To have a free tier, or to not have a free tier?

Question

For https://simpleotp.com, I'm currently offering 3 different plans (essentials, pro, enterprise). Had someone on hackernews suggest that I consider adding a free tier with a cap of 500-1000 users.

I've been thinking about doing something like this because:
- This is a security product and making either a free or open source tier *could* increase trust
- People generally like to try before they buy

But there are also some negatives which is why I haven't done it yet:
- There are recurring hosting expenses here that I need to pay for (not for a bit because AWS is taking care of my expenses due to some AWS founder credits, but this will be a problem at some point).
- I already offer a free trial with each plan - surely this would be enough if the product is compelling enough? This might be an ego thing but I think good products are worth paying for, and if no one enters their payment details upfront it probably just means the product isn't good enough, yeah?

For context, I have about 13 users that signed up for the product (since I launched 2 days ago), but none have actually started a trial yet. I plan to email each of them in a few days (don't want to bombard them immediately) to ask if there's any questions I can help answer, are there any features missing that would prevent them from using the product, etc

Besides the usual "talk to users" thing which I'll do as I mentioned above, how would you go about thinking about the pros/cons of adding a totally free tier?

Ben Katz · Accepted Answer

Hey again @tyler, just wanted to let you know that I took this feedback seriously and ended up simplifying pricing. There are now only 2 plans (standard and enterprise) and the MAU count is just 10k vs. "custom." I ended up giving standard members API access as well - I think it's important at a scale of 10k users, plus I can always rate limit the API to prevent abuse.

Let me know what you think: wip.co/todos/275202

Let me know what you think: https://wip.co/todos/275202

Nik Spyratos · Answer

What about a different kind of free tier - limit by both amount of users, and time based? "30 day trial or 1000 users, whichever comes first".

Jasmin Ihtijarevic · Answer

It appears that Clerk, Supabase, and Auth0 are your competitors, all of whom offer a generous free tier plan. Consider either offering a similar free plan or differentiating yourself in some way to make your paid plan more appealing.

Tyler Barker · Answer

Nice one! Keep us posted with how it goes 👀

Ben Katz · Answer

Thanks for this detailed response! Yes, the reason I didn't add one is precisely because I'm funding this myself and it needs to make financial sense haha. I don't have VC money to burn through. That said, a compromise could be the OSS tier I had in mind above.

1. Yep, I'll plan to change the free trial to 14+ days. Probably just going to do 30. 
2. Ha, well, I somewhat randomly grouped features into different plans since this is my first time doing it. I was roughly thinking about what a "pro" user might want but it's possible I'm off base. The $100 was really for the extra MAUs, but maybe that's the wrong way to ask for $100 and I think you're right that API access might be critical even at 10k MAUs since that's also a lot of users.
3. Yes, I've been thinking about this. Maybe it makes sense to keep the number of MAUs the same on essentials and pro and just offer different features.

Thanks again for this, very helpful and let me know if you have any other thoughts after reading my response

Ben Katz · Answer

Hmm - I’m already offering a trial with each plan, so in effect users are already able to achieve this with higher caps (existing plans all offer a trial plus a min of 10k users)

I may need to extend the trial though. It’s currently 7d

Ben Katz · Answer

Thanks for this response. Right, I don't think I'm at the stage where I need to spend on marketing or heavily market in general - I'm just getting started and just launched a couple days ago.

For now, I have 13 people that signed up for the product that haven't paid or started a trial yet, so my first thought is to talk to customers and figure out what kind of features are missing/why they haven't started a trial yet. I'm doing that later today. From there I'll make some adjustments as noted above and try to make at least a few sales before doing anything "marketing" related.

My thought is: if I can't get even 1 person to pay for the product w/o offering some free tier, it's probably just not compelling enough of a product for people to use. And in this case that's fine because I'll use the product myself for some of my new startup ideas (they all need authentication flows)

Marc LG · Answer

The way I like to reframe it is by thinking of a free-tier as a marketing expense.

Serving those free plans costs money (hosting, support, etc) but it leads to word-of-mouth and eventual conversions.

Is your startup at a stage where you should be spending money on marketing?

If yes, then ask yourself "is a free-tier the highest ROI for your marketing budget?"

Tyler Barker · Answer

Hey Ben, just my opinion, but given it's a security product and a B2B offering I think a free tier is unnecessary. It's true you have competitors who offer free but those mentioned here are all VC-funded so they're in a very different position.

A few thoughts after checking out the website:

- I agree with what you've already mentioned that you should offer a longer trial. 14 days tends to be the least I've seen.

- Is there any particular reason the API + Webhooks is only on the Pro plan? $100/mo for access to that seems prohibitively expensive, imho. Could broader access to that be part of how you differentiate from free competitors?

- Your essentials plan is $10/mo for 10,000 MAU's, and the next plan up is $100/mo for 100,000 MAU's. That feels like a really big jump. Also, I would think any company with 50k-100k monthly active users is already starting to look pretty enterprise-y. Maybe you don't need to tie your price so directly to the number or MAUs?

- If you're worried about affordability, perhaps you could have a ~$5/mo plan for some number of monthly actives as a "starter" plan or similar.

I'm no expert in this space by any means - I could be way off base with all that - but hopefully the brain dump was useful. Cool product! ✌️

Ben Katz · Answer

Yep - trying to figure out the differentiation angle mainly. Maybe what I can do is create a similar free tier, but include attribution in the email like “this email was generated by simpleotp.com” + hope that some people convert to paid customers. However, I’m just a bit nervous of offering a free tier, incurring server costs when people abuse it, and having no one convert I suppose.

However, the OSS angle is becoming more and more interesting the more I think about it:
- No free tier users to abuse the system or cause increased burn on my end as they’ll be running the server themselves
- Increased trust as they can read the code, which no competitor is offering today
- Customers can pay to receive better support and cloud hosting if they don’t want to run simpleotp themselves
- I can also turn on GitHub sponsorships or similar if people want to support the OSS version.

Think I’ll go in this direction if I don’t get any conversions by EOW. Thanks for spurring these thoughts on my end! Happy to hear any other feedback if you have a different idea

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To have a free tier, or to not have a free tier?

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