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Is Freemium the Right Path for You?

by Jeff Chamberlain  |  July 13, 2018  |  Submit a Comment

The Freemium Hype

“If I could only get people using my solution, they would see the value and love it.”

This is the way almost every person building, marketing or selling a software solution feels about their product.

As a result, the rise of the freemium approach to marketing and selling software sounds like a dream come true. Finally there is a relatively low cost and accepted means to get people using a solution. The short story is compelling. Make a free version of your product available and users will flock to the offer and start using your product. Their enthusiasm for the product will lead to fast growth and viral promotion making you the next success story in software.

Is Freemium Right For You?

Consequently, if you are marketing a SaaS software product you have probably been asked about or considered offering a free trial or “freemium” version of your product. There is no doubt it has been a very successful approach for a number of companies. In general, anything that can remove friction from the marketing and sales process will be a boost to the bottom line and likely the top line as well.

Freemium is the clever contraction of “free” and “premium” implying there is a free and premium (i.e. subscription) version of a product. This generally describes what I call a capability-limited free trial. As it implies, capability-limited means there is a permanent free version available and the natural use of the product drives a person to desire an upgrade to a premium version. The other popular option is a time-limited free trial where you provide your whole product to someone for free for a limited period.

But, there are gotchas. I had a conversation with someone recently that had offered a one month free trial. Unfortunately, it was taking more than a month to get the product up and running so the user actually didn’t interact with the product during the free trial. It really amounted to a free month of subscription at the beginning of an engagement. In this case, the free trial offer became a negative because it set the wrong expectations. There are clearly products that aren’t a fit for free trials because of the length and amount of implementation services required to get going. These might be better opportunities for a Proof Of Concept demo or conference room pilot using some dummy data to help people get that valuable taste of your product.

Four Steps to Freemium Success

Four Steps to Freemium Success

To dive into this popular trend, I recently researched and wrote a note that walks someone through evaluating whether a free trial option is a fit and then how to proceed if it appears to be a good option. The economics can be compelling and can also be disastrous so careful consideration and management is important at each step of the process. You can see a summary of the note here and read it if you are a Gartner client with access.

Tell Me Your Freemium Story

Freemium is not the end of it all. There will continue to be innovation injected into the sales and marketing processes finding new ways to access buyers and accelerate their interest and/or use of a product. If you have done something you feel is innovative or different or if you are trying free trial and have thoughts, let me know with your comments.

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Tags: demo  free-trial  freemium  poc  software-pilot  

Jeff Chamberlain
Research Director
1 years at Gartner
37 years IT Industry

Jeff Chamberlain is a Research Director focusing on software applications product marketing. He specializes in advising enterprise application software vendors on their go-to-market strategies. Read Full Bio

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