There are several revenue models available in the B2B SaaS world to optimize the product. One of them is freemium. Although it is one of the most popular methods, it is not for everyone.
Before moving ahead with our subject matter, let us closely discuss what freemium is and what makes it tick.
The words free and premium combine to make the term Freemium. In the Freemium revenue model, the product is offered at a free cost to the users but with blocked or gated features for which users need to pay a specific amount to get those unlocked.
The basic functionality of the product is available free of cost; however, there is a charge for using premium and proprietary features.
Now, let us delve into the subject in-depth and understand why the freemium revenue model works in the B2B SaaS economy.
What is Freemium?
The word – Freemium is all about offering basic products like web services, a software tool for free while charging a premium for increased functionalities. It is a growing concept that helps attract users with the basic features. It also shows users the possibilities and opportunities.
What makes Freemium tick?
Freemium works because ‘free’ is something that always works. Customers get attracted to something and try to familiarise themselves with the product. They discover the product and try to see how it fits into their scope of work. If they like it, they will spread the word on social media. If not, there is always a scope to improve. As more users try the product, the chances of them coming up with solutions is more. This improves product performance and also establishes user personas.
Here are the top reasons why Freemium works for companies.
People like free things, simply put. With the proliferation of data, content, and tools, users are now accustomed to having a lot of information for free. This is why many users choose freemium models and it works.
- Freemium allows for testing
When a product is offered for free, users can test that information. This makes users familiar with an unknown product. This is testing the product for its core features.
- Freemium is what some users want
Sometimes all customers want is something basic. In that case, freemium meets their requirements. Users may be satisfied with what freemium offers, and if they want more, they can always upgrade to a premium package.
- Freemium is simple and usable
Using a freemium product or service is quick and simple. You can see a quick demo of how to use the product and service. Usually, freemium products work on all platforms, so you can easily download or sign up for the service.
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How to achieve your objectives with the freemium revenue model?
In case you are looking to achieve goals with a freemium revenue model, here are ways to do that. These pointers will ensure a successful launch and product usage.
The primary objective is to use the free features as a marketing tool. You can push users who have downloaded or used the tool to comment on its features. It is possible to track what works and what does not. These free features will prove to be the right arson for all further promotions. You can get testimonials from users, which will power future purchases or freemium usage.
You can make freemium work when you ensure users are in awe of the product. This will create word-of-mouth publicity and ensure other users find the product engaging and interesting. Free users can be product promoters and evangelists. Some of them may even become premium users of the product. You can create a content strategy and marketing plan that works for users. Referral and affiliate marketing can help increase product and service reach.
3. Give a valid reason for the users to upgrade
It would help if you gave users a reason to upgrade. If your free version has every feature you can possibly have, there is no reason for users to choose a paid version. Users must be segmented as per free or paid to get the best results. Striking the right balance is important in these cases. One needs to know which features need to be paid for and which ones are free.
4. Make the customers aware of the advantages of becoming a premium user
You need to tell the customer the advantages of being a paid or premium user. The user should know the details of what is in store for them in case they access the paid services. Engagement can happen in-app or outside it. You need to gather feedback and create a plan to drive the point home to users.
5. Numbers speak a lot – track them
Every B2B product marketer needs to track numbers. Numbers mean everything when you are looking to reach certain goals and objectives. To get a comprehensive idea of product performance you need to track the number of users, time spent on the service, clicks, click-through rate, and more metrics.
Types of freemium
1. Traditional/classical freemium
Free but limited feature product that works for most users. Most users know this product as it is and feel it works best that way. Examples include Dropbox, OfficeDrop, and others.
2. Land & Expand
This is an upcoming type of freemium to acquire users. This is where users and buyers are the same. Some examples include Amazon Web Services, Yammer. In these cases, monetization is at the organization level.
3. Unlimited free trial
In this freemium, the user can use the product for an unlimited period of time. The vendor feels they will convert into paid. However, the user feels they will continue to use the product premium-free. For example- Spotify, Basecamp
4. Freeware 2.0
Freeware 2.0 is when the product is fully functional and forever free. There is no expectation of converting into paid users. The company creates monetization through add-ons to the product. Examples include Skype, Evernote
5. Alternate product strategy
In this method of freemium, the goal is to keep the primary features free. Cross-selling other offerings from the company is the primary idea. There is no direct sell-up to other models. Example- SketchbookPro
This is a forever-free base product. The goal is to monetize revenue share through third-party apps with add-ons and more. So, the app or product is free- but not in the true sense. Examples include Google products.
7. Network effect
In this freemium model, the goal is to monetize eyeballs by aggregating behavioral data. In this, the advertisers are only the customers. An example is Spiceworks.
Do you know, apart from great free services and even better-paid services, what is the one thing that is common against freemium products? It is great pricing and features table.
Although it seems quite simple in theory, it is the key that makes users ultimately decide whether they would like to try a freemium product. The reason is it shows the scalability of the product for beginners to advanced users.
Once they know the missing features with the free plan, they might decide to upgrade to a paid plan. 31
So, which of these freemium are you going to try for your B2B SaaS product today?
Dattatraya Shetty is an IT Professional with 2 Decades of experience in areas of Product Development, Implementation & Service Delivery Management. As the Head of Implementations and SOC Compliance in Smartkarrot he is on a mission to provide relishing customer experience.
Published December 14, 2021, Updated April 12, 2023