Product demonstrations and free trials are two popular methods for allowing customers to experience a software product before committing to a purchase.
In the initial stages of SaaS companies, product demos are often the preferred choice. They provide valuable insights into prospects’ pain points and objections, offering a personalized approach to addressing customer needs.
However, relying solely on demos poses scalability challenges, prompting many businesses with acquisition goals to consider incorporating free trials. Despite the appeal of free trials for user acquisition, it’s crucial to acknowledge the associated risks that companies may underestimate.
In this article we will dissect the suitability of each approach for your product, helping you make an informed decision. Let’s get started!
Table of Contents
- What is the SaaS Demo?
- What are the Advantages of Sales Demos?
- What are the Disadvantages of Demos?
- What is the SaaS Free Trial?
- What are the Advantages of Free Trials?
- What are the Disadvantages of Free Trials?
- Which Option is Best for Your SaaS Product?
- How About a Demo and Free Trial Combo?
What is the SaaS Demo?
Providing demos typically involves presenting customers with an overview or demonstration of your product or service.
For B2B SaaS companies, a common and effective format for demos is a live, one-on-one meeting. This format allows for personalized engagement, enabling you to tailor the presentation to the client’s specific pain points and ensuring that all their queries are addressed.
In cases where the lifetime value (LTV) of customers is low or maintaining an extensive sales team is not feasible, alternative methods for executing demos exist. These may include pre-recorded videos, live webinars, and interactive online previews.
Regardless of the method chosen, the core function of demos remains consistent: showcasing key features, the problem your product solving, and the added value of the product, aiming to generate interest in the offering.
What are the Advantages of Sales Demos?
1. Cost-Effective and Easy Implementation
One key benefit of demos over free trials is their cost-effectiveness and ease of implementation. Demos can be swiftly created with fewer resource investments compared to the trial alternative. Additionally, they can be delivered remotely, providing convenience for both global customers and businesses.
2. Lead Generation Tool
Demos serve as an effective lead-generation tool. Businesses can use demos to nurture prospects interested in understanding the product or service better, potentially converting them into customers. This is especially pertinent for intricate products or services that require more in-depth explanations. By guiding customers through the workings and benefits of the product, demos facilitate a product discovery process aimed at concluding with a purchase.
However, there are notable downsides to relying on demos as a strategy for customer acquisition.
What are the Disadvantages of Demos?
1. Lack of Firsthand Experience for Customers
A significant challenge with demos is that they don’t provide customers with a firsthand experience of the product or service. While a demo offers a good overview, it might not be sufficient to fully engage customers or persuade them to make a purchase. Customers often require more time and interaction with the product to genuinely recognize its value.
2. Difficulty in Standing Out from Competitors
Demos can make it challenging to differentiate from competitors who likely employ similar demo strategies for customer acquisition. To be effective, demos need to be both engaging and informative, capturing the attention of potential customers and showcasing the unique value of the product or service. This proves to be a hurdle in a crowded market where competitors use similar tactics to attract and retain customers.
#TCCRecommends: Here are some do’s and don’ts of a sales demo.
What is the SaaS Free Trial?
Providing free trials entails giving customers the chance to utilize a product or service for a defined period or a specific number of uses before committing to a purchase. These free trials can be either entirely free or offered at discounted rates, and they may come in opt-in (card-less), opt-out (auto-charged), or usage-based models.
The primary aim of offering free trials is to empower customers to first handedly experience the product or service, facilitating an informed purchase decision that can result in a more substantial lifetime value (LTV) for your business.
It’s crucial to distinguish free trials from freemiums, as the former provides a limited but time-bound access to the product, whereas the latter offers an indefinite limited use of the product.
What are the Advantages of Free Trials?
1. Firsthand Experience for Customers
Free trials offer customers the opportunity to experience the product or service firsthand before committing to a purchase. This hands-on experience builds trust and confidence, allowing customers to explore the product at their own pace and witness its full value in action.
2. Higher Customer Lifetime Value (LTV)
Free trials can effectively address customer objections or concerns by allowing them to try the product or service without an upfront payment. This is particularly valuable for more expensive products or those requiring a significant customer investment. Implementing card-less trials through subscription management software enhances customer safety and trust, enabling them to pay only when they are ready, ultimately increasing their lifetime value (LTV) for the business.
3. Insights from Tracking Trial Usage
Offering free trials provides businesses with the opportunity to collect valuable feedback from customers. Tracking trial usage allows businesses to understand how customers interact with the product, identify preferences, and gather insights for potential improvements. This feedback contributes to product enhancements, fostering higher levels of customer satisfaction and retention over time.
What are the Disadvantages of Free Trials?
1. Higher Cost
Implementing free trials, especially with extended trial periods, can be expensive and resource-intensive. Beyond the trial cost, businesses may need to invest in additional resources like customer support, marketing, and logistics to ensure a positive trial experience for customers.
2. Lower Customer Lifetime Value (LTV)
Free trials may attract customers who are not genuinely interested in making a purchase, leading to lower conversion rates. Since trials are often free, some customers may exploit the offer without intending to make a commitment. This can result in a higher cost per acquisition for the business.
Which Option is Best for Your SaaS Product?
Determining the optimal approach for your SaaS product—whether a free trial or a demo—hinges on various factors, including product complexity, target audience, and sales cycle. The choice ultimately depends on what drives the most sales for your specific SaaS product. In some instances, offering both a demo and a free trial might be the most effective strategy.
The decision-making process can be informed by testing different approaches. Experiment with demos, free trials, or a combination of both, analyze the data, and make informed decisions based on the outcomes. This iterative testing approach allows you to tailor your strategy to what resonates best with your audience and maximizes sales for your SaaS product.
Case #1: When to Offer Only Demos
While offering a demo is often beneficial, there are specific scenarios where exclusively providing a demo is warranted:
1. Product Development Stage
If you are building a new product and haven’t precisely identified the customer problem you’re addressing, demos can serve as a valuable tool for startups to refine their product’s positioning through immediate customer feedback.
2. Resource Constraints for Free Trial Optimization
In situations where resources are limited, such as lacking the capacity to hire a dedicated product manager to optimize the free trial experience, relying solely on demos may be more prudent. Crafting an effective onboarding journey for free trials often requires dedicated attention and expertise.
3. Extended Time-to-Value
Products with a lengthy time-to-value or complex use cases may struggle to convey their benefits during a free trial. If customers cannot grasp the product’s value without a demonstration, a free trial may result in high churn. In such cases, demos are preferable for showcasing the product effectively.
Case #2: When to Offer Only Free Trials
1. Intricate Product
In some instances, free trials emerge as the preferred option for companies. This is particularly true when the product or service is intricate, demanding more time and interaction for comprehensive understanding. A trial, in such cases, becomes a potent tool for establishing trust and confidence with potential customers.
2. Substantial CLV
Free trials prove effective for businesses with a substantial customer lifetime value, where the expense of offering a trial can be balanced against the long-term value derived from the customer. They play a crucial role for companies with ambitious growth objectives, especially when demos become impractical due to the exponential growth phase, often referred to as the “hockey stick” growth. In such scenarios, free trials offer a scalable solution to accommodate the increased demand and facilitate user expansion.
How About a Demo and Free Trial Combo?
Regardless of your pricing structure or company size, there’s a diverse preference among users when it comes to learning about products. Some are comfortable initiating a demo with a salesperson, while others prefer the autonomy of assessing the product on their own before engaging with anyone.
An interesting case study from Asana reveals that they derive 40% of their revenue from sales and 60% from self-service, reflecting a balanced approach that caters to different buyer preferences.
Hence, the inclusion of a small “start a free trial” button in the main menu as a secondary call to action, alongside the primary “book a demo” option, has proved to be insightful. This hybrid approach allows for flexibility until a clearer understanding of customer preferences emerges or a strategic mix continues to be effective.
In conclusion, both demos and free trials serve as robust strategies for customer acquisition, aiding businesses in attracting and retaining customers. Recognizing the unique advantages and challenges of each method is crucial, but the ultimate key to success lies in a deep understanding of your audience and their preferences. Experimentation with different approaches is essential to determine what works best for your business.
Whether opting for demos, free trials, or a combination of both, prioritizing the delivery of a high-quality experience tailored to the needs of your customers is paramount. This customer-centric approach fosters trust and loyalty over time, laying the foundation for a sustainable business that consistently delivers value for years to come.