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The Rework Podcast

Bringing Back Free

21 min episode · 2 min read
·

Episode

21 min

Read time

2 min

Topics

Health & Wellness, Design & UX, Product & Tech Trends

AI-Generated Summary

Key Takeaways

  • Freemium conversion timeline: Weekly signups more than doubled after launching free plan, with 3% higher paid conversion early on, but success measured over 2-5 year horizons rather than immediate results to account for long-term exposure effects.
  • AB testing duration requirements: Price and design tests need minimum 21 days to reach statistical significance, as daily fluctuations create false patterns. Early results frequently reverse, making premature decisions based on short-term data actively harmful to outcomes.
  • Free plan structure for viral growth: One project limit with unlimited users creates network effects where non-paying customers expose dozens of potential buyers to the product organically, generating more value than direct conversion from those free accounts.
  • Margin-dependent decision making: Companies with healthy margins should prioritize unmeasurable factors like customer experience over bean counting individual support costs, while low-margin businesses like Walmart must track every expense to survive at 4% margins.

What It Covers

37signals reintroduces a free Basecamp plan after removing it in 2015, explaining how freemium models drive organic growth through product exposure rather than immediate conversion, and why they reversed their pricing strategy.

Key Questions Answered

  • Freemium conversion timeline: Weekly signups more than doubled after launching free plan, with 3% higher paid conversion early on, but success measured over 2-5 year horizons rather than immediate results to account for long-term exposure effects.
  • AB testing duration requirements: Price and design tests need minimum 21 days to reach statistical significance, as daily fluctuations create false patterns. Early results frequently reverse, making premature decisions based on short-term data actively harmful to outcomes.
  • Free plan structure for viral growth: One project limit with unlimited users creates network effects where non-paying customers expose dozens of potential buyers to the product organically, generating more value than direct conversion from those free accounts.
  • Margin-dependent decision making: Companies with healthy margins should prioritize unmeasurable factors like customer experience over bean counting individual support costs, while low-margin businesses like Walmart must track every expense to survive at 4% margins.

Notable Moment

The team admits their 2015 decision to remove free plans stemmed from hubris after ten years of success, failing to recognize an entire generation of potential customers aged 10-20 would enter the market never having heard of Basecamp.

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Episode Transcript

Welcome to Reebok, a podcast by thirty seven Signals about the better way to work and run your business. I'm your host, Kimberly Rhodes, joined by the cofounders of thirty seven Signals, Jason Fried and David Heinemeier Hanssen. Well, last year, in an earlier podcast, Jason mentioned we were working on a free version of Basecamp. That version is now out. So I thought we'd talk about why we're doing that, why we're offering the product for free. Something we used to do years ago, stopped doing it and brought it back. So I thought we'd talk a little bit about that decision making process and why we're doing that now. So let's kinda go back in time a little bit. Jason, I know there was a free version, I think, in 2019, if I'm not mistaken. Tell me a little bit about that and why we decided to stop offering free and then offer it again more recently. When we first launched Basecamp, we had a free one project plan, I believe. Right, David? We had a free one now. So we had three pricing tiers and we had a free plan. And, it was one project, and that was huge for us because as much as we don't want to admit it sometimes, like free sells, essentially, you know, you're not making anything on it. People want free stuff. They want to try free stuff. They want to try something obligation free. They want to try something price free. They just want to give something a shot with no strings attached. And we all want that, basically. Even when I'm looking at, like, an app in the App Store, I'm like, oh, it's $2. Like, let me just try it for free. And, like, it's $2, but I still want it for free because I just I don't want it to be a transaction. Right. I just wanna try something. Right? That's all. And so we we had it for a while. We had it for some more time. We went away from it, and then we recently brought it back as you mentioned. It actually stemmed from a conversation we're having with, our new, head of marketing. He used to be over at Mailchimp, and he was just telling us, like, what really kind of changed our trajectory was offering a free option, a free plan on Mailchimp. And we've been sort of tossing this around internally for a bit, and I think that kind of threw us over the edge. Like, yeah, of course. Of course, we should offer something for free primarily because for us, and we've seen this in the past, is that when we when we lose free, we might pick up more paid accounts. But over time, we're exposing Basecamp to fewer people. And, Basecamp is something since it's or primarily our all of our growth is organic, we need more and more people to be exposed to it. It does a …

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