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Karl Jesper

This Is How You Succeed With Freemium Business Models

Freemium is one of the most difficult business models you can pick. It’s not easy. But when you get it right it’s one of the best.

So, how do you get it to work? Well, that’s what we’re going to figure out right now so keep reading!

A lot of business owners today are doing freemium only because others are doing it. But what they never realize is that for freemium to work, you’ll need a specific product and audience. If you’re lacking in those areas, chances are your freemium business model isn’t going to work out.

The four elements needed for freemium success

Shift your targeting from team-focused to individual-focused

You need to shift your targeting mindset from team-focused to individual-focused. Companies selling a B2B team driven product are often missing out on this. By targeting your ideal individual, and bringing them the most value possible, you will plant a seed with that person and it sort of spreads throughout the organization.

They will then do most of the heavy lifting in convincing management to invest in team accounts.

Supercharged TTV (time to value)
The second part you need to have in place is to make sure that your product has a very quick time to value. If it requires a lot of work, education, and support to get set up, it’s not gonna work.

If you have a product today that requires a lot to get going, you are most likely better off by raising your prices and having a more hands-on approach.

Upsell path from individual to team account
The freemium model takes off when you move your customer from an individual account to a team account.
Take a look at Dropbox…
It started with an individual account. Now they’ve got Plus and Pro plans and suddenly they are expanding into the different organizations. And they can get those team accounts more efficiently since they have lots of individuals already using their product.
And the last thing you need to have your freemium business really take off is virality. You need to have some sort of mechanism to get your users to refer your product to others.

The free users that never convert into paying customers need to bring you value some other way. Which is to bring in even more users.

Lots of people don’t pay for Dropbox. But they help Dropbox get a bunch of other users, and some of them will upgrade to paid accounts. Evernote is another example of a company using this method successfully.

So the free users are indirectly delivering value to the business, just not with their dollars and cents.

A lot of people trying to go down the freemium route are missing this vital piece of the puzzle. So if you don’t have virality built into your business today, you want to look into it as soon as possible. Otherwise, you most likely will have a hard time succeeding with a freemium model.

Freemium is a complicated business model that requires a lot of work and effort to go into the product, technology, data and building the right teams.

But if you nail the four elements we discussed, then freemium is a really exciting business model to work on and can turn into a very powerful and profitable business.

Are you using freemium as a business model? Leave a comment below and let me know 🙂

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