PLG Clinic: The Free Plan Edition

1. What is your primary vs secondary goal for offering a free plan?

Some teams may offer a free state because they expect monetization quickly. Others may want to offer a free state because they're building a market and need to build awareness. The free plan exists primarily to get more people into the product and using it, with monetization as a secondary goal. Being clear on your goals will help you make decisions on how you monetize and package the free plan.

In the case of the Confluent team, they want broad adoption to help capture existing demand for the open-source tool they're built on top of - Kafka. But monetization is a critical secondary goal as they experiment with packaging their free plan.

2. Who is your ICP for the free plan?

While most companies are clear about who their ICP is in general, it's important to map an ICP for each plan type - including your free plan.

Ok, let's get started!

Japna laid out a simple framework she uses to determine:

• Whether or not a company should offer a free plan
• What the free plan should look like
• First principles that will make a free plan successful

A painkiller product solves an acute problem that the target user already understands and doesn't need to do a lot of additional learning and education to help solve the problem.

When you have a product that addresses an acute pain point, then it's easier to acquire users without having to do a lot of convincing. And users are willing to try things out on their own since they're motivated to solve their problem.

A vitamin product is one where users invest a lot up front, and they may see benefit longer-term, maybe over a few months or quarters because it's more of a central platform and doesn't exist to solve an immediate problem.

While you're making this distinction, it's also important to the plan you want to offer at the bottom of the market is one that can solve an acute pain point and is something that someone will want to get up and running quickly.

✅ Verdict: Confluent's product is a painkiller. The product offers a way for developers to stream data pipelines, enabling dev teams to have the data they need as they build.

We found this quote on Confluent's site with a customer referring to an acute pain point that was solved quickly. 👇

When you have a free plan, you can't spend sales or customer success calories getting people activated unless these users are actually going to monetize. And that goes the same for keeping users engaged in the product.

A few questions to ask yourself are:

• Does it require a lot of customer success or sales people to get people successful in your product?
• Do you typically see a high velocity sales process or do potential users need to get detailed demos before getting value from the product?
• When you do see prospects reach out, is it fairly low touch or do most people end up booking a call?

❌ Verdict: Getting to Confluent's setup and activation moments is not easy. There are a number of hoops to jump through, and ease of use is highly dependent on the user's familiarity with event streaming and Kafka.

But....✅ The Confluent team lowers the bar and helps users get activated with helpful checklists, product walkthrough, and a valuable demo experience which allows people to pipe in dummy data to quickly reach an "aha" moment in the product.

Now that users are activated, can the users reasonably stay engaged with the product? And if you're running a free trial, do users have enough time to successfully activate and then start using the product to start getting value?

A lot of times, free plans will include features that are really easy to adopt so users can quickly get to initial activation or initial aha. But there are other features that will drive more engagement. And it's important to think through these things when you're thinking of pricing and packaging.

❓Verdict: Unclear. Confluent offers a great demo experience that essentially creates a sandbox with dummy data streaming in. This helps users quickly get to activation and aha. But how well does that translate into more meaningful engagement and getting those users to start bringing in their own data? These are early days of testing, so we'll keep an eye on this checkpoint to see what the Confluent team decides. 🧐

Our final checkpoint is packaging. Similar to Goldilock's approach to trial and error on her quest to find the "perfect" everything, Japna advises to do something similar as you start designing packaging.

It's never perfect right off the bat. To get started, design an MVP package and add more things to drive engagement, then retention, and ultimate monetization.

🔑 The key thing to test is achieving the right amount of friction to facilitate monetization from free to paid. Look for where you need to draw the line, at least initially, to ensure that people are initiating a monetization conversation with you.

❓Verdict: Needs more testing. As we mentioned above, the Confluent team has tested a few versions of a free trial (30-day and 60-day). They're also testing usage limits in the form of free credits. Next steps for the team are to look at their current user data for target customers and see which features they're using and how quickly they got there. Look at these users' usage patterns.

Trap #1: Not having a clear idea of who your customer is per package. Teams talk a lot about ideal customer profiles, especially in B2B SaaS. But most teams stop at thinking about ICP for the product overall. Avoid this trap when designing packaging. For each package, you need to have an ICP because when you're designing packaging you have to design with your first principles in mind.

Trap #2: Not being clear from the start who the final decision-makers are in your pricing council. Pricing and packaging is very cross-functional, and most companies will form a pricing council. But make it should be very clear from the start who are the decision makers vs contributors to the decision. Sometimes (read: all of the time) it can get very messy. So its always helpful to have that delineated in advance of any sort of discussion.