The Basics of Freemium: 3 Tactics That Drive Conversions

How to hit the functionality sweet spot — enough for users to fall in love and leave them wanting more.

Written by Todd Olson
Published on May. 04, 2022
The Basics of Freemium: 3 Tactics That Drive Conversions
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As more companies enter the crowded SaaS landscape — and traditional enterprises spin up digital products of their own — companies need a way to differentiate their offerings and show (not just tell) why their product is the best choice. Companies are implementing product-led growth strategies, including offering their products for free, to do just that. 

Simply put, being product-led means putting your product at the center of the experience you provide to customers. By moving aspects of sales, marketing, customer support, and service inside your product, it becomes a powerful and efficient vehicle for generating leads for the business, converting prospects into customers, onboarding and educating users, driving adoption of features, and selling additional products. But the success of any product-led growth initiative comes down to the user experience — it has to enhance the experience users have with your company. And in the case of a free product, which engages potential customers, that experience must be so great that it hooks them in and incentives them to (eventually) buy. 


What Is Freemium?

A freemium product gives users access to part of a product for an unlimited time, but doesn’t include the product’s entire feature set or functionality. The goal is to offer users enough functionality to provide value and to pique their interest about what more the product can do. Often the reason someone uses a free product is because of budget constraints, but they want to have the option to pay for the upgrade when it makes sense for their business. A lot of companies launch free products to create a viral effect for the business — a great experience with a free product can mean more people talking about it, sharing it, and then adopting it.

So, freemium products need to serve customers at a baseline functionality that adds value to their current business, but also entices them to upgrade when the time is right. Here are a few considerations to ensure you launch a freemium product that accomplishes your goals.  

 

3 Must-Dos for a Successful Freemium Product

Make Sure Your Freemium Product Succeeds With These 3 Tips

  1. Set usage limitations carefully.
  2. Get users to value fast.
  3. Make it easy to upgrade.

 

1. Set usage Limitations carefully

There are different ways to approach the limitations of a freemium product, including:

  • Limited functionality: In this scenario, users only have access to certain elements of the product. Companies usually offer the foundational components of their product for free, and reserve more advanced and valuable functionality to provide a reason to upgrade.
  • Usage quotas: Companies often limit usage by the number of monthly users allowed to access the product. Many news websites and collaboration tools, for example, limit the number of access to articles and trials allowed for free per month. Calendering and collaboration tools use similar limits. This tactic works best when there isn’t a direct alternative that users could turn to instead. 
  • Limited support: Freemium users may only be able to utilize self-service support options, whereas paying customers receive a customer success manager and access to a certain number of hours from the professional services or training team.
     

 

2. Get Users to Value Fast 

Your goal is to determine the “aha” moment or action that makes your product sticky for users, and then to drive as many people as possible to perform that act. This will also help your team build a reference set of users, so you can build momentum faster to become the product of choice in your space. The more users you have, the more you can learn from their workflows and use cases to continue iterating on your product. This is also key for faster (and better) feedback cycles, since you’ll have more inputs to help identify areas for improvement and opportunities to optimize the product experience. The shareability of freemium is also critical. If possible, it’s important to design a freemium product that has shareability built in — consider how easy it is for freemium users to invite people in their own network to try it out.

 

3. Make It Easy to Upgrade

The product itself is a monetization channel, so it’s important to consider how easy you make it for users to upgrade. Think about how you can offer upgrade options at natural points in users’ workflows — let your product lead users to the point of realizing that the paid version of the product can provide the value they need. If it’s not clear what free users will gain by upgrading, you likely won’t monetize as many of them as you’d like. In-app guides are also useful for letting users know about an upgrade option they might not be aware of.

The important thing to remember is that building a free product isn’t a one-and-done project. It takes ongoing effort, experimentation, and committing the appropriate resources across engineering, support, marketing, and beyond. Remember, freemium won’t be right for every product, and it may take some trial and error to find the right offer and value to drive conversions, but great product-led companies iterate until they get it right.

Read More About Launching Successful SaaS Products on Built In’s Expert Contributors NetworkHow to Embark on the Complex Journey Toward SaaSifying Your Business

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