Jan
09

Here’s why free trials don’t work and what to do instead

posted on January 9th 2017 in Uncategorized with 0 Comments

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When I was on the corporate side of the table I would meet new suppliers who would sit down and pitch us their product or service, and almost all of them would throw in a free trial as standard. From a startup’s perspective, the theory goes that free trials get your foot in the door with established brands and lend themselves to an eventual graduation to a paying client. The reality is that this theory, whilst not always wrong, is inherently flawed. Of all the free trials I green-lighted, not a single one came to anything. Here’s why, and what to do instead.

Don’t leave pricing until last

Pitching a product isn’t the hard part. As an entrepreneur it’s expected that you’ll be passionate about your product, and most successful entrepreneurs understand the basic laws of pitching and presenting. Brands don’t doubt your enthusiasm, and they might even love your product. The problems begin when the subject of price rears its ugly head, usually right at the end of the conversation. Both sides of the table skirt around the subject of money, neither party wants to show their hand, until eventually the buyer asks, ‘how much?’. To which the general answer from the entrepreneur is, ‘it depends’. I’ve been involved in brand-startup relationships where it’s taken 3 months of email back and forth to arrive at a price – the buyer figuring out what they need, the startup figuring out how much it’ll cost – by which time it’s too late. Free trials can mistakenly be considered as a defence mechanism against this very scenario. It’s an easy option because it avoids the discussion about price. Instead, I suggest that you…

Start with price

If you’re unsure about how much to charge for a trial, start with your break-even point and go from there. Once you’ve worked out a price point, create a consistent set of deliverables. You should know, for example, exactly what a £10k trial looks like. You can use a tiered pricing structure, but be sure to know exactly what each price point will buy.

Free is not a good deal for anyone

As a startup, if you do something for free you risk creating a mismatch of expectations between you and the buyer. Nobody likes doing something for free, especially if it ends up costing you money. Starting with free can lead to a strained relationship down the line. The startup expects paid work to follow, the buyer expects more for free. If you put a value on what you’re offering in the form of a price, there’s a higher chance that somebody will value it themselves when they pay for it. The great irony is that even if you offer a free trial thinking you’re giving someone a great deal, to the buyer your product is effectively worthless. Trouble also arises if the buyer says yes to a free trial, even though they know that it’s highly unlikely that they will pay for the product or service in the future.

Get skin in the game

Corporate people are very careful with how they spend their budget because they know that eventually they’ll have to justify it to their team and superiors. If I’m sat in a meeting and my boss asks me what that £10,000 outgoing is for, I’d better have an answer lined up that explains exactly what we stand to gain, and why it’s a good investment. By this point I’m personally invested in that project, because I know that in 3 months time I’m going to be asked to report back on how it went. In the corporate world, the mere fact that somebody has paid for something can generate a much higher degree of personal responsibility. The individual, and therefore the company, has skin in the game, and they’re going to engage with the trial to a far greater extent. Nobody wants to put their company’s money into a project only to forget about it. Free is forgettable. 

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