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Adventures in freemium


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  • Thanks, Navin! Needed to see this. Mada's been trying to sell me on free for a while, will finally pick up Anderson's book
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  • 1. Adventures in FreemiumNavin S. GaneshanMarch 13, 2013
  • 2. Get  a  ta&oo  for  one  year  of  free  movies?    18  people  did…  
  • 3. Lindt   Hershey   They  Chose   $0.20   $0.05   76%  Lindt   $0.15   $0.01   73%  Lindt   $0.14   $0.00   14%  Lindt  The  Penny  Gap  -­‐  Lindt  Truffles  vs  Hershey  Kisses  
  • 4. “Free” is a special price – creates non-linear demand & drives irrational purchasing behavior“Making money around free will be the future of business” – Chris Anderson
  • 5. Freemium is one of many ways to capitalize on freeFree Messaging Free Components Free Trial Freemium
  • 6. Freemium  is  about….  capitalizing  on  the  inherent  sFckiness  of  your  product    …not  just  behavioral  manipulaFon  
  • 7. Is Freemium Right For You? Broad Solution, No   Big market? Paid or Yes   Freemium Free-Trial (See execution) Low marginal No   cost? Yes   Work on product and come back Does yourwhen you’re ready No   product rock? Yes  
  • 8. Executing Freemium 1.  Streamlining Signups 2.  Compelling Conversion 3.  Meaningful Marketing 4.  Controlling Costs 5.  Managing to Metrics
  • 9. Streamlining SignupsInvest Early in Organic Find Channels that can free Search qualified users(Freemium can’t support paid search) (“psst..want to give away a free product?”) Referrals/incentives (leverage network effect)
  • 10. Compelling Conversion Ideal conversion drivers are those that occur naturally with increased consumer investment and value deliveredGood  •  Usage-­‐Based  •  Feature-­‐Based   CreaNve  •  Component-­‐Based   •  Ad-­‐Removal   •  Service/Support   •  Mobile  Bad   •  Humor/Goodwill?  •  Time-­‐Based    (not  Freemium!)  •  Views  or  Paywalls  (#%@$)  
  • 11. CreaFve!  
  • 12. Meaningful MarketingBuild a communication plan – a matrix of… •  Who – target users •  When – times/triggers •  What – message, content(but you already knew this….)
  • 13. Controlling CostsService/support Overuse/AbuseRely on email/self-service Monitor, monitor, monitorHelp users help other users Use the big-stick – service- agreement
  • 14. 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
  • 15. 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
  • 16. 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.
  • 17. 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
  • 18. 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”
  • 19. 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
  • 20. 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  
  • 21. Good Luck!Navin Ganeshan March 15, @NGaneshan