Growth August 1, 2020

Does Freemium make sense?

Nikola Kretschmer @Nikoisonfire

Found this interesting flow chart . For me, this shows a different perspective on the freemium model, i.e. there is an impact on existing customers (if not implemented from launch)

What do you guys think about this?

Source: https://fourweekmba.com/what-is-a-business-model/

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    Edited for brevity

    TL;DR: I think the chart brings up a good point on why to run freemium (after a paid launch) and that’s growth. Esp. if growth can outweigh churn.

    I’m curious to see some examples of companies that went free after an initial paid subscription. Any ideas? If Netflix offered a free version tomorrow, what would that look like?

    • Would it be ad-supported?
    • What if they offered a limited library? And offered say, HBO and SpikeTV as upsells?

    My guess is that the revenue from upsells would outweigh the churn.

    What if Trello launched first as paid? And then introduced a free tier. In the free tier are upsells via power ups (it’s like skins so you’re paying for aesthetics, not added functionality). It's kinda like as a pay-what-you-want thing. Perhaps, relentless fans will find a way to pay you anyway? In the case of Radiohead, it worked somewhat successfully. More people listening to your music means more paid tickets to your concert. They expanded the top of their funnel.

    How about tools with network effects? If Zoom's competitors offered a free tier pre-Covid, how stunted would Zoom's growth have been?

    I'm not sure if Box.com always had a free plan. I know they started out with Enterprise. But they would've missed the growth loop that Dropbox did - refer users and gain more space.

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      I’m curious to see some examples of companies that went free after an initial paid subscription. Any ideas? If Netflix offered a free version tomorrow, what would that look like?

      I believe Spotify was premium-only before they switched to the current freemium model. I bet that it accelerated their user growth too, but it's hard to say because any music streaming service is advertised much more by word-of-mouth then any other kind of promotion.

      How about tools with network effects? If Zoom's competitors offered a free tier pre-Covid, how stunted would Zoom's growth have been?

      I think Zoom just broke through other platforms like Skype, Teams, Slack or OS Software like Big Blue Button because their streaming was the best in terms of video / audio quality, the amount of people you can put in a room and connectivity (pretty sure they are boasting at least 99% uptime).

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    There is always a way to do things wrong.
    If you have got a good core offer that's an easy sell for the paid version, sure you might not do freemium initially or at all...
    Many things need to be demonstrated to be sold, especially software services that's why it's popular, cause without the demonstration there aren't many sales or at all.
    Some prefer trying free trails first, it's less of an effort I guess, but you'd have less people trying that.

    I'd say it comes down to:
    How hard is the sale? Would one pay for it without trying it?
    How many users do you need/want? Like is this better as an exclusive/premium offer?
    ..

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      Hard sells is IMO software that's usually planting a need you initially didn't have (e.g. software for organizing data, marketing tools, etc.). MS Office / GSuite is pretty obvious to have as a new company, but who wants to spend 10-20$ a month on JIRA when you can just use Trello (or even Excel for that matter) for project management?

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        yea, it's easy sell if the user already know what this is and why he wants it and how it probably works... and expects to pay...