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Freemium model: let your product do the talking

A common challenge for a lot of my clients and young software companies generally is around product pricing: figuring out how to tier or differentiate pricing, deciding whether to offer free trials or implement a freemium model, etc.

If you're in the midst of this and maybe considering testing a freemium approach with your customers, this post from Reforge's Elena Verna is well worth a read (hat tip to colleague/friend Matt Macfarlane for sharing).

A freemium approach typically allows the customer to try a basic version of the product for free, and once they realise the product is so good at solving their problem they happily upgrade to a paid subscription offering premium features and/or scale.

This process allows the customer to remove as much uncertainty as possible with respect to whether the product will solve their problem, and the longer they have to remove uncertainty, the more their willingness to pay will increase.

Freemium is preferrable to free trials and demos, because often these don't allow the user enough time to really get intimate with the product - and while some users can be 'sold to' in the space of a short trial, others will take longer.

Freemium is aligned with a more bottom-up B2B approach, where early-adopting employees are the trojan horse of enterprise customer acquisition (rather than relying on the sometimes flawed approach of selling to the top and hoping an enterprise-wide roll-out is adopted by the end users).

I covered freemium in my post on software-as-a-service businesses back in 2020, in which Functionly's Tim Brewer shared his thoughts on product-led marketing. Product-led growth is often associated with freemium, because it's all about relying on the strength of your product to acquire customers, as opposed to marketing or sales-led strategies.

Nowadays investors expect products to not only be good, but to be able to onboard users by themselves. According to Tim:

"Very good products don’t need a walk-through."

"Needing an onboarding process is a bug. By the time we speak with the customer for their free onboarding session, they’ve already spent 3-4 hours in the product by themselves – so they're seeing value in the product from the outset and it's easily accessible to them."

This sentiment is echoed by Elena Verna: "When your product can communicate value proposition on its own, you get much more naturally occurring, predictable, and sustainable habits that drive long term retention and revenue."

I recently went through a lengthy onboarding process with a provider of an enterprise travel management system I was implementing for a client. It required multiple step-through sessions by zoom before I was allowed into the product, that were well-intentioned but clunky and ultimately unhelpful. The demos were not customised to what I needed from the product - as ultimately the only person who knows that is me, and even if asked I wouldn't be in a position to articulate that until I'd used the product.

The implementation ended up not going ahead. Users don't want to sit in the back seat while someone else talks them through riding a car. Most people want to jump in the front seat, figure out the controls, and if they enjoy the ride, only then come back and ask targeted questions on the aspects that they couldn't work out intuitively. And then, fingers crossed - buy the car.

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