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Ask HN: Which Payment Model to Chose?

4 points by danTheFounder ↗ HN
I am checking into different payment models and want to start one for my SAAS business. It's not straightforward as it sounds, even though I have learned from YC Startup School that only paid customers matter. But in a world where softwares are all over the place, how many people would like to pay a software without even trying it, for free ?! Here are some models that I know a SAAS company usually does (based on researches and discussions):

1. Freemium (for ever) + Paid plan with more functionalities -> This one was quite popular 5-10 years ago. But I heard a lot of founders saying that SAAS should not do freemium, especially at the beginning. Because only paid customers matter and only paid customers confirm that your product is needed - the product market fit.

2. 7-14 days free trial then paid plan + Credit card required -> Personally I hate companies requiring credit card for a free trial. I heard that this can result a hight churn rate as well. Benefit: It may get extra revenue because some users forgot to cancel their accounts.

3. 7-14 free trial then paid plan + credit card not required. Need some more insights about this one. It seems to be the best option so far.

After writing this down, I think I should just take one model, try it out, and iterate...Does it really matter the initial choice?

5 comments

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seanwilson
It's too general a question to answer. It depends on the type of customer, the type of service, the price, how long users need to try it to know they're ready to invest etc.

Multiple payment models exist because there isn't one that suits every SaaS business.

danTheFounder
Indeed. I have to admit that it's like other questions around doing a startup. It seems that other people all have similar questions, but nobody's situation is exactly the same. So we can only learn what is the best option by trying it out. But appreciate your answer.
wusatiuk
Depending on the product, i would suggest option 1 or 3. Maybe you can find a limitation for the free (lifetime) version, where the free users can help you to get some traction. (Like trello.com does)
rahimnathwani
Think hard before introducing a free plan. People invest their time in your product, so may (i) introduce a support burden, and (ii) be unhappy if you decide to start charging. It's not an easy two-way door.

People who submit their credit card are serious about trying your product. This is partly through selection bias (only those who are serious will sign up) but the act of entering a credit card also encourages people to be more serious about trying out a product. (This could be because they want to feel consistent: I entered my credit card, so I must be considering this product seriously. I'm considering it seriously so I can't just not bother to log in during the free trial.)

I'd go for 2 to start with. It is likely to maximise trial->paid conversion, whilst reducing # trials. This will be easier for you to manage (in terms of support costs and customer discovery), and it keeps the door open for the other options later.

danTheFounder
Thanks for sharing your insights. I personally don't like asking people's credit card during the trial. But what you said makes sense as well. I think we just need to try.