You might want to flip back to the on-line trust for answers to some of the behaviours you’ve seem.

Reciprocity (I feel I owe you because you’ve given me something) can work in your favour – if the service is positioned as $x per month, but I’m giving you a special 100% discount that can buy some good will. Likewise, urgency has always been an effective marketing tool – even in the land of free.

Price elasticity is a curious thing – it has floor and ceiling effects. Reduce prices below a certain level, or push them above a certain level and the elasticity breaks. Understanding the effective range is a challenge, even for a very good product manager.

Another technique I’ve seen used in free services is the “step on-push off” idea. The service is free, but an ‘advanced’ pay-for feature is included ‘free’ for a . After that it is removed or you can switch to paying for it.

A has to be long enough for the ‘advanced’ feature to become something that is used by the customer everyday, and the feature has to be quite compelling. It’s a dangerous game, since it can irk customers, but I am seeing it used more and more as a tactic to get people to upgrade. Likewise, randomly giving free users trials of the advanced service can also increase the upgrade yields.

That said, the key for the freemium model is to get users to be passionate enough about the service to want to pay – regardless of what features they use. Flickr has done this well. Making the paid for service a badge of honour.

There a behavioural differences between consumer and business services, and most of the people I’ve talked to simply don’t get that – which I’d be very worried about if I was one of their investors.

With the plans and paid plans and the trial conversions you mention, I’d say you are probably tapping into deferent market psychographics, hence the different behaviours.

Some great validation in there – thank you again for sharing!

Great post and sharp analysis.

At proofHQ (http://www.proofhq.com) we have been thinking long and hard about this issue.

We have a web app aimed at designers, creatives and marketing teams. It simplifies and takes cost out of the design review and approval process.

We tested various price points and trial periods and saw first hand what you hypothsise.

First, we had much stronger conversions when we reduced our trial from 30 days to 14. We think that is because of the urgency and seriousness that a shorter trial conveys.

Second, we offer a Personal plan which is free ongoing and a range of increasingly bigger paid plans. People can take a free trial of any plan, but the vast majority choose the Personal plan even for the trial. The conversion rate of people who trial a paid plan is much higher than ones who start with the Personal plan. We are not sure what to conclude from this. Perhaps people looking seriously at tools like ours want a serious trial.

Third, we have thought about offering more under the free Personal plan, but we are hesitating. Our lowest priced plan used to be $29 per month. We started offering a plan at $17 a month. We did not see a huge increase in paying customers, and only saw some small cannibalisation of the $29 signups. Our conclusion is that the price elasticity between any paid plan is on a normal curve, but the big inflection point is from free to $1. I know that this has been discussed before, but it was certainly validated.

Thanks again for raising the subject.