It’s a well-known business model in B2B SaaS and now it’s making headway in other industries too: the ‘freemium’ model. Not only has the freemium model changed the way B2C and B2B technology companies do business, but its very existence has a significant impact on your Customer Success and Support, too.
What is a freemium business model?
A freemium model allows customers to use ‘basic’ services or products completely free and with no investment needed. There’s no time-limit like there would be with a free trial period. So what’s the catch? Services on the free tier are limited—this could be in the form of features, accessibility or storage space. In some cases the free tier is simply ad-supported, whilst the premium services offers an ad-free user experience. Usually, these premium upgrades are where the true value for a business lies. Freemium works in the case of tech or software where the incremental costs of servicing 100 users over 10 are minimal. Successful freemium businesses set a clear parameter that differentiates their free product from their premium product.
“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.” Fred Wilson, Venture Capitalist
According to subscription management platform Chargebee, “the main plus-point of the Freemium business model is that you can do away with the traditional sales-driven marketing strategy—the potential customers get to learn by themselves about the benefits of the product by trying it out, before even buying it (winning their mindshare)”.
Fred Wilson’s AVC blog post from 2006 popularizing the term ‘freemium’
Examples and advice on how to create a highly successful freemium model are enough for another article—today we'll be looking at supporting those freemium users.
It’s one thing when you have an initial product that can easily be offered to 100 users vs 10 cost-effectively, but when it comes to actually servicing those users and providing the necessary support? This can be where your approach falls down.
Freemium: A one-sided story?
As much as freemium is now a well known and accepted business-model, we feel it’s a bit of a one-sided story. Just Google ‘freemium’ and take a quick look at all of the Marketing blogs discussing the importance of quickly up-selling freemium users to a paid plan. What these businesses seem to be missing is that your product or service should do that job for you. Let the standard features, user experience and service included in the free tier delight those customers so much so that upgrading to the premium product feels like a no-brainer.
But the generally accepted view seems to be that freemium users are a temporary hassle; an annoying ‘problem’ that needs to be ‘solved’ by up-selling them to the paid tier.
Logically, this makes sense. Any business owner will tell you; paying customers aren’t just great—they’re vital!
But let’s get one thing straight. Freemium users are, in fact, customers too!
They also use and depend upon your product just as much as any paying customer, and you shouldn’t be letting the service you provide them slide.
So why are we focusing solely on ways to make them pay as quickly as possible? We should be focusing on making them successful, and subsequently, happy— which will achieve the upgrade objective in itself.
You should be scaling your users’ success if you want them to start paying for yours.
You could run the 40th email marketing cadence to your freemium users and hope for the best. A few of them might convert to a paid plan, right?
Slack has successfully used a freemium approach to explode the business to $100m ARR
At inSided we see a different approach becoming way more successful: scaling the success of your freemium users. The general concept is simple. It purely revolves around value. Make sure your freemium users get as much business value from your product as possible. When they see real results that can be attributed to your product, their usage will further increase and soon they’ll be ready to start paying to further build on that success.
Unfortunately, here’s what most companies think next:
“But… this will only drive my costs up…!”
A rational yet short-sighted response.
We’re not suggesting you add 25 agents to your support staff in order to cover all of the questions asked by freemium users—or even to be proactive when it comes to scaling their success.
You need to support them, but you need to be smart about it. This is where self-service comes in. Self-service is the key method for scaling customer service. By enabling freemium users to self-serve, you’ll be equipping them with all the tools, resources and information they need to get maximum value out of using your product, driving faster product adoption (vital for freemium model uptake) and allowing yourselves to maintain a high level of quality support.
How’s that for scaling your efforts and putting customers first?
Self-service is the key to scaling and serving
Here are some tips and tricks for enabling self-service within freemium model businesses.
- Facilitate peer-to-peer (P2P) support. Particularly in B2B software products, where the learning curve is steep, P2P support and knowledge-sharing can be a gamechanger when it comes to driving product adoption and facilitating users through the freemium model onto paid tiers. Allowing free users to see how other companies or peers are using, applying or getting value out of the (paid) product will serve to inspire them to embed it further into their own workflows and make the jump from free to paid.
- Enable self-service directly within your own product environment. Don’t force users to break their workflow in order to access the help or support content they need. Barriers to exit for free users are low, and if you force free users (especially new ones) off your product and away to some complicated support destination to get their basic usage questions answered, it’s highly likely they’ll abandon ship altogether. Don’t dance with the devil but instead support all of your customers (yes, even the non-paying ones) with in-product onboarding, walk-throughs, workflow guidance and contextual, personalized help topics.
- Implement effective knowledge management. Outdated how-tos, folders full of ageing tutorial documentation (“was this the latest version? Or was it that one?”) and wildly irrelevant FAQs from many moons—and features!—ago cause havoc for a support team’s efficiency. For the sake of your customers and your up-sell objectives, use an effective knowledge management system that will self-maintain. Keep all of your customer insights, support materials and user-generated content in one easily accessible knowledge base where user activity, responses and ratings will help you understand what’s hot and what’s not.
Want the free tips & tricks downloadable PDF?
Finally, don’t forget to work on segmenting your freemium users and calculating what they may be worth to you someday. You don’t want to miss out on having the next Google, Slack or Zapier on your customer list because you didn’t give them enough love and attention in the beginning. Invest in a future-proof, scalable solution and provide quality support and proactive success tools for these customers—while they’re still customers!
By Danielle Juson
Customer success community expert and writer at inSided. Passionate about sharing the value and impact of community, and enabling companies to get it right. Connect on Linkedin