Why Would You Pay for a SaaS Product?
This post is a result of a “Marketing Squaretable” meeting, which takes place every Tuesday in 30 minute lunch sessions at work.
There are so many free products online today, do you really need to pay for a tool to get things done? Couldn’t you do most, if not all, of what you need to using free tools like the Google Apps (Gmail, Drive, Docs, Sheets, etc.)? For some reason, productivity tools in the SaaS space tend to do very well, which gives a hint to the idea that somebody out there is paying for something.
Why Would You Pay For Trello Gold?
If you’re not yet familiar with Trello, you should check it out. This task-oriented project management tool started off as a project within FogCreek Software, later to break off on it’s own as a product of Trello Inc. It claims 4 million users to date and getting started with their free tool will give you a hint as to why it’s so popular. While their free offering is very robust, they also offer two paid versions. One is called Trello Gold, the other is Trello Business Class. Before diving into the nuances of these two paid versions, let’s first take a look at what “paid versions” usually entail.
Freemium Models (that “s” is not a typo)
Those of us familiar with the SaaS world are very familiar with Freemium Models. Users are offered a free version of a product and offered a better version at a premium price. Part of the idea is to hook in users and then charge them once they’re addicted. But “Freemium” as we know it is really not that simple. According to Lincoln Murphy of SixteenVentures.com, there are actually seven different types of Freemium models. I tend to disagree slightly and will have condensed his list a little bit here:
1. The Classic
In this model, users are offered a free version of the product. It’s free forever and very helpful. The premium version doesn’t offer all that much and the business understands that a vast minority of it’s users will actually buy in. This model is not very sustainable, but it remains as the model most associated with the term “Freemium”. LogMeIn and DropBox are both examples of this. Arguably so is LinkedIn.
2. Meant for Teams
This model refers to a product that is free for individual use – so you can sign up and get started today – but is premium for teams. The idea is to get a large amount of users and to get them hooked. At some point these users will want to collaborate and will need to buy in. This is how Yammer grew their user base (they were later bought by Microsoft and now seem to have a different model).
3. The “Free Trial”
It’s free forever, but for whatever reason the marketing teams at these companies decided that “trial” was a good word to have. The free version is usable, just like it is in “The Classic” model. But because it’s a “trial” it’s blatantly limiting in functionality, and might be noted as such in the UI itself. The premium model is essentially the same product, but functions better and has a more polished UI/UX. Basecamp works this way; you have 60 days to try it in full, after which it becomes limited. At this point they’ll ask you for $20/month, which apparently is worth it for thousands of users.
4. Company Project
This is where I combine Murphy’s “Freeware 2.0” and “Alternative Product Strategy”. This model, which again is still under the title “Freemium”, is a product that is totally free, but created by a company that has better things to sell. Take join.me for example. It was a totally free product (they have since started a premium version of it) that was fully usable and loved by many (it still is) and helped promote LogMeIn. It was a way of saying “Here, you can get a ton of stuff done with Join.Me. Oh, and by the way, we’re made by LogMeIn which makes some other things you probably need.” Trello was similar in this regard. It was a totally free tool that helped bring attention to FogCreek’s Kiln and FogBugz products (both of which are premium tools).
For #5, which is my final item, I’m combining Murphy’s “Ecosystem” and “Network Effect” models. In this version the product itself is free, but there are purchases made within the product. For example, iTunes is a free product (a great way to enjoy audio or video entertainment) and you’ll probably end up purchasing items (songs and movies) through it. Another example is Google Chrome, a great free product that you may end up purchasing apps through, via the Chrome Web Store.
Each one of these models could be discussions of their own, consider this a brief synopsis. While Lincoln Murphy and I differ on a few points, at the end of the day you now have a general understanding of what a Freemium Model could be. We’re still left with the question of what a premium model would actually entail, and how does that fit into Trello’s Gold and Business Class?
What We Pay For
I ran a very quick analysis of what I felt were popular SaaS tools. This included Asana, Trello, Podio, MailChimp, and FreshBooks, as well as a couple of others. What I found was the following:
- We pay for Team Features, such as roles and permissions and the sharing features that come with.
- In the case of MailChimp and FreshBooks, we pay for usage (which means our usage on a lower tier is limited). In the case of project management, paying for usage can be the amount of projects you have.
- We don’t often pay for storage, probably because you can get 2GB for free at DropBox, but it does still come up in pricing sometimes.
- We pay for convenience, such as integrations or larger file uploads (enhanced features).
- We pay for premium support.
Again, this was a quick analysis, done by spending a few moments on each company’s pricing pages. Trello Business Class offers a few of those features: administrative features (roles and permissions), enhanced features and convenience (larger file uploads, better import/export, Google Apps integration) and… some fluff.
Trello Business Class is $5/month for each user. So is Trello Gold. Trello Gold offers larger file uploads and… the same fluff as Trello Business Class. That is, custom backgrounds, custom stickers, custom emojis and a little golden crown to put on your avatar. So why would you pay $5/month for fluff when you can pay $5/month for fluff plus useful tools? That is to say, why pay for Trello Gold when you may as well just pay for Trello Business Class?
Really, Why Would You Pay For Trello Gold?
The secret, in my opinion, is that you wouldn’t actually pay for Trello Gold. First of all, you can get Trello Gold for free simply by inviting other users. Each use is one month’s worth of Trello Gold, so if you know 12 people that would love Trello, you get a year for free off the bat. Second of all, a quick glimpse at the Trello Gold landing page puts things into perspective right away: “Support your favorite organizer and get extra fun and functionality.”
Trello Gold is not a premium version, it’s a request for donations. It’s a way of saying “We love you and you love us. Please drop up $5 so we can keep the lights on. If you do, we’ll give you some fun fluffy goodness. Don’t have $5? No problem, you can still help us by inviting a friend. Oh, you do have $5? Well, we’ll tell you what, why not spend that same amount of money on Business Class? We have a ton of stuff you would love right there.”
I think it’s brilliant. I also think it’s great that Trello does not only have customers, they actually have fans. Otherwise I’m not sure they would be able to pull this off.