Question

firms often offer free trials woth their products. explain why this strategy increases their profit, using the insights from the prospect theory, in particular, the loss acersion hypothesis. illustrate ur andwer with a diagram and use sources.

Answer 1

The Benefits of Offering a Free Trial

1. First-Hand Experience for the Consumer

As marketers, we’re always trying to find new, effective ways to convey the value of our products and get our potential buyers to imagine themselves benefiting from it.

Providing a free trial of your product lets them experience it first-hand.

Unlike some persuasive copy on a landing page or even a demo video, a free trial of your product lets prospects see behind the curtain, per say. It lets them know definitively, without question, what your product looks like, how it functions, and how they personally will interact with it.

What they see is what they get.

2. Easy to Set Up

For the companies themselves, free trials are also one of the simplest strategies to implement. Unlike creating an eBook or white paper to gather leads or having to get on the phone to answer questions which often require research, writing, revision, etc., your software already exists.

To start generating leads off of a free trial, all you need to do is give people access.

3. Lowers Friction of Converting

One of the hardest things about shopping online is not knowing what you’re really going to get.

In a traditional retail store, you can go in and usually physically touch and hold the product you’re about to buy. Even when it comes to software, it’s likely you can hop on a laptop and try it out in some stores, but online, these experiences are rarely possible.

This uncertainty creates friction between the consumer and making a purchase -- but a free trial, helps eliminates it.

As mentioned above, a free trial lets people see exactly what they’re getting into, before officially committing. It enables them to personally experience the product and make a more informed purchase decision, while also feeling more comfortable doing so.

Plus when people sign up for a trial, they enter your marketing funnel and to a degree, qualify themselves as a promising lead.

Why Offering a Free Trial Might Be Dangerous For Your Product

The Product is Too Complicated

NEVER assume that your prospective customer will even attempt learning how to use your product. If the process isn’t obvious or – at the very least – simple, they won’t see the value.

In simpler words, if your product is too complicated, a free trial will probably not work for you. Why? Two main reasons:

1. Without training, enterprise-level software tends to intimidate users, making free trials generally ineffective.
2. Complicated processes tend to cost more money. Unless you have deep pockets, getting people to use your product for free might not be viable.

You aren’t encouraging enough usage

The Journal of Marketing Research ran a study on free trial users. They found product usage tied closely to conversion rates. “When it comes to free trial customers [the usage intensity] effect appears to be particularly strong, suggesting it may be in a firm’s interest to encourage usage among these customers.”

The right usage is important, too. How your users interact with the product will affect their likeliness to buy it. You have to figure out what your users value and give it to them.

When they updated their onboarding process to include theme selection, conversions increased by more than 1,000%! For whatever reason, users found that one step especially valuable.

Use analytics and customer interviews to discover what your users find valuable. Determine the key value moments, then map your onboarding process to hit each moment.