Does a free tier help or hurt?
For most small products, it mostly brings signups, not customers. The typical free plan turned about 1 or 2 in 100 users into payers, and the typical founder only had about 125 free users. When founders took the free plan away, they usually got more paying customers.
Syed Asif Sultan · every number regenerable from the repository
Short answer: for most small products, it hurts more than it helps.
A free plan brings signups. It doesn’t bring many customers. The typical free plan I found turned about 1 or 2 in every 100 free users into paying ones. And the typical founder only had about 125 free users. That’s 2 customers.
When founders took the free plan away, or swapped it for a trial, most of them got more paying customers, not fewer. They got fewer signups. But the signups weren’t paying anyway.
Here’s where that comes from. I read 563 posts from founders in seven subreddits (r/SaaS, r/SideProject, r/startups, r/indiehackers, r/Entrepreneur, r/microsaas and r/buildinpublic). Each one talked about a free plan or trial with real numbers, or a change the founder made to one. 289 were founders reporting on their own product. I left out 24 more that were mainly selling something.
What a free plan converts
96 founders with a free-forever plan said how many free users they had and how many paid. Here’s how that spread out:
| Free users who paid | Founders |
|---|---|
| Nobody paid | 32 |
| Under 1% | 12 |
| 1% to 2% | 11 |
| 2% to 5% | 22 |
| 5% to 10% | 7 |
| Over 10% | 12 |
The typical plan converted 1.6%. A third converted nobody at all. Only 12 of the 96 got more than 1 in 10 free users to pay.
Free plans for business buyers did a little better than ones for consumers. The typical business one converted 2.5%, against 1.33% for consumers. Both are small.
The maths most founders skip
A free plan is a numbers game. At 1 or 2 in 100, you need a lot of free users before it pays for itself.
The typical founder here had 125 free users. A quarter had 50 or fewer. At 1.6%, 125 free users is about 2 customers. To get 100 paying customers at that rate you’d need around 6,300 free users.
And a free plan that’s too generous can stop sales outright. One founder of a recipe app raised the free limit from 3 recipes to 15. They made nothing for the next three weeks.
So if you’re early and you don’t have much traffic, a free plan mostly gives you people who will never pay. That’s the same problem I found in How long does it take to get your first customer? Most founders stuck at zero didn’t have a conversion problem. Nobody had seen the product.
Trials do better
A time-limited trial is a different deal. People know it ends. 57 founders with a trial said how many people started one and how many paid.
The typical trial converted about 10%. That’s several times a free plan. It isn’t a fair race, because a trial counts people who chose to try it, and a free plan counts everyone who signed up. But that’s the point. A trial asks for a decision. A free plan lets people put it off forever.
Asking for a card up front is supposed to filter out tourists. Only 7 posts with a card and 7 without one gave numbers. That’s too few to say which works better.
What happened when founders changed it
This is the most useful part. 61 founders made their free offer smaller. They removed the free plan, swapped it for a trial, cut its limits, shortened the trial or asked for a card. 39 went the other way and added a free plan or made it bigger.
| What they did | Founders | Paying customers after | Signups after |
|---|---|---|---|
| Made the free offer smaller | 61 | 40 more, 3 same, 2 fewer | 1 more, 0 same, 18 fewer |
| Made the free offer bigger | 39 | 10 more, 5 same, 2 fewer | 19 more, 1 same, 0 fewer |
Cutting back worked for almost everyone who said. 40 of the 45 who reported paying customers got more. Signups fell for nearly all of the ones who said.
Adding a free plan did what you’d expect. Signups went up for 19 of the 20 who said. Paying customers went up for 10 of 17. For the rest, they stayed the same or fell.
So a free plan is good at one thing: getting people in the door. It’s bad at getting them to pay.
So does a free tier help or hurt?
It depends on what you’re short of. If you have plenty of people trying your product and too few paying, a free plan is probably part of the problem. If almost nobody is trying it, a free plan won’t fix that either. Nobody signs up for a free plan they’ve never heard of.
Founders themselves were split. Of the ones with a free plan who gave a view, 27 said it helped and 26 said it hurt. So it isn’t always wrong. But for a small product with little traffic, the numbers above are what usually happens.
What I’d do
Start without a free plan. Charge from day one, or offer a short trial. You’ll learn who will pay much faster.
If you want people to try it first, use a trial. Give it an end date. A trial asks for a decision, and a free plan doesn’t.
Add a free plan later, if ever. Do it when you have thousands of visitors a month, or when free users bring in other users. Give it a hard limit that the people you want as customers will hit.
If you already have a free plan and few payers, try cutting it back. That’s the change that most often brought more paying customers.
What I can’t tell you
These are Reddit posts. I only know what founders chose to share. People who changed their pricing and saw it work are keener to post than people who saw nothing happen.
When a founder changed their free plan, they often changed other things too, like the price or the product. I can’t pull those apart.
Most of these are small products with a few hundred users. A free plan works very differently for a company with millions of visitors. Nothing here says Slack or Dropbox were wrong.
A second reader went through a random 56 of the posts without seeing the first reading. They agreed on whether a post counted 51 times out of 56. Where both recorded a conversion rate, they matched 12 times out of 12.
How I did it
The posts: every post since 1 January 2022 in the seven subreddits above, from the Arctic Shift Reddit archive. A small model sorted each one: is the poster building something of their own? The method is in Building got easy. Getting anyone to care didn’t.
The sample: one post per founder, each with at least a few sentences of text. I took every post that says the founder added, removed or switched a free plan or trial. Then I added a random draw of posts that mention a free plan or trial next to numbers of users and paying users. 563 in all. I read each in full and only recorded numbers the post states, or that follow exactly from them.
The rates: free plans are free users who paid, divided by free users, for the same group. Trials are trial users who paid, divided by trial starts. I kept the two apart. Where a post gave a rate, I used it. Where it gave counts, I worked it out. I left out posts that mainly sell a product or service.
Cite as: GTM for One (gtmforone.com), “Does a free tier help or hurt?”, https://www.gtmforone.com/blog/does-a-free-tier-help-or-hurt.
I’m building GTM for One for the step most founders skip. Working out who would actually buy what you’re making, and writing to them one at a time.
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