Discover how the freemium pricing model can become a powerful growth magnet for your business, driving customer acquisition, market share, and revenue while maintaining a competitive advantage.
In today's ever saturating market making a "first company client" part in the market is becoming increasingly challenging. Many companies, especially in the software workspace, have mixed towards freemium pricing strategy, as a customer acquisition method.
But how do you effectively transition your free users into paying customers? Wouldn't introducing pricing alienate your audience which is accustomed to using the service for free?
In the following blog we will discuss premium features, the benefits of making the distinction between basic and premium features and how freemium acts as a growth magnet for a business.
It is important for a business to maintain a dynamic pricing structure that will allow it to offer a wide range of pricing options to its customers at each of the created levels. It will help the business to identify the most sustainable pricing for their products, considering factors such as costs, competitive landscape and other external factors.
Changing and continuously adjusting prices according to what your competitors are charging for similar products.
Cost based pricing: A fixed percentage or amount is added to each unit of the product to determine the price.
Value based pricing: Price is determined by the customer's perceived value of the product.
Adjustments are made to the base price in real-time based on the competition, demand and other external factors.
Multiple products and services are offered together at a combined price. This combined price is much lower than purchasing each of them individually.
Entering the market with a low price and then increasing the price as market share is gained.
Exclusive pricing option that is charged to reflect the product's high quality.
Basic services are offered for free while premium services are billed.
The Freemium Pricing strategy acts as a growth magnet for the business. The strategy allows the business to focus on customer acquisition by providing the following benefits:
Revenue: One of the most important aspects of any business. But, how can a free service generate an income? Processes like: data management, metric calculations and advertisements can generate revenue for the companies, even from the free users. When the time comes, these calculations will help the companies determine the revenue from other subscriptions in the other cost-based (instances) which are usually set free.
Once at scale, there may prove to be valuable sources of revenue. Since the customer buys in, the payments can be automated with a subscription service, generating a stable periodic income.
Companies also start-ups show prefer to use freemium pricing to quickly gain a broad customerbase base. Network effects naturally pull word of mouth marketing influence a lot of this users growth. It is an aggressive marketing strategy.
Freemium model is a great customer acquisition strategy and not a monetization strategy. There is no monetary entry barrier, which allows any users with a need for the offering to be able to use it, which would not have been able to otherwise.
Upselling is selling products or services that are one tier above the current tier, to the existing users. There is no niche who is the freemium model, we can easily pivot on existing user; rather than acquiring a new one. If focused on retension and reducing churn, the users are kind to grow with your business feeling the users who are already familiar with your product and know what it can do for them.
Users find themselves increasingly leaning to freemium, due to the flexibility that this business model provides them with. It empowers the users to giving them the freedom to choose between the two best categories of offerings. It is one of the fastest growing SaaS business in the industry.
Freemium services need neither a skilled free onboarding, activation, nor the prospect information. This creates an extremely low barrier to entry of new users. Freemium might pivot most users as try and use the product, which will either the company a very low customer acquisition cost. The acquisition cost is shifted to the infrastructure and other necessary to maintain the service.
High competition is an industry for the same service, of identical quality, creates a race for the bottom for pricing. Advantages of freemium, among others, give the businesses a pricing tool that's advantage over its competitors who do not offer a freemium model. They have already managed to get the prospective customer to use their product, what remains is upselling. A freemium content will have a higher amount of users than its paid alternatives.
There are various ways to switch the free version users to the premium version. The idea is to make the switch as easy as possible. The software of the premium version needs to have a pull that will lead the free users in. Top freemium companies who utilize successfully freemium models have the following features in common:
The new features of the premium version must offer the users an incentive to make the switch. Offer compelling premium features which will significantly enhance the user experience compared to the free version.
Update the features regularly and make improvements according to user feedback, to ensure they remain valuable.
Users need assistance when they face an obstruction. This idea is to always be available to assist the users when they get stuck in something. Offer the premium users enhanced customer support and highlight it's benefits.
Updates available for accessible to the older users, and feedback to improve the performance, security and overall functionality and usability of the software. The updates can be:
The onboarding process for the premium version is designed to be smooth and as informative as possible, about the new features. It needs to have clear instructions and minimize steps.
Each user within a user segment can be sent tailor made marketing messages which highlight the specific benefits of the features that the user needs. These features can be sent through user data analytics.
Limited time discounts to create an urgency. Discounts can act as an additional incentive to push the users that have been on the edge of conversion.
The users can access for a limited time trial which covers all the features while the premium version to give them a taste of the service in its finext.
Users can be reminded of the benefits of upgrading through frequent messages, emails and in-app notifications.
The Freemium Pricing Strategy Model is exceptional in building brand awareness, providing exponential growth, reducing marketing costs and the first to market. Companies need to make this decision after careful considerations and through strategic thinking, as this will talk to them making changes to their entire operating model.
Discover how EarnBill's flexible pricing models can help you implement and manage freemium strategies effectively
