Why You Shouldn't Be Using The Freemium Business Model Part Three

In Part One we looked at how freemium is a bad business model for indiehackers. I’ve talked about how, like Mailchimp, startups should wait till they reach a certain level of revenue and growth before they implement the freemium strategy (if they decide they want to).

And, in Part Two, we saw why, although Mailchimp’s timeframe for using freemium should be copied, its growth strategy for getting there should not. Instead, we saw why you should be using a growth strategy that harnesses human nature rather than the short-term loopholes that drove Mailchimp’s early growth.

Here in Part Three, we’ll look at the best marketing strategy that leverages human nature.

This strategy is what I call The BLUNT Method. It involves selling a specific type of belief called a BLUNT belief instead of one’s product or service.

BLUNT is a mnemonic that encapsulates the five characteristics that this type of belief has.

To illustrate exactly what they are and how it harnesses human nature to more effectively grow a business I’m going to use HubSpot as an example.

Now, there are plenty of other examples that I could use, examples that didn’t receive venture capital funding, but there are a few reasons that I think HubSpot is the best example in this context.

First, because at the time it started implementing this strategy, it was 2008. This is the same time that Mailchimp was relying on short-term growth hacks to continue to grow its business, so it makes the perfect comparison timescale wise.

Second, it operated (and still does) in the same field as Mailchimp (marketing technology) and it sold to (and still does) the same target audience – small-to-medium-sized businesses (SMBs).

Again, as I said before, don’t be blinded by the type of company it is. The strategy and why it works will apply to your business regardless of scale, solution type, or current size.

HubSpot And The BLUNT Method

Launched in 2007, HubSpot made $255,000 in its first year selling its internet marketing solution and the belief that SMBs should do internet marketing.

However, in December 2007, it made a radical change to its marketing.

Instead of selling the belief that SMBs should do internet marketing, HubSpot sold a brand-new belief that they had just created. That new belief was called inbound marketing.

Nothing about their solution changed. It was still the same internet marketing product (despite them calling it an ‘inbound marketing solution’).

That year, in 2008, whilst selling this belief of inbound marketing, they generated $2.2 million in revenue – an increase of over 762%. And that growth didn’t stop there. Today the company generates $883 million in revenue.

That belief, inbound marketing, was a BLUNT belief. Let’s look now at it and understand why it was a BLUNT belief, how it aligned with the way that HubSpot’s potential customers (and all human beings) evolved to make decisions and how that was responsible for HubSpot’s growth.

Inbound Marketing: A BLUNT Belief

Inbound marketing was (is) the belief that by 2007/08 the internet had fundamentally changed the way that people bought.

They no longer had to rely on companies to come to them and tell them what they could buy. People (and businesses) could now use the internet to research themselves and discover new products and solutions in their own time. In other words, they were now in charge of the buying process

The belief of inbound marketing stated that, in this new internet age, people would reject marketing that interrupted them and attempted to convince them to buy things right now. As such, businesses that continued to use these tactics would find their marketing less and less effective.

The solution, this belief stated, was to create valuable content that helped potential customers with answers to questions that they were searching for online. By becoming a helpful source of valuable information to their potential customers, companies would become trusted advisors and, when the time came for them to buy, they would choose the business that helped them the most.

What this looked like in reality was a business creating valuable content on their website to attract visitors and offering more helpful content in exchange for an email address. The company would then continue to nurture them with more helpful content until they were ready to buy.

Note that this is NOT internet marketing. Whilst the internet is used to implement inbound marketing, inbound can also be done offline. And internet marketing can be done without using inbound marketing (as plenty of businesses did prior to 2007).

This is an important distinction to make as internet marketing is not a BLUNT belief.

Let’s look at how inbound marketing was (and still is) a BLUNT belief.

(B)rand New:

Unlike the belief that HubSpot was previously selling with its internet marketing solution – namely that SMBs should do internet marketing (which everyone was telling SMBs they should do), inbound marketing was a brand-new belief. Nobody else was selling this belief to small-to-medium-sized businesses at the time.

Now, you might notice that the marketing strategy contained within the belief of inbound marketing was not new.

Businesses had been doing this helpful content marketing for at least 100 years. Farm machinery company John Deere started publishing its magazine The Furrow in 1895. It became wildly popular as it focused on providing content that helped farmers with their problems rather than selling John Deere products.

However, as just mentioned, the belief that traditional ‘interruption’ marketing tactics like cold calling, cold emailing, and advertising were no longer effective in the internet era was a brand-new belief for SMBs.

(L)eading:

Unlike the belief that SMBs should do internet marketing, inbound marketing led back to what made HubSpot’s solution unique. HubSpot’s internet marketing solution was a complete end-to-end solution and as such, it was the only solution that enabled SMBs to implement the entire strategy contained within the inbound marketing belief (creating visitor attracting content, capturing email addresses, nurturing them with autoresponders etc.). HubSpot’s competitors only offered part of these in their products.

(U)nfamiliar:

The belief of inbound marketing introduced an element of unfamiliarity into SMBs lives. It talked about the fact that the internet was changing the way people were buying (something that SMB owners could attest to in their own personal lives) and this made the world within which SMBs were operating suddenly seem very unfamiliar.

(N)o Product Required:

Although inbound marketing led to what made HubSpot’s product unique, SMBs didn’t need to buy HubSpot’s solution in order to implement this belief in their lives.

(T)raction:

The solution type that HubSpot offered (an internet marketing solution) had existing demand aka traction. That is to say that they weren’t offering a brand-new, never-seen-before solution and starting a new category.

So How Did This Help HubSpot Grow?

So why did this enable HubSpot’s growth to explode?

Well, as mentioned, this strategy aligned HubSpot’s marketing messages more effectively with the way that their potential customer’s brains evolved to be persuaded and make decisions.

But how?

Well, each of the five characteristics of a BLUNT belief plays a role in making it generate massive growth in four main ways:

1. It makes marketing and sales messages more persuasive and effective
2. It enables your business to generate so much more word-of-mouth growth
3. It increases the amount of money that you can generate from your existing customer base
4. And it creates a virtually impregnable defensive barrier that stops your competitors from being able to copy your competitive advantages and steal market share

All four of these are detailed in my book along with a step-by-step guide to exactly how to create the right BLUNT belief for your business, but for this article and for the sake of brevity let’s focus on one of them, reason number one.

Making Sales & Marketing Messages More Effective & Persuasive

In 2007 HubSpot was selling its internet marketing product and the belief that SMBs should do internet marketing. I call this type of belief a ‘generic’ belief because it didn’t lead back to what made HubSpot’s solution unique (an SMB could believe that they needed to do internet marketing and still buy from a HubSpot competitor) nor was it brand new (others had been selling this belief to SMBs for some time).

And the fact that it (like all generic beliefs) was not brand-new meant that its marketing and sales messages had limited effectiveness.

Note that this is very likely to be a problem for you right now. Look at your own product and industry. It’s likely that the belief that you sell (either explicitly or implicitly) is one that is not brand-new. If you sell an email marketing solution for example, it’s likely that you will be selling potential customers on the belief that they should do email marketing. This is a generic belief that is not brand-new.

As such, you’re severely limiting the effectiveness of your sales and marketing messages.

Why?

Because the human brain is essentially one giant predictive machine. A significant portion of its job is to take information in from the senses and make judgments on that information in order to better model the world around it and predict and react to future events more effectively.

As a result, whenever we hear, see, read or experience something we make a judgment about it. Is it good, bad, interesting, uninteresting, useful, or not useful?

So, this means that when a business sells a generic belief, its target audience has already heard of it (because it isn’t brand new) and therefore will be made up of the following four groups:

1. Those who have adopted the belief & are looking for a solution to help them.
2. Those who have adopted the belief and have already bought a solution.
3. Those who have adopted the belief but aren’t looking for a solution.
4. Those who have heard the belief and don’t believe in it.

By selling the generic belief that SMBs should do internet marketing, HubSpot’s marketing & sales messages were falling largely on deaf ears as the majority of its target audience had already made its mind up that it needed to do internet marketing. They would agree with HubSpot’s marketing message that they needed to do internet marketing, but this message wouldn’t convince them to buy HubSpot’s solution.

The only people that HubSpot’s marketing and sales campaigns would have any effectiveness at persuading to buy its solution were those people in group 4 – those who had heard the belief and didn’t believe it.

The problem is, not only was this one small section of its overall potential target audience, but it was also a group that was getting smaller and smaller by the day.

With lots of other companies promoting the same generic belief in the need to do internet marketing, the number of SMBs that didn’t believe this was rapidly shrinking. This is a result of two things – repeated exposure to the message and a form of peer pressure. As more and more of their peers adopt this belief, they will start to doubt the reasons why they don’t believe it. After all, they, like all human beings, are social creatures. What those around us do and believe shapes our behavior and our beliefs. It’s the reason why we use testimonials and customer reviews to help us decide which products to buy.

So, what changed when HubSpot started selling the BLUNT belief of inbound marketing?

It made its marketing & sales message effective with all of its target audience. Its target audience was no longer split into 4 groups but one single group – those who hadn’t heard of the belief of inbound marketing because, like all BLUNT beliefs, it was brand-new.

As a result, HubSpot had a clean slate. There was no longer a large part of its target audience that had already made their minds up. HubSpot’s marketing and sales messages now worked on everyone in its target audience rather than just a small percentage. And this produced the dramatic increase in revenue within just a year and the explosive growth that HubSpot achieved in the years that followed.

But that’s not all.

In a funny twist of fate, the fact that inbound marketing was a BLUNT belief made the implementation of the inbound marketing belief even more effective for HubSpot.

As mentioned, a key part of the inbound belief is that businesses should create helpful content to educate their target audience (the other part of the belief is that interruption marketing no longer worked in the internet age).

Interestingly, HubSpot was doing this when it was selling the generic belief of internet marketing. It created helpful content on how SMBs should best do internet marketing. But, of course, a number of its competitors were doing the same thing. As a result, its content marketing was much less effective than it was when it sold the BLUNT belief of inbound marketing.

Why?

Well, a study by content marketing company BuzzSumo, shows us the importance of being first when it comes to creating content on a subject.

The company found that businesses that were the first to talk about, and publish content on, a topic generated the majority of the attention and website traffic even when the market became inundated with competitors.

For example, the topic of Bitcoin became very popular towards the end of 2017 and by December of that same year, there were 40,000 articles published per week on the subject.

The majority of this content, however, received little to no attention – the median number of shares was just four between February 2017 and February 2018. However, articles written by CoinDesk (a website established in 2013 that focuses solely on the topic of bitcoin and digital currencies) received an average of 874 shares in the same time period.

By building up a large volume of content, and authority, on the topic of Bitcoin way before it became popular, CoinDesk was perfectly positioned to capitalize on the flood of traffic that arrived when Bitcoin hit the mainstream.

Incidentally, the only other website that BuzzSumo notes as generating more attention and shares than CoinDesk is The New York Times with an average of 2,300 shares of their Bitcoin articles. This further proves the point that pre-existing authority is king when it comes to standing out in saturated markets.
And that’s exactly the kind of market that HubSpot was in when it sold the generic belief in the need for SMBs to do internet marketing. It wasn’t first to the market with content on internet marketing – it was pretty late in fact. As such, it wasn’t in a position to really benefit from it.

By switching to selling a BLUNT belief, HubSpot was now first to market with a new topic – inbound marketing. This made its content marketing incredibly effective because now HubSpot was the one generating the majority of the attention and traffic as a result of its authority created by being first.

Of course, there is a lot more to all of this than I can fit into one article. However, I hope this has given you some insight into the power this strategy.
If you’d like to learn more about all the reasons why The BLUNT Method is such a powerful growth strategy and, more importantly, how to implement this strategy yourself, it’s all detailed in my book. For more information and to pick up a copy visit www.thebluntmethod.com.