A case against “Free Trial Coworking”

In the last 4 years, I’ve come up with some pretty wacky ideas for how to get IndyHall into the brains of more people and, more importantly, the coworking concept into the mindshare of the ever-changing workforce.

I’ve noticed a relatively typical trend in that the kind folks who operate places where coworking takes place seem to struggle with how to market it and build a sustainable operation to support it.

I’ve been guilty of parroting the “build the community first” as the solution to nearly every problem that brand new coworking spaces encounter. It’s not a silver bullet, and it’s not meant to be. What it does is put the person who’s in the leadership role in the right state of mind – that of a leader and not just a proprietor - of the community space they’re about to attempt to operate. Being in that state of mind puts you in the most advantageous place to solve the typical, un-special problems that you’re bound to come across. That makes solving the weird, hard problems your focus. And if you give it enough time, they will show up.

But that’s not the point of this post. Lets say you’re doing a great job of developing the community before you’ve even got a space, and now you want to start converting those people to paying members so you can support a home for them to work in.

Freemium doesn’t work with coworking.

Free trials are an epidemic with new coworking entities.

It seems to make some sense. Coworking is a new concept, so charging a new member-potential to try something new raises the barrier far too high for them to walk in the door at all.

Except now you’ve created a new problem for yourself. That member-potential has significantly diminished value associated with what you just provided them. How are you supposed to charge them for the same thing the next time they come in?

In most cases, free coworking is being offered by prepubescent coworking spaces. Those coworking spaces lack the critical mass of smart, interesting, creative people that represent the primary attraction for most of the members they don’t have yet. Once you have that, it’s easier to diminish the value a little bit because you’re starting from a much higher offering of value.

But if your goal is to get people in the door that will stick around and help you sustain the business that will operate their clubhouse, you’ve gotta charge from day 1.

Case Study – The Free Trial of Doom

I got a panicked email from a coworking space owner who I’ve corresponded with a fair amount in the past, and I have full confidence is in this for all of the right reasons. The space was only a few months old, but she felt her runway shortening and was concerned about their member acquisition rates. 8 members had joined in 3 months (which, by the way, isn’t that awful when opening a space with 0 members). She was doing all of the things I typically prescribe: get out there and meet your potentials. Find ways to support them. Get them involved. Here was an excerpt from the email:

Many come and try out the space (we offer a one week free trial) but they dont come back, sometimes even after the first day. They all say they love it, the vibe is great, etc., but wtf. For the life of me, I don’t get it. We follow up, send emails, and even anonymous surveys to figure out what we are doing wrong, and people usually respond with either “it’s too far” or, “I absolutely love your space, and will sign up soon.” Soon. Soon doesn’t come soon enough. Rent in our area is high, and even though we got an AWESOME deal on our rent, we aren’t anywhere near break even.

How many times I’ve heard this isn’t a number I care to count, and it breaks my heart.

We offer a one week free trial. Kiss of death.

My response included the following:

A one week free trial is WAY too much. In fact, I don’t believe in free trials at all. You’re devaluing your Workspace before people even walk in the door by making it free. Don’t be afraid to exchange money for goods and services. It’s the only hard rule of business :) You’re using free space as a “bell and/or whistle” to get people in the door, but it gives them zero reason to stick around. If you can’t get them hooked in an hour, you’re not going to get them hooked in a week.

She took my response to heart and immediately made some changes. Among them was dropping the free week trial.

A few weeks later, I got a follow up:

…over the past week and a half, we’ve gotten 13 new members!!!! I guess I may have spoke to soon… not to mention that a one day trial as opposed to one week has made a HUGE difference! People come in, love it, and sign up!

In 10 days she had more than doubled (nearly tripled) membership growth that had previously taken almost 10x that long to achieve.

These specific results are admittedly anecdotal, and your milage may vary, but this isn’t the first time I’ve seen this sort of course correction.

I also included:

There’s nothing [inherently] sticky about that onboard process that you described. Show up … for free, and then a wishy-washy “I’ll sign up when its right for me”.

Not only does charging from day one give us the ability to maintain value from the moment the member-potential walks in the door, but it provides us with an extremely effective conversion point. It works like this.

Your first day is $25. But if you decide to sign up that day, we’ll happily apply that $25 towards whatever level of membership you’re interested in!

Which works nicely when our basic membership is $25, the same price as our drop in day. So you essentially get 2 days for the price of one just for signing up, and then your 2nd day lets you explore Indy Hall as a member, rather than a drop-in.

Also, because we have the aforementioned critical mass of smart, interesting, creative people, the rate that drop-ins sign up for ANY level is extremely high. We convert our paying drop-ins at a rate of 2:1. That is, for every TWO people who drop in, ONE of them typically joins at some level of membership. At our spring 2010 drop-in rates, that’s a relatively consistent 10 new members a month, and the numbers only climb as our presence grows in our region.

Other things to consider

  • Not charging for drop-ins (who contribute relatively less) for the access to space that you charge to members (who contribute relatively more) is disrespectful to the people who pay their hard earned money and contribute
  • What kind of people continually use something that provides value and are OKAY with not paying for it? Now compare that with people who happily pay for the things that make their lives better. Who would you rather spend your time doing business next to?

So free is bad?

Absolutely not. But it’s unwise in an early stage business to give ANYTHING away that you wouldn’t otherwise charge for. Instead, give away things that cost you nothing!

  • Run free events and make them awesome and open to anyone. Work with local businesses as sponsors. Find a local bar or restaurant and make them your watering hole. They’ll appreciate you consistently bringing them customers, and you’ll love having a place you can walk into and have a good chance of bumping into someone you know.
  • Partner with other local organizations and cross promote ideas, events, and opportunities when your core values align. Don’t be a logo slut: make sure partnerships are mutually beneficial, and you’re giving with purpose.
  • Share knowledge. Collective knowledge is at the core of coworking and a great way to get people in the mindset of sharing is to lead by example. What have you learned that you can give away and will be interesting and of value to your member-potentials. Who else has interesting valuable things to share, and what formats can you help provide for sharing that?
  • Start or support a local Jelly! Many have said that Jelly is a gateway drug to coworking, but I’ve discouraged coworking spaces from hosting Jelly in their spaces for all of the reasons I’ve outlined in this piece. Instead, participate in a local Jelly as members of your coworking space and go with the intent to meet people, not with the intent to recruit. Help a Jelly get started, but I wouldn’t run your own. Heck, even send the people who don’t want to pay for your membership to a Jelly as a free coworking alternative. Let them get hooked on a free version of coworking…there’s a great chance they may end up back on your doorstep wanting “Jelly Everyday” and decide to try out that membership after all.

P.S. Hey Alex, what about offering TOTALLY free coworking all day, every day?

That’s another post, another day. :)

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  • http://www.infinimedia.com Brian Breslin

    great post.
    I think freemium models only work in the following cases (this applies to any product)
    - where the value proposition is immense and very well eloquated to upgrade
    - the free version doesn't satisfy ALL their needs. (imagine free to hang out, but $10 to get wifi for the day)
    - too many people offer too much in their free version, thus diminishing the value associated with the product and the paid version.
    once you have $ associated with the product you are way ahead.

    Have any coworking spaces offered a 1 week money back guarantee? I'd assume most people would be hesitant to ask for their money back or bail after having bonded with the other coworkers after that week.

  • TedC

    Excellent Post! Free co-working is what I do at the coffee shop. Think about book clubs. I have points that I haven't used for a book club that I don't buy books from anymore, but even so, I don't want to give that up. Same with anything free. Putting up money makes people want to use the resource because they have a vested interest in getting their value back. I think you've got the perfect self-selecting model. It' so important not to waste time with customers who don't convert. :)

  • http://markjaquith.com/ Mark Jaquith

    I'm generally a supporter of a 100% money back guarantee vs a free trial. It weeds out all but the cheapest of cheapskates. Asking for your money back is more confrontational than cancelling a free trial. It involves human interaction, and acknowledgement of yourself as a cheapskate.

  • JDean

    Interesting perspective. My problem is that I have paying members who want their money back after one day. I am trying to figure this one out yet.
    I do give free guest passes (good for up 4 hours of coworking.), so people can get a taste of it. If they want to stay the whole day, they will need to pay for it. However, I have not had to many responses to it. Trying to change the market, and spread the word is tough. Sometimes, I feel like I am hitting my head on a brick wall, and giving myself a concussion.

  • http://www.dangerouslyawesome.com alexknowshtml

    Jodi,

    Expecting a market to change for you is a pretty tall order. Maybe you
    should be looking hard at that market to understand what they do want
    rather than selling them something they don't.

    You may have a few, or even many iterations of a business concept
    between here and the business you want to run, but trying to run a
    business for a market that is uninterested is like being a fish out of
    water, as you've experienced. Hey yourself to a place where you (and
    you business) can breathe so you can press forward with your big
    ideas!

  • JDean

    I am trying to not get a market to change, but trying to find a number of creative, talented people, who want to fill it. In Fort Wayne, there seems to be an “I'm better off in my basement, mentality.”

  • http://www.dangerouslyawesome.com alexknowshtml

    If that's the mentality amongst creatives, then you're selling something to
    people who aren't interested in it.

    Is there another audience in your market that might want it more? Maybe the
    “creatives” aren't the niche in Fort Wayne that needs coworking, and it's
    another industry entirely.

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  • RAJ

    good…

  • http://www.NoizIvy.org Jason Reis

    Interesting Post I saw offering a free day as a way to expose people who do not know what a Jelly or a coworking space is and offering them a free no risk oppertunity to come down and try it. The thought is then once we are able to get these people down here they would fall in love with the relaxed yet productive social working environment that we offer and be interested in paying down the road.

    However reading this article does bring up some good points. However wouldn't charging right away discourage or reduce the number of people who never heard of the coworking concept from coming down and giving it a try?

  • http://www.dangerouslyawesome.com alexknowshtml

    I'm not opposed to free, as I said, but I think it creates a misplaced
    incentive.

    Take a big step back a think about what you're REALLY able to offer
    that is uniquely valuable:

    The members.

    There are tons of great ways to get members together with non-members
    that cost you nothing, including the devaluing of the access itself.

    We've focused on events, because they only cost time, and provide so
    many corollary benefits.

    You're not only getting your existing members together in a non-work
    or pseudo-work context where they can work on their relationships (the
    things that will make otherwise impossible work possible).

    You're also getting existing members to interact with non-members,
    where they will form real bonds of trust and friendship. At that
    point, the interest joining to space to be around those people every
    day increases, but you haven't devalued that opportunity to do it
    every day by putting it next to a zero-cost version of the exact same
    thing!

    Additionally you're marketing! The buzz between members and members,
    members and non-members, and even non-members and non-members, is
    marketing that you simply can't pay for. Creating a reason for people
    to talk about you (and workspace is only one of those reasons) is the
    BEST marketing. Bottom line is that YOU talking about your space is
    only 1/100th as valuable as OTHERS talking about your space.

    The problem with running a coworking space is that it seems obvious
    that you'd want to have EVERY event there!

    I've found that some people are actually intimidated by Indy
    Hall…but once they meet some of the people who work there, they're
    hooked on the idea of joining. So rather than try to get them in the
    door, we try to get some of our members out into the real world, into
    neutral territory. Think of it like an ambassador program!

    Are your members going to meetups NOT held at your space, and when
    they do, do they make it known where they work?

    What other places near your space (radius may vary from neighborhood
    to entire cities) do member-candidates hang out? Can you plan an event
    in that location?

    We've built relationships with a NUMBER of bars and restaurants
    throughout the city as neutral territory venues for hosting things.
    It's not only fun to leave the office once in a while, but those venue
    owners APPRECIATE that you're bringing them patrons. Guess what
    happens when you bring a venue owner lots of patrons, especially the
    kind who spend money in their establishment?

    THEY LOVE YOU FOREVER!! And they make holding more events in the future easier.

    So, again, if you're struggling to get people into the door…maybe
    what you need to do is re-think where your door is. It might be
    further down the street than you think.

    -Alex

    /ah
    indyhall.org

  • http://www.facebook.com/alexhillman Alex Hillman

    I'm not opposed to free, as I said, but I think it creates a misplaced incentive.

    Take a big step back a think about what you're REALLY able to offer that is uniquely valuable:

    The members.

    There are tons of great ways to get members together with non-members that cost you nothing, including the devaluing of the access itself.

    We've focused on events, because they only cost time, and provide so many corollary benefits.

    You're not only getting your existing members together in a non-work or pseudo-work context where they can work on their relationships (the things that will make otherwise impossible work possible).

    You're also getting existing members to interact with non-members, where they will form real bonds of trust and friendship. At that point, the interest joining to space to be around those people every day increases, but you haven't devalued that opportunity to do it every day by putting it next to a zero-cost version of the exact same thing!

    Additionally you're marketing! The buzz between members and members, members and non-members, and even non-members and non-members, is marketing that you simply can't pay for. Creating a reason for people to talk about you (and workspace is only one of those reasons) is the BEST marketing. Bottom line is that YOU talking about your space is only 1/100th as valuable as OTHERS talking about your space.

    The problem with running a coworking space is that it seems obvious that you'd want to have EVERY event there!

    I've found that some people are actually intimidated by Indy Hall…but once they meet some of the people who work there, they're hooked on the idea of joining. So rather than try to get them in the door, we try to get some of our members out into the real world, into neutral territory. Think of it like an ambassador program!

    Are your members going to meetups NOT held at your space, and when they do, do they make it known where they work?

    What other places near your space (radius may vary from neighborhood to entire cities) do member-candidates hang out? Can you plan an event in that location?

    We've built relationships with a NUMBER of bars and restaurants throughout the city as neutral territory venues for hosting things. It's not only fun to leave the office once in a while, but those venue owners APPRECIATE that you're bringing them patrons. Guess what happens when you bring a venue owner lots of patrons, especially the kind who spend money in their establishment?

    THEY LOVE YOU FOREVER!! And they make holding more events in the future easier.

    So, again, if you're struggling to get people into the door…maybe what you need to do is re-think where your door is. It might be further down the street than you think.

  • http://twitter.com/JarrodHennis Jarrod Hennis

    Might be a little late replying on this post but I will give it a shot. Im having similar thoughts, concerns. Still in the early stages I have had are cowork space open for a month in a half. We have a few members which is a great start. Offering first day free, and having a monthly Free Day to try and strum up some members has not worked. Nobody has taken advantage of first day free. We have quite a few tours for people to check it out and get and idea what co working is.

    I have noticed that people show interest, love the space, but don’t call/email/reply back after they have been in and enjoyed there time. Trying to find new marketing techniques to work in are area is a slow process. I have had a few suggestions from local Business owners, friends, etc. Offering a 30 day money back guarantee. For are Full time and part time members.. I’m not really out money for them being there. Just some coffee.

    Any thoughts on this? I would really appreciate fellow coworkers feedback..

  • http://www.dangerouslyawesome.com alexknowshtml

    I think that a money back guarantee is FAR better than a free introductory rate, for a variety of fundamental business reasons:

    1) It doesn’t instantly devalue your offering. 2) It provides the amount of time that’s likely necessary to find a fit, value, or create a pattern of commitment 3) Most people actively avoid confrontation, so people will tend to abide by policy compared to those who will attempt to augment the model to their benefit. 4) It lowers the barrier for entry in peoples minds without lowering the expectations of the business relationship that will support their long term involvement.

  • http://www.dangerouslyawesome.com alexknowshtml

    I think that a money back guarantee is FAR better than a free introductory rate, for a variety of fundamental business reasons:

    1) It doesn’t instantly devalue your offering. 2) It provides the amount of time that’s likely necessary to find a fit, value, or create a pattern of commitment 3) Most people actively avoid confrontation, so people will tend to abide by policy compared to those who will attempt to augment the model to their benefit. 4) It lowers the barrier for entry in peoples minds without lowering the expectations of the business relationship that will support their long term involvement.

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  • John Baxter

    I disagree completely.

    This is based solely on my experience of different coworking spaces. In particular, Inspire9 in Melbourne has a very open casual coworkers’ option. You come and work with us, for free, whenever. If you like us and we like you we invite you to join the community. It seems a little crazy, and for someone like me who lives in another city but drops into town occasionally, it’s crazy convenient. What it does, though, is establish that the reason you pay to work at I9 is because you’re paying for membership in a community. The community is happy to support you until that point.

    That place has the best, most welcoming, most inclusive community vibe of any place I’ve been in. Admittedly I don’t pay them anything for dropping in occasionally – so they’re behind on that front – but they’re the place I recommend to everyone, and they’re also the place I tell everyone in the coworking biz they should aspire to be. If I paid to work anywhere (fact is, at the moment I can’t afford it – so it’s free or at home), it would be there. I’d hope I’d fit in well enough to be invited. (If I hadn’t, I’d be less worried about not being able to work there than I would that I’d obviously not been a very good community member.)

    Places where payment is the number one gateway to participation send out a very different vibe. Depending on how that plays out, they can feel very icky indeed. Especially when this means that you’re welcome as long as you pay.

  • http://www.dangerouslyawesome.com alexknowshtml

    Hang tight there John, this isn’t about payment vs. free, or setting up barriers.

    “That place has the best, most welcoming, most inclusive community vibe of any place I’ve been in.”

    THIS IS THE DIFFERENCE. This is rare, very rare.

    Their approach to free trials isn’t in an attempt to fix a culture problem. It’s a way to open the door further. But again – this is a rare case in the larger spectrum of what’s happening.

  • http://climbtothestars.org Stephanie Booth

    Agreed! Though — I have to say, we do have trial days at eclau. But the way it works is that after somebody has come to visit the space, after we have talked, after we have agreed that things should work out, the aspiring coworker comes in for a day or two before signing the contract.

    It’s “trial for everyone”: for them to make sure their decision is sound and that they can actually work at eclau, and for us to make feel confident that they are going to be healthy and valuable community members that we get on with.

    We’re small — 14 coworkers now and it’s a record, so each individual person carries tremendous weight in our community dynamic. People also sign up for 6 months at a time, so it’s quite a commitment.

    When I opened eclau, I said to everyone “drop-ins are free”. Well, believe it or not, nobody dropped in. Swiss culture: people just didn’t feel comfortable showing up without paying.

    So I made drop-ins pay to sign up: 20CHF for the first day, and then feel free to use the tip jar. But there are restrictions: you don’t get a key (we don’t have opening hours, each full member has a key) and you cannot come more than 3 times a month. This has worked out fine!

  • http://www.dangerouslyawesome.com alexknowshtml

    That’s the way we do our trials as well. It’s a 2-way try out. Sets the stage for the conversation. The day isn’t free, but if you do join with a membership we waive the first day as a thank you for trying it out first!

    Very interesting about the “free vs paid” barrier. I wonder where else that pops up culturally!?

  • Tamara Acosta

    Great Post and great feedback of all the community. We are just starting a coworking space in Mérida Yucatán (small country) and we were planning on free trials. After reading this post I am rethinking all my strategy. What we are afraid of is that members come in to see the space and try out free day pass but there is nobody to cowork with! except me! so obviously they dont feel the vibe of coworking, they like it but they don´t come back. Now i am making events of networking and coworking that have a price and it seems it is working somehow. I was also thinking of a ambassador, maybe an exchange. Hours of coworking in the space for this important designer to talk about our space between their friends or a journalist that writes articles. I like that of “money back” maybe i will apply it also. I was making free fridays but saw that everybody comes but nobody returns so I cut that off. Thanks all for your feedbacks =)