Adventures in FreemiumNavin S. GaneshanMarch 13, 2013
Get a ta&oo for one year of free movies? 18 people did…
Lindt Hershey They Chose $0.20 $0.05 76% Lindt $0.15 $0.01 73% Lindt $0.14 $0.00 14% Lindt The Penny Gap -‐ Lindt Truﬄes vs Hershey Kisses
“Free” is a special price – creates non-linear demand & drives irrational purchasing behavior“Making money around free will be the future of business” – Chris Anderson
Freemium is one of many ways to capitalize on freeFree Messaging Free Components Free Trial Freemium
Freemium is about…. capitalizing on the inherent sFckiness of your product …not just behavioral manipulaFon
Is Freemium Right For You? Broad Solution, No Big market? Paid or Yes Freemium Free-Trial (See execution) Low marginal No cost? Yes Work on product and come back Does yourwhen you’re ready No product rock? Yes
Streamlining SignupsInvest Early in Organic Find Channels that can free Search qualified users(Freemium can’t support paid search) (“psst..want to give away a free product?”) Referrals/incentives (leverage network effect)
Compelling Conversion Ideal conversion drivers are those that occur naturally with increased consumer investment and value deliveredGood • Usage-‐Based • Feature-‐Based CreaNve • Component-‐Based • Ad-‐Removal • Service/Support • Mobile Bad • Humor/Goodwill? • Time-‐Based (not Freemium!) • Views or Paywalls (#%@$)
Meaningful MarketingBuild a communication plan – a matrix of… • Who – target users • When – times/triggers • What – message, content(but you already knew this….)
Controlling CostsService/support Overuse/AbuseRely on email/self-service Monitor, monitor, monitorHelp users help other users Use the big-stick – service- agreement
Managing to MetricsMetric Explanation Acquisition Visitors to UsersAcquisition cost Marketing/Advertising cost per signup 2% varies widely Effective Marketing/Advertising cost perAcquisition cost paying customerLifetime Value/ Customer Lifetime Value (e.g. Avg Conversion Tenure X Price) Users To CustomersPV 1-‐3% Daily signups Number of signups per dayConversion rate Percent of free users who convert to paid Lifecycle >90% Retention & Churn retenNon “Free” Product, Support costs per Free userOperating Costs Terminology may vary Your mileage WILL vary
Case Study #1 Switched from Freemium to Free Trial in 2010 Before 300K Free sites, 15K Paid 6% Conversion After 35K paid sites after switch, grew to over 200K by 2012 Learnings Out of Control Free-Loader Costs
Case Study #2 Poster-child for Freemium 50M Users 4% Conversion When They Started SEM didn’t work – $338 CPA for a $99 product – fail! What Did Work Stopped search marketing Referral programs increased signups by 60%, Now 35% of daily signups from referral Learnings Search marketing did not work because demand did not exist. Referrals/WOM drove awareness, created demand.
Case Study #3 Freemium Failure…and recovery Their initial Freemium model Free for low-usage – under 50tx/mo Almost went bankrupt in 1 year What Did Work Paid model for all but test-levels Went from 25 to 225 cX/month YoY Learnings Conversion triggers not matched to customer profile – too many users were subsisting in the free tier with no natural trigger
Case Study #4 An IDEAL Freemium Story 34M Users, 1.5M paying 4-6% Conversion No social/network advantage Purely driven by product quality and WOM Unique aspect – negative churn as usage increases after first year – “The Smile Graph”
So…are you ready?q Qualifiers – is it right for you? q Broad Solution / Big Market ? q Rockin’ product? q Low Marginal Cost?q Execution – what’s your plan? q Streamlining Signups q Compelling Conversion q Meaningful Marketing q Controlling Costs q Managing to Metrics
Interesting Case Studies Experimented with Free Great case study on Trial w/out CCard virality and sFckiness Moved from Freemium Moved from Freemium to Free trial to Free Trial Moved from Free Trial to Freemium Good learnings on sFckiness and cost-‐ control in Freemium Good Reads Predictably IrraNonal Free The hidden forces that shape our The future of a radical price decisions Chris Anderson Dan Ariely
Good Luck!Navin Ganeshan March 15, firstname.lastname@example.org @NGaneshan
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