Strategies for a Freemium World
How Freemium helped transform B2B tech buying — and how you can respond
06 Minute Read
It feels like the most obvious principle in business: success depends on being paid for the solutions and services that you provide. The more you have to invest in developing and maintaining those solutions, the more important it is to make sure the revenues keep flowing. And as B2B tech marketers, that’s our job.
But how do we play that role when some of the world’s fastest-growing tech companies are moving away from the principle that you should only get what you pay for? When some of the world’s most admired B2B tech brands don’t charge most of their customers anything at all?
The rise of the Freemium tech business is rewriting the rules of B2B buying. It’s making it easier for any employee to experiment with new technology. And it’s changing expectations about the form that IT purchases take. However, it also creates opportunity – and not just for the big Freemium players. Marketers who integrate Freemium thinking into their strategies can remove friction from the buying journey, and create better customer experiences without having to rewrite their business models – or give up on revenues.
What Freemium means in B2B tech
In her 2019 Internet Trends Report, Mary Meeker defines a Freemium business as one that offers a basic, free user experience in parallel with a premium one. The free user experience drives usage, engagement, social sharing and network effects. It also provides a wealth of data on how products are used, which can drive innovation and development. The premium user experience takes care of monetisation and, crucially, it’s where those innovation and development efforts are focused.
Dropbox, Slack, Wix, Google G-suite: all of these B2B tech businesses have grown the number of people paying for their services by giving even more people access to them for free. Even Microsoft now drives growth for Office 365 with free web app versions of Word and PowerPoint. In each case, the free user base acts like a marketing strategy, filling the top of the funnel with people who are familiar with the brand and have used its products. These people become increasingly aware that there are better and more advanced services available if they or their business are prepared to pay for them. And pay for them they do. Each one of these Freemium businesses is growing its number of paying customers at healthy double-digit rates that are accelerating, year-on-year. The more free customers they get, the more successful they become at converting them into paying ones.
The crucial difference between Freemium and free trials
Many B2B tech businesses are already familiar with the concept of people using their solutions without paying for them. They run free trial offers that give people months of access before they start paying. However, free access isn’t quite the same as Freemium.
The crucial difference between Freemium and a free trial is that a trial is deliberately time-limited. It’s an introductory offer that must either cease or become paid-for after a certain period elapses. Freemium solutions are free indefinitely. Their non-paying customers can use them for as long as they like. And this creates an entirely different user experience.
If you sign up for a free trial, you’ll be asked to share your personal details and, probably, credit card details as well. No money may leave your account for a few months but you’ll feel very aware that, sooner or later, it will. Even if you’re not yet paying, it feels like a paying experience. If you’re signing up to the service for work, you might well need to clear your free trial with a manager or procurement before you start using it.
Users of Freemium solutions are able to feel differently about them because no payment details are exchanged – and there’s no date at which costs will kick in. They can therefore embrace and explore them in a different way, and with less need to sign-off potential future expenses internally. When they decide to upgrade to a paying version, it’s a decision that they drive themselves – not one that’s forced on them. They want something better and they want to pay for it.
These different user experiences are underpinned by different business models. When a product or a solution is offered as a free trial, it’s still the same solution as the one other people are paying for. A Freemium version isn’t. It lacks many of the more advanced features of its Premium cousin – and it’s going to get far less of those features in the future, or get them a lot more slowly. Freemium versions tend to remain fairly static, while their Premium cousins benefit from ongoing innovation and development, leveraging the vast amounts of data that the free user base provides. The free version soaks up less ongoing resources, which helps to keep it free. Freemium businesses are effectively creating two different solutions, with different purposes.
Freemium’s journey to the heart of tech buying
The concept of Freemium started out in the world of online gaming, where it underpinned the growth of titles like Runescape and Fortnite. It’s taken off so spectacularly in B2B tech because of one simple reason: it aligns almost perfectly with the era of the anonymous buyer.
We operate at a time when many of the people driving tech purchases forward don’t think of themselves as IT buyers – and don’t want to go through a procurement process in order to try a new solution. A Freemium product that they can start experimenting with straight away, before deciding to upgrade later, therefore has a huge advantage.
The growth of Freemium quickly becomes self-reinforcing. Anonymous buyers drive growth for businesses like Dropbox, Slack, Drift and Atlassian, which persuades other businesses to launch similar free solutions. This embeds anonymous buyers’ own expectation that they shouldn’t have to pay to start using a new tech product. And that makes the ability to offer a Freemium version of your solution all the more significant as a competitive advantage.
How can B2B tech marketers compete with Freemium?
But what happens if your B2B tech business doesn’t fit neatly into this model? What if the technology you’ve developed can’t easily be adapted into a more basic version that you’d be happy to distribute for free? What if it can’t easily be delivered over the cloud (as most freemium B2B tech products are)? What if you’re a hardware manufacturer who can’t just hand out your product and expect people to pay later?
At its heart, Freemium is about adding value for prospects before they become paying customers. If we’re to thrive in an increasingly Freemium world then B2B marketers will need to explore all kinds of creative options for adding value in this way.
These could involve a free version of your core product. However, they could equally involve offering free consultations, or free tickets to high-profile conferences and events. The most successful tech companies know that the easiest lead to convert to a paying customer is one that’s already delighted with you. The good news is that there’s more than one way to generate those leads.
Is there a valid Freemium experience you can provide?
The first and most obvious question is whether there is a valid Freemium version of your solution. Can you make parts of your product available for free without undermining your overall business model? Perhaps there’s one specific feature that could be hugely useful to large numbers of people but only represents a fraction of what your full solution can do. It’s not always easy to re-engineer your portfolio this way. However, the success of Freemium tech businesses shows that it’s a possibility worth exploring.
Can you make free trials more accessible?
If you can’t adapt your business to accommodate Freemium, you might well be able to tailor your existing free trials, discounts or offers so that they come closer to the Freemium experience. Focus in on the friction points, and when and how you ask for personal and payment details. Could you structure free trials so that customers can get started without putting in payment details and with minimal personal information? What would happen if you triggered this process at the end of the trial rather than the start? You’ll get fewer people becoming paying customers by default when they forget to cancel a trial subscription – but you might find that you get a far wider pool of people taking the trial to begin with.
Are there other ways of scaling your user base?
Freemium may not feel like an option for hardware brands – but that doesn’t mean you can’t find innovative ways to grow the number of people using your product. The headset manufacturer Jabra runs attractive discount offers on its state-of-the-art consumer headphones for employees at its priority target accounts. This equips the brand with a large number of user-advocates at businesses making enterprise-wide buying decisions. It achieves something similar to a Freemium business model, but via a different route.
Can people design with your solutions before they buy them?
The first stage of the tech buying process often involves anonymous buyers experimenting, to see what a solution could eventually do for them. Helping them to visualise this could add up to an accessible, Freemium-style experience without actually providing a solution for free.
The communications solutions provider Twilio encourages developers to start experimenting with building chatbots and other widgets in its Twilio Studio, before they start paying (or have to share any credit card details). Conversational marketing platform Drift shows potential customers what a ‘Driftbot’ would look like on their site. Both solutions invite anonymous buyers to experience what it’s like to be a customer – without the need to become a customer.
Decoding the Freemium revolution
The Freemium revolution in B2B tech isn’t really about giving away valuable products for nothing. It’s about helping buyers buy. By making aspects of what they do more accessible, successful Freemium businesses have been able to build large user bases extremely quickly. At the same time, they’ve helped people to work out for themselves why it’s worth paying for a more premium version of their solution. Freemium is a business strategy that looks and feels a lot like a marketing strategy. And it’s therefore something that any B2B tech marketers should make time to think about.
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