Behind the question of whether a billing system can help your SaaS business grow is the question of what it means for a SaaS business to grow. This guide tackles both — it creates a model you can use to approach SaaS growth and a 360-degree view of how your billing system fits into it. Read More >
A primary practice in the SaaS industry is to offer users a trial period to check out how your app works and see whether it will benefit them. Time bound trial is the most common trial option offered in the industry. But how does it stick up against usage based trial?
SaaS consumers are used to trials. This is logical because the consumers need to get a “feel” of your service before they decide to jump in. Some companies use the freemium model, where they offer a set of features for free and hope consumer can see the benefits of the app and later upgrade to access more robust features, storage space, support, etc. However, it is time-bound trial that is most prevalent among SaaS businesses.
SaaS Time Bound Trials
Time bound trials are everywhere, with most businesses offering between 14 to 30 days trial. The sales team hopes that within the trial period, users will have gotten the hang of the application and seen its benefits.
Time bound trials create a sense of urgency to the user. Given that the clock is ticking, the user may be more committed to trying the app and this is good news for the SaaS business in three ways:
- Serious users can be identified based on their activities. These users can be segmented and allocated dedicated Account Managers that can pursue them to close sales.
- The business can know which aspects of their app are important based on user activity. This information can be used in R&D.
- Payment based trials give the business some revenue regardless of whether the customer uses or doesn’t use the software. (e.g. Aweber)
In spite of the above advantages, time bound trials may not give users ample time to explore the service to make an informed choice. This usually leads to low sign up rates. Things happen; the user may go on vacation, PCs may crash, and so on; all this time the trial period clock is ticking. It is not uncommon for users to sign up for trials and never use the service until the trial expires.
Thus, there is need for a more beneficial user-focused trial that will also benefit SaaS owners. This is where usage based trial comes in.
Usage Based Trial
Usage based trial is based on how much of the service a customer uses. Typically, SaaS companies will offer their services with unrestricted access to features, but institute quotas on usage. For example, a web hosting company may offer free hosting but with limited disk space.
Usage based trial gives the consumer more freedom to explore the app, and thus make a more accurate decision. Users who get to learn how an app works and at their own pace are more likely to upgrade.
Usage based trial is more about value rather than rush to explore like is the case with time based trial. As the customer continues to interact with the app, he can find better value it. By the time you are asking for an upgrade, it will be a no-brainer for the lead on whether or not the app is right for them.
Time Bound Trial vs. Usage Based Trial
The difference between the two trials lies in the power of the value derived during the trial period. With a time bound offering, the user is compelled to explore the app and this can mean deriving low value in a bid to test the app before time expires. On the other hand, usage based trial puts the power of exploration in the user, which usually results to higher conversions.
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