Think Before you Freemium

Think Before you Freemium

November 12, 2014

 

There are numerous pricing strategies for B2B SAAS companies and all of which will make an impact on your finances, marketing and organization. How do you decide which is the best strategy for your company?

 

Let’s talk Freemium! Until recently the Freemium pricing alternative was a top contender, however it might be losing it’s strength to other hybrid alternatives or a combination of methods available.

 

What’s Freemium?

Freemium give your product away for free, with limitations; Give add-ons or other versions at a Premium.

 

Before you choose, think carefully.

  • Are you ready to give your product away, for FREE?

  • Where is the money coming from?

  • What are you going to get out of the Free users?

 

Lincoln Murphy published a great post on this subject.  He indicates that there is confusion between the Freemium and Free Trial method and goes on to suggest maybe drop the “mium” from the Free, or check out the Premium with a Free Trial which is really not the same as a freemium model!

 

 

“…Free Trials are a simpler approach if for no other reason than the lack of psychological hurdles present with Freemium.”

 

Your marketing team will love a Freemium model, it can be a great tool for acquiring specific users.

 

The Freemium model has an upside, as the growing rate of customers shy away from the thought of having to take the time to cancel and unsubscribe!  Read Vineet Kumar’s article on Making “Freemium” Work. In the article the best question he asks is “What should be free?”.

 

What do you give for free?

Here is one story of how a startup dropped it’s Free Plan for a Freemium plan. They have many solid beneficial reasons including this:   

“Reason #2: Free Users Help You To Build A Cool Product. Paying Customers Help You to Develop A Valuable Product”

 

Why not Freemium?

  • The first issue that comes to mind is the Penny Gap. It is always difficult to get your customer to pay the first penny. Freemium makes it easier to gain free users but more challenging to gain paid users in the future.

  • Pricing your product too low or even free will risk unsustainability or a lower perceived value.

  • Income model - Can you turn your free users into money makers using a third party? I.e. advertising

 

The decision is not only between Freemium and Premium or Free Trial – but what type of each or hybrid model will fit in with your B2B entitiy. Research your market before making a final decision to let everyone in for free!  Think about it … Products are rarely actually free, just paid for by another product!

 

What works for your company?  

 

Photo:   http://priceonomics.com/

 

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Incentive Management Inc.
Ariel University Center of Samaria Upper Campus, Building 10 
+972 (0)3 908 5000
+972 (0)3 936 6873
Incentive, Peregrine Ventures Incubator 

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