As with most industries, trends come and go within the SaaS space. The best option for your company today might be the worst one tomorrow.
That’s why it’s important to understand different SaaS models before deciding which one is for you. This couldn’t be truer for the SaaS freemium model.
Put simply: freemium = free + premium. Using the SaaS freemium model for your company means giving away a portion of the value you’ve created to gain user interaction. The hope is that by using your product or service for free that users will recognize its value, and be enticed into becoming paying customers who switch to the premium option.
The debate around the SaaS freemium model is ongoing — is freemium a revenue model or a marketing strategy? Does it drive customer growth or bring in freeloaders? Freemium brings in new users, but it doesn’t mean instant revenue. In fact, the SaaS freemium model can be quite difficult to monetize successfully. This is one of the reasons why many view it as a marketing expense rather than a revenue stream.
It’s no secret that converting a free user into a paying customer using the SaaS freemium model takes work. It requires intimate knowledge of the customer’s mindset — their motivations, habits, and goals. You’ll need to research different demographics and understand their unique customer journey. Truthfully, the processes which go into marketing strategies and using freemium models aren’t that all different.
You might be thinking ‘so what?’. Successful marketing is just as important as revenue — why not just use freemium for that?’ Well, it’s not that simple. When freemium goes wrong, it goes really wrong, and can lead to potential disaster for your business.
Learn more about Freemium on PayPro Global’s blog.