Should I offer Free Trials?
Scaling sales from €100 to €1,000,000
When I founded a membrane technology business - Sandymount Technologies - our price/product points were as follows:
$200. Paid samples = we would process 300 ml samples of the customer’s product (beer, in this case). Later, we raised the price a lot for this because it was quite a bit of work.
$10,000. Paid trial = the customer sends 8 kegs of beer, we process them on our site and the customer comes to visit.
$15,000/wk, typically for 2-4 weeks. Paid rental = we rent the customer a machine that can process 8 kegs per hour.
~$600,000 = we sell a “small” industrial machine (as it turns out, we skipped this step because a customer bought bigger).
~$2,000,000 = we sell a “large” industrial machine.
There a few underlying points to note here - worth exploration:
a. The difference between free and paid trials.
b. Reverse engineering the price point escalator.
Do you really understand the difference between free and paid?
Perhaps there are cases where it makes sense to offer free trials, but you should understand the behavioural difference between the two.
Your goal as an entrepreneur is to efficiently find strong signals of willingness to pay.
Free trials are a weak signal because:
Free trials have no economic skin in the game for the customer. It costs them nothing to do a free trial*.
MORE IMPORTANTLY - Free trials have no reputation/career skin in the game. If a customer does a free trial, and it goes badly, they can move on as though it never happened. If a customer does a paid trial then a) their manager probably knows about it because they had to get approval to pay and b) the individual won’t want the paid trial to fail because then it makes them look bad to their manager. Many times, I saw customers who had paid for trials rooting very strongly for the success of the trial. Individual reputation is a powerful force not to be under-estimated.
*yes, sometimes a customer has internal costs to do a “free trial”. If they can afford those internal costs, then typically they should also be able to afford paying you something!
Not only are free trials a weak signal, they are inefficient. Most free trials go nowhere, so you expend a lot of effort for not learning much.
Reverse Engineer the Price-point Escalator
Is it hard to get someone to pay you $1,000,000? Yes, that is hard.
Is it hard to get them to pay you $100. That is a lot easier!
And once they have paid $100 - and you deliver - it’s a lot easier to get them to pay $1,000.
And once they have paid $1,000, then they’ll more easily pay $10,000 - and so on.
It makes sense to forget about product and just ask, ok:
What can I sell for $100?
What can I sell for $10,000?
What can I sell for $1,000,000 etc.?
It’s hard to sell $1,000,000 products, but if you sell something worth $X, then you can get to a price point of 10-100X, and then to a price-point of 10-100X again.