In a product-led world, people expect to try things before having to pay for them. One of the primary ways to let users try before they buy is to build what we now commonly call a “freemium” version of your product. A freemium offer gives users the ability to use at least some of your product for free in order to entice them to “convert” or buy the product. Some freemium users may decide to buy in a short period after using the product for free, while others may wait until their needs at their company change.
Another approach is to offer a fully featured trial version of your product for a limited amount of time, say 14 to 90 days. The value here is that they experience your whole product and they have a hard date that drives them to purchase. Typically trial-only offerings have a higher conversion rate than freemium. However, many companies offer both trial and freemium. This gives the user an option to stay on using a limited set of functionality even after their trial is over. This way, you don’t lose them as a prospect and you have more time to convert them down the road when they are ready.
Striking the right “freemium” balance
While there is obvious power in using a freemium strategy, you also need to strike a very delicate balance in terms of what you give away, and what you don’t. While it might seem obvious that you never want to give too much away in a free version of your product or a trial, not giving away enough can also backfire. Think about a time when you’ve viewed an online media site and the frustration you feel when a paywall comes up before you can even read the first page. You haven’t even really gotten to try the product before you’re being asked to pay for it—which is frustrating. The key to avoiding this trap is to be very clear up front about what the user can expect to receive.
Here are a few best practices for delivering a successful freemium product that’s more likely to convert free users into paying customers.
Set usage limits and set expectations up front
Be transparent with your freemium users about what they’re getting, and what limits come with it. The New York Times, for example, does a good job with its online edition. It communicates clearly to users that they get ten free articles a month. If they want to read more, they’ll need to sign up for a subscription. This is the perfect amount of product for someone to trial before committing to purchasing a subscription. If the Times gave away, say, 20 free articles per month, many freemium users might never have the incentive to convert to a paying customer. The more you can use product analytics to track what your customers are using, the better you can find that balance point for your freemium strategy.
Monitor heavy usage to target your upsell
Another potential product-led trigger that you can employ to increase conversion is when a user is clearly using your product a lot. This might show up in the metrics as:
- Logging in multiple times over a short period of time
- Spending multiple hours with the product
- Using all of the features available multiple times
- Installing add-ons that you might have made available
In this case, your product could message this “super user” segment to let them know that there are even more powerful features available in your paid version of the product.
Create advanced features worth paying for
TurboTax is a great case study on freemium conversion, as they’ve employed and experimented with a number of techniques. Tax returns that can be filed via the 1040EZ form are free to all users. This is generally a simpler form targeting individuals with basic financial setups. These individuals are also less likely to pay for tax services. Once those users get into a more complex financial situation—for example, if they are buying a house and want to file a mortgage tax deduction—they will be forced to graduate to the 1040 form and convert or pay to use TurboTax’s more advanced product.
This strategy is all about giving away lower valued, more commoditized features and monetizing more advanced capabilities. To make this strategy work, you need to ensure it is very clear to the user which features are paid and which are free. Often, free users don’t know enough about what they are missing out on with the paid version. You can drive awareness of the different offerings by highlighting Paid/Premium in the navigation, and highlighting paid feature value periodically in any email and in-app communications you send. A fun option to try is to open up a paid feature to your freemium users for a limited period of time.
One of the most powerful ways to encourage conversion among free trial users is to show them the results they’re getting from using your product. For example, if your product is e-commerce software that helps sell widgets and you see that the user sold a widget using your software, this can be an apt time to reinforce the benefits of your product while also encouraging them to upgrade to the full version. You may, for example, want to send an in-app reminder about how the full version of the software offers even more features that make it even easier for them to sell widgets.
These strategies are all premised on the idea that the best way to demonstrate value to a customer or prospect is not by having a sales rep walk them through a demo, but through letting them use the product themselves. When it comes to driving revenues, freemium is the future.
To learn more about how companies use product-led strategies, including freemium models, to drive growth, check out Pendo’s PLG Teardown series.