With the recent sharp increase of SaaS platforms, and the general shift from “own” to “lease” equally pushed (supply) and pulled (demand) by the market, startups and incumbent are turning into subscription-based models. Within this context, Freemium models took the lead, especially because these new subscription formulas have been embraced by new players whose primary goal is to attract new free customers (users), and sooner or later turn them into paid ones.
While the hunt of the customer start, marketing and financial teams take a creative side and they start to assess subscription alternatives with the overall goal to acquire and to lock-in the customer, and possibly (either aggressively or gently) “extract money” from them. If we look closer, even players whose basic service costs (apparently) “pennies” might be associated with the Freemium model: underselling a product/service can be an effective strategy to have the customer “walking-in” the premises[1].
Note to the subject: I personally associate, within the FREEMIUM model, all businesses applying a “free use” formula to try, test or experience the product, with the purpose to generate, later, customer audience and direct or indirect revenues. This means the “Free-Trial” players fall into the Freemium category as debated by the present article.
FREEMIUM WITH A SURPRISE
As consumers, all of us have direct unpleasant life experiences where we decided to proceed with a subscription, which turned to be “not exactly what expected”. Or, to “rent” something at one price, which suddenly upgrades to another package much more expensive…. The customer service reassures us we can downgrade or cancel, but with a certain notice, and at the end, we are not actually free to go (“sure, you are released, with the payment of this bail!).
What really happens, behind the scenes, is that companies rush to set up Freemium packages in a chaotic way, in most cases not even fully aligned with the overall company strategy. In their internal meetings, setting up their system, platform managers debate what models would fit best and what ones would generate the highest revenues, surveying the market to find Freemium options to choose.
POOR “CUSTOMER CENTRIC” MODELS
So, what model we select? This is exactly the point. The question shall be, instead: how we can create tangible value a customer would pay for it?
In the rush to get onboarding customers and to keep the metrics up, and to generate revenues to slow the cash burning rate, Freemium platform’s marketing teams lose sight. Whose outcome can be a satisfactory A Side with “growing revenues” and “many new users”, forgetting the B SIDE which comes with “how these revenues are generated” and “how to keep the customers using the platform”.
Why to get many customers if they then soon leave? Why to generate spot revenues with lock-in strategies or unwanted upselling which alienate customers and mine the platform reputation? Altogether, mixed strategies “care for valuable customers” + “extract money from or simply disregard those ones which will never be our target” are not wise, because in this interconnected word to install a firefighting system inside the house if the fire might come from the forest all around might be definitively short-sighted.
MONEY DRIVEN SHORT-TERM FREEMIUM STRATEGIES
Users shall a platform’s Freemium model attractive, easy and convenient, worth not only to try but to definitively use it. So, “locking” them by convincing value propositions, not by selling tactics.
Here some examples on how some wrong techniques look alike:
1. I AM NOT SURE I HAVE A REAL VALUE PROPOSITION “Insert your credit card data and start your free trial, you can cancel anytime”. Why the credit card? Why shall I cancel the automatic upgrade? Why shall not decide myself if to upgrade or not, when I want?
2. JUST WATCH, DO NOT TOUCH, PLEASE “Start your free trial (and start to be frustrated)” Yes, all free, no tricks! What? You want to use this? To have this? To access this feature? Sorry, it is for the premium customers…ending up in a poor customer experience and even a lack of interest in trying to upgrade.
3. WE WILL GENTLY MAKE YOUR EXPERIENCE GETTING WORST “Start your free trial with premium features, in 15 days you will be asked to upgrade if you do not want to lose the premium status”. Why to give me (temporary) access to premium features and then take them away from me? Why to not let me decide if to activate instead premium features with no obligation, in case? Why to set up a complete profile (premium) and lose most of my profile add-ons while you downgrade my status, making me unaware I spent hours for nothing?
4. YOU AND I WILL BE LONG-TERM FRIENDS, YOU BET! “Free lifetime subscription, no worries (and please, do not check your credit card statement that often…” How I have been charged for that? What it is this add-on? I never asked for it! And, damn, how to cancel it now?
…all of us, as consumers, found themselves involved in multiple annoying experiences, so why as business we treat our customers differently?
VALUE DRIVEN LONG TERM FREEMIUM STRATEGIES
If you are willing, instead, to set up a sound, wise Freemium Model, you shall focus on the customer experience with your product. SaaS entrepreneurs shall ask themselves the question “why users shall adopt (or switch to) my product, what problem it solves, what value it delivers”, and subsequently build a customized and aligned Freemium model (and not replicating existing systems adopted by competitors or other industry players). This job can be done answering to three questions:
1. what features will ensure a great experience and value for the free adopters.
2. which additional features can be released only for the paid users (making sure their extra value does not come at the “expense of the free customers”).
3. how to make the users’ journey easy, convenient, fair, leaving them the full control of their customization options (in terms of accessible services, process, timing) in full transparency.
By carrying out these steps, SaaS platforms can therefore skip choosing standard Freemium models, and create “their one”, fitting perfectly with their business strategy, product and their audience needs. Delivering value to users and building their brand and reputation over the time.
HOW TRADETOWORLD IS BUILDING ITS OWN FREEMIUM MODEL
Using the stated principles as a compass, TTW team set up a long-term journey for their corporate users (Sellers, Buyers, Service Providers, Sales Partners). The outcome, and any additional option, had to be tested guaranteeing an awesome user’s experience in using the platform, with transparent terms, independent scalable options, and full free choice in adopting solutions within or outside the marketplace.
As said, there is not a unique formula in building a consistent, fair and transparent Freemium Model, so we are going to describe what is our “recipe”, leaving the readers to choose their own path in creating an added value “free versus paid” value proposition.
TTW (ongoing) roadmap:
1. (GENUINELY) FREE “Try the great free features of the platform, use them, and upgrade only when and if you want”. Building tangible benefits and value to the Free audience, by lifetime subscriptions, with no tricks or upgrade pressure. No credit cards, easy navigation interface, clear and powerful free services granting a great (free) user experience.
A similar strategy must be wisely implemented to unbalance the SaaS platform early-stage financial stability and to avoid missing growth opportunities over the time. At TTW, we are obtaining such result keeping low the platform fixed costs and building multi-revenue sources beyond the “subscription fees”.
2. OPEN “Keep the platform open and let Users to choose what to use”. We are building an open platform users can step in and out along all their journey, like using a service and quitting, maybe accessing again for other available tools. Within a path of full free choices, users then can stay comfortably (and conveniently) inside the platform in all stages of their trade project, avoiding “lock-in” tactics or services.
3. TRANSPARENT “Gain full trust”. This is where the promise you make with the user showcasing transparent rules and policies, turns into trust for the brand. As a matter of fact, even if you pitch your values, you onboard companies with comprehensive support, and new users experience easy navigation and valuable platform services, it takes time to conquer their full trust, which is the key factor in building a strong company brand (and positive word a mouth campaigns). Among its customer-centric policies and transparent rules of use, TradeToWorld will explicit its business model and revenue sources, so that users will understand and trust the platform free(mium) services.
4. FREEDOM “Pay for what you want, when you want”. TradeToWorld will publish prices and highly advertise if a service is included or not in the subscription package, and how to navigate in the full free-of-charge list of services. Doing this, users are fully aware of platform services and can make any payment (“without being charged”) only for desired upgrades or features.
5. FAIR “Do not (rush to) upsell”. If a platform delivers real value, makes users willing to extensively use it. In Freemium platforms, users must be convinced of the value proposition and eager to upgrade and/or pay for a service after completing a full experience of the platform. Not to walk to dead-ends which require “a payment” to move forwards. The navigation experience matters. Free users shall be able to fruitfully use the platform and only pushed by their own desire (and not platform’s tactics) to get more paying for the extra value. Well aware of that, TTW “upselling” will be soft, wisely used, and not employed as marketing weapon (which might push free users to pay for something they end up being not happy for, risking ruining their beginning positive experience with the platform).
6. HELPFUL “Educate Users”. Through clear navigation interfaces and references, stylish minimal virtual environment, short video tutorials, and prompt customer support, TradeToWorld will help users on how to use the platform, optimize their journey and improve their experience (making free and paid users equally important).
7. INNOVATIVE “Constantly innovate”. TradeToWorld will relentlessly (but gradually) add features, process or product-driven, keeping the navigation and interface lean and intuitive. The platform integrations or updates will be carefully tested and monitored before their full deployment. And again, the new benefits will be allocated either to the free and paid users, not just for the premium customers (with a wise balance to keep the added value of passing to premium accounts increasingly appealing).
In summary, free users will be treated in a fair way, and additional value will be granted over the time, constantly improving their experience, while keeping the gap with the paid ones high thanks to the gradual overall innovation of the marketplace (in other words, not working to widen the paid features impoverishing the free platform value but keeping the free/paid ratio constantly well balanced).
At TradeToWorld, we believe the 7 points above, wisely applied, will create a virtuous loop with a winning Freemium formula. Market will tell!
Kingsley Borello
Founder and CEO
TradeToWorld Marketplace Corporation
[1] Which can be virtual as well as physical: as a matter of fact, same techniques, usually with fewer options, are applied by off-line players (for instance, Gyms, etc.)
