.

Published on January 4, 2017

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