I’m Taige, founder of Fairytrail, a freemium travel buddy app for remote workers. We launched our new monetization feature a month ago. Shoutout to Mixpanel for their startup friendly free plan.
Key Question
The question was how much of a free trial should we give to users? If we don’t give enough of a trial, people won’t trust us and won’t see value. If we give too much, people may naturally churn and we won’t be able to monetize.
Since we are a startup, user growth is more important than monetization. However, charging can be great for growth. In Elad Gil’s High Growth Handbook, Marc Andreessen says , “Companies that charge more can better fund both their distribution efforts and their ongoing R&D efforts. Charging more is a key lever to be able to grow. And the companies that charge more therefore tend to grow faster.”
When we launched the feature, we setup an A/B test to measure
- Conversion to paid
- Engagement (i.e. matches, chats)
- Retention
- Quality (e.g. profiles reported)
We split users into two groups: 50% of users were able to send 3 connect requests before we ask them to pay. 50% of users were able to send 30 free connect requests. Note: There’s still a verify with friends option so technically users never have to pay to use this app. They just need to do the work of inviting a remote worker friend to the app to verify them.
Verify Screen
Test Group A : 3 free connects before being asked to verify
Test Group B : 30 free connects before being asked to verify
My hypothesis was that sending 3 connect requests would be enough to build trust with our users and offering more would not help much.
We’d see higher conversion rate to paid. We’d see less engagement due to users being restricted. We’d see a lower retention rate as some users would delete their accounts because of the friction and they have a lower chance to start a chat. We’d see a higher quality user base as paying users are more intentional.
Expected Results
| Metric | 3 Free Connects | 30 Free Connects |
|---|---|---|
| Conversion to Paid | Baseline +5% | Baseline |
| Engagement | Baseline -5% | Baseline |
| Retention | Baseline -5% | Baseline |
| Reported Profiles | Baseline -5% | Baseline |
Findings
After running our experiment for 30 days, here’s what we found.
Conversion To Paid
3 Free Connects group had a 10% higher conversion rate. Time to convert was 1.5 days instead of 2.6 days. Asking for payment sooner, led to more payment sooner.
Paid Conversion Rate
Engagement
On the other hand, the 30 Free Connects group had a much higher match rate as measured by users having at least one match, 87% vs. 60%. Higher match rate is better!
30 Free Connects group had 7% more engagement events per day per user than the 3 Free Connects group. Higher engagement is good, so that’s another win for 30 free connects.
Daily Avg Events Per User