Dont Fear the Freemium
•Download as PPTX, PDF•
10 likes•1,629 views
We are witnessing the rise of a class of enterprise technology products which employees adopt for free, at their own free will, and then begin using immediately. These enterprise freemium products have been contributing to the Consumerization of the Enterprise movement by disrupting old incumbents in the areas of communication, collaboration, productivity, and back-office tools. When IT and business stakeholders at a company encounter these products, their first reactions are often negative. They’re worried that a product they didn’t vet has gained traction in their organization, or that the product isn’t secure or compliant enough for their industry. Neil will argue that these products should be embraced because they have successfully solved the problem that plagues most IT deployments of user-facing technology -- Employee Adoption. Enterprise freemium offerings provide significant advantages to the vendors that offer them. Neil will describe how enterprise freemium offerings can help vendors optimize their product offerings, shorten their sales cycles, and more effectively compete against entrenched competitors using examples from Yammer’s experiences and observations of other enterprise freemium products.
Recommended
Recommended
More Related Content
Viewers also liked
Viewers also liked (14)
Similar to Dont Fear the Freemium
Similar to Dont Fear the Freemium (20)
Recently uploaded
Recently uploaded (20)
Dont Fear the Freemium
- 1. Don’t Fear the Freemium Neil McCarthy Director of Product, Yammer
- 2. Consumerization of the Enterprise • “The emergence of consumer markets as the primary driver of information technology innovation is seen as a major IT industry shift, as large business and government organizations dominated the early decades of computer usage and development.” Wikipedia • “But while this trend may be true when it comes to the technology itself, the differences in business models and go-to-market strategies seems more distinct than ever.” Ben Thompson, 2013
- 3. Bring Your Own Apps (BYOA) • First, users became more comfortable using their personal devices for work email. • Mobile app, web app, and desktop app adoption exploded. • Users have become comfortable using these apps for work. • Enterprise freemium is a business model built for BYOA.
- 4. Contrasting business models • Boxed software sales (traditional) • Time-limited trials • Consumer freemium => enterprise – Gmail/Google Docs => Google Apps – Dropbox => Dropbox for Business – Evernote => Evernote for Business
- 5. Who does enterprise freemium benefit? • Users - they can adopt the product and start using it right away without any obstacles. • Customers - they know a product is getting adoption so they know it’s a worthwhile investment. • Vendor - it can use modern methodologies to prove out ideas and grow.
- 6. COFFEE CUPS FOR THE ENTERPRISE
- 7. Coffee cups for the enterprise
- 10. The rest of the process • Implementation • Validation • Migration • Internal launch event • Training • Don’t forget to deliver on those sales commitments! Most Importantly: Pray for Adoption
- 11. Coffee Cup Takeaways • Current process rewards complex checkbox products. • Complex products are usually unusable for end users => users don’t like them. • Users rebel and use consumer alternatives => hurts adoption for selected product.
- 12. The freemium acquisition process • Users and teams adopt the products that they want to use without involving IT or other stakeholders. • When a product gains adoption, the users or company upgrades it as necessary. • Bonus: Users feel empowered because autonomy kind of has that effect.
- 13. IT’s Reaction At first Eventually The goal
- 14. The role of IT • Product Selection – Enterprise freemium reduces their role in this. • Security – Here be dragons. • Supportability – Worst case scenario: more products to support, but they are easier to support than complex alternatives.
- 16. Advantages for the product • Get into organizations where there is an entrenched competitor. • Get into organizations where enterprise buyers are skeptical about the product.
- 17. Unfair advantages Buyers care Security Existing relationships Checkbox features Press Users care High Low Analyst attention User adoption Low High Cost
- 18. Tactics for enterprise freemium • Sign up flow • New user onboarding • Virality and social proof • Reengagement tactics
- 19. Build the right signup flow • Ask users to sign up with their work account. • Don’t blindly minimize friction – require some investment by the user. • Introduce concepts from your product. • Borrow heavily from consumer product patterns. • Useful: http://www.useronboard.com/
- 20. New user onboarding • Training wizard • Contextual tips • Getting started checklist
- 21. Virality and Social Proof • Invites • Solving the cold start problem with social proof
- 22. Reengagement tactics • Email notifications • Email digests • Reengaging lapsed users
- 23. Freemium revenue Economics of Freemium, Peter Fishman, 2014
- 24. Data Informed Methodology • Choose a metric to try to improve – success will result in more revenue. • Opens the door for data-informed product management: – Clear feature goals – Defer non-impactful features – A/B testing to measure success
- 26. How engagement becomes revenue • Sell to small teams – credit card upgrades • Sell to the whole company – traditional sales cycle – Takes longer, but deals will be bigger. – “56% of respondents indicated that either the CIO/top IT executive or the IT department were the primary leader in driving change through the consumerization of IT at their organizations.” Reference
- 27. Using your unfair advantage • Your signed up users have voluntarily shared their contact information with you, transforming them into free leads – find executives to reach out to. • Some users have already adopted the product with no help from IT – find champions by looking at usage activity.
- 28. Objection handling • “Your product is not secure.” – 90% of enterprises say that the use of consumer services used for work is pervasive today. – 41% of these sites are used without IT approval. • “We already have a product that does <x>.” • “We don’t have the resources to support your product.” source of metrics
- 29. Common sales requests • “Can we do a Proof of Concept? It’s part of our acquisition policy. Also, we need to block all users from using your product until the POC users have finished evaluating it.” • “Can we turn off <feature x> for our users? They already have that feature in a different product that we’ve invested significantly in.” • “Now that we’ve purchased the product, can we turn off invites? IT can handle onboarding all the users.”
- 30. Customer Success • Roll outs and launch events • Training • Roadmap and release schedules
- 31. Should you offer freemium? • Adoptability – Easy to use with no formal training? – Doesn’t require IT to set it up? • Network effects – Helps make it more likely that the product will gain adoption.
- 32. Thanks for coming! • Neil McCarthy, @hardkornelius • Christina Fan, @cfanimal • Related resources – The Economics of Freemium, by Peter Fishman – New Sales Models, by David Sacks – Testing Yammer’s Signup Flow, by Neil McCarthy
Editor's Notes
- Hello, my name is Neil McCarthy. This is my first time giving this talk about enterprise freemium and I’m really excited because it’s something that I’m passionate about.
- The Consumerization of the Enterprise, or Consumerization of IT, is a pretty well established trend originally coined in the early 2000s. Up here I’m showing the Wikipedia definition. My big takeaway from this is that consumer products are increasingly driving user expectations. Thinking about what caused the consumerization of the enterprise trend, and what continues to drive it forward, it seems clear that as we become more comfortable and confident in information technology, we start to develop our preferences and usage patterns. Increased comfort leads to increased expectations and thus stronger preferences. Increased confidence using technology also leads to decreased tolerance for less optimal products. So what an organization or product vendor can end up with if they ignore this trend is a bunch of annoyed or even rebellious users that just end up using whatever they want anyway. When most industry people people think about the consumerization of the enterprise trend, they think of the BYOD movement that gained lots of traction back in the early iPhone days. Although the BYOD trend continues to evolve, another trend is evolving right beside it.
- Devices as inherently useful objects exploded in the consumer tech world. Users became more comfortable using their personal devices for work, especially native integrations with work email. Mobile, web, and desktop app adoption exploded in the consumer tech world. Users are becoming more comfortable adopting their own apps for work. Enterprise freemium is a business model that’s designed to support and even promote that trend. In addition to being a good way to drive revenue for the product, there are a lot of ways enterprise freemium is better for users than other methods.
- The traditional boxed software sales process is very familiar to anyone who has tried to sell software into large companies. It’s designed to help companies make important decisions on complex products that they can’t easily turn back on. Make contact with the customer. Pitch the product to various people in the organization. Receive an RFP and do a proposal. Sell to your strengths and against your competitor’s weaknesses. Commit to building some features to cover your gaps. After months spent winning the deal, spend more months implementing, migrating, training, etc. Time-limited trials are a step in a more consumerized direction. Users can do their own evaluation process. When the time runs out, they can decide whether to upgrade themselves or try to get their company to initiate an acquisition process, depending on policy. The creation of business products based on successful consumer products is even better. Users know they like the product and demand it at work. It’s hard for the vendor to stay focused on both the consumer and enterprise product offerings and maintain focus. Enterprise freemium has advantages for all three stakeholders in the enterprise product sale.
- The three stakeholders of an enterprise technology product are the users, the customers, and the product vendor. Users can adopt the product actually start using it for work right away. There is no need for them to think about how they should evaluate this product vs. others. They either like it and use it, or don’t and stop using it. The customers, like IT, executives, business owners, basically whoever can pay, know that when they pay, they’re getting a product that users will use… because users are already using it. The big advantage for the vendor is that it can use modern, iterative product development methodologies to improve the product while maintaining a focus on enterprise use cases. It’s harder to iterate with trials, because users know they can’t really trust the tool. The usage patterns of free users in trial products is not indicative of real behavior because they are just poking around. They can’t trust a product that will expire.
- Offering a successful enterprise freemium product also offers direct business advantages to the vendor that become useful during the sales cycle. Eventually, if you want to sell into large or medium-sized companies, you’ll need to contend with their acquisition processes, even if you’ve successfully gained some level of adoption with your freemium offering. I’m going to go through an example of what that process usually looks like, using coffee cups as my example product. Then I’ll talk about how freemium improves the vendor’s position.
- What if coffee cups were selected the same way as enterprise software? Which would your organization choose for you? They would probably start by surveying the employees about coffee cups they like and features they need for their coffee cups. They add to that some market research and possibly bring in an analyst from Gartner or Forrester to tell them about the latest trends in coffee cups. It feels like a very democratic process at first.
- They then use that research to create a list of everything they think their organization needs or wants in their coffee cups. They then find a set of vendors that offer coffee cups, culling the list based on analyst/consultant input and any organizational preferences that currently exist. They formulate the list of requirements into an RFP and send it to the vendors. You can see I’ve even gotten pretty advanced and weighted each requirement in my RFP so I can assign a fair score to each vendor in the end. You can also see that I added some other sheets of requirements so that I can make sure that the product is ok with my security team and that I’ll be able to get the services I need, like implementation, migration, and training. The vendors do their best to answer yes to every question. Any time they answer no, they typically provide a date they think they can ship the missing feature by.
- As a vendor, after I go through a few rounds of this process with various companies, who each have different requirements, btw, I end up with a coffee cup that looks like this. You can see I have features like… My point here is that the traditional process was not only designed for the sale and implementation of complex products, it actually incentivizes vendors to overcomplicate their products. In the consumer world, you can just create a minimal product, get engagement and growth, and win the market. Because of how this enterprise acquisition process typically runs, the enterprise technology companies have to create a product that includes all the features everyone wants so they can win the checkbox battle against their competitors.
- The rest of the process looks like this. The most important thing to point out here is that for the traditional enterprise software deployment, we’ve put months of time and energy into it before we know if users will adopt it. Lack of adoption is the most tremendous risk that exists for user facing IT products, dwarfing even security risk. You can’t have real security risk without adoption, after all. If we’re talking about products like Knowledge Management systems, Enterprise Social networks, File Storage solutions, etc., going through this process this way seems as crazy to me as it does for coffee cups.
- So I’ll just point out my three main takeaways, they are: the traditional process can’t help but incentivize the creation of complex products. overly complex products are more difficult to use. also, they incur higher training and support costs, which is bad for customers. and in the end, users will just rebel and use whatever they want. To make matter worse, the sales cycle took so long that they probably already adopted something they like and they’ll be hesitant to switch to the selected product.
- The freemium acquisition process is much simpler. In an ideal world, users and teams just use whatever they want and they or their IT teams upgrade products as necessary. In addition to saving lots of money, time, and hurt feelings, I believe there is a psychological benefit here for the morale and culture of the company. Users that feel like they have the autonomy to do their jobs as best they can, with the best products they can find. Users are in charge of their own destiny and are being shown a level of respect that acknowledges they are the best people in the organization to make product decisions for themselves.
- IT doesn’t always react that well when an enterprise freemium product gains success in an organization. The guy on the top has this perception that Yammer adoption in his organization is bad because it’s unplanned. It shouldn’t surprise you to learn that I don’t agree with this perspective. I believe the users using a product have autonomously made a choice to use that product. Yammer will only be able to retain them and grow if it provides value, so it seems like a win-win. The guy in the middle is describing the next step of the journey. Stakeholders inside the business start to understand that the product is valuable after it starts getting adoption. The stakeholders are starting to understand the relationship between voluntary adoption and value. The guy at the bottom is describing the ideal situation for an enterprise freemium product. The users had begun to adopt the product and the stakeholders bought in and began promoting the product.
- Product Selection The classic role of IT in distributing user-facing products is mostly in these three areas: Product Selection, Security, and Supportability. They have traditionally been the organization that runs all of the technology acquisitions, including user-facing products. They’re used to going through the coffee cup process. Enterprise freemium reduces their role in this step, because we’re giving the autonomy to select products back to the users. Security IT has also traditionally been involved in making sure that the products and services that companies use are secure, so the company won’t get hacked and lose data, which can lead to everything from embarrassment to lost revenue. They are still very involved in this and I’ll get more into this later, but rest assured that this is a very tricky area. Supportability Finally, IT is involved in supporting the products that their employees use. At first, the prospect of letting teams or individual users select their own products would seem to create an untenable number of adopted products to support. However, as I mentioned, these products are more simple and users are much more likely to solve problems themselves than they are to rely on an IT ticketing system for help. If I have a problem with my laptop, I often need to go to IT. If I have a problem with my Evernote for Business account, I just Google how to fix it. More and more users are becoming capable of fixing their tech problems like this, leaving IT in a good position to fix more complex and important problems.
- Later, I’m going to go into much more detail about things that can happen during an Enterprise Freemium sales cycle. First though, I want to talk about how to build a successful enterprise freemium product. If you release an enterprise freemium product and you don’t get users to adopt the free version, you don’t get any of the benefit of being freemium.
- One of the ways enterprise technology can be a harder space to win is than consumer technology is caused by the barriers to entry. These barriers to entry are caused by the power asymmetry between users and enterprise buyers. With enterprise freemium, vendors are putting some power back in the user’s hands to select their own products, and this makes it an effective way for vendors to get into organization they ordinarily wouldn’t be able to.
- Enterprise freemium helps products break into organizations, because users don’t share the same value system as traditional enterprise technology buyers. On the y-axis, we see the a scale of how much buyers care about something. On the x-axis, we see a scale of how much users care about something. Entrenched, competitive products have a lot of unfair advantages. The security of their product is already vetted. They have existing relationships with the buyers. They may have checked more boxes that the buyers care about. If they’re a large vendor, they may get more press and attention from industry analysts. Enterprise freemium can be a good way to break into companies like this, because you’re differentiating based on user adoption. Even with user adoption, you have less things going for you. However, user adoption is very powerful because it’s aligned with the priorities of both the users, who just want to get work done, and the buyers, who look good if the products they champion are well-adopted.
- Next, I’ll get a lot more practical and talk about tactics that can help enterprise freemium products get user adoption. Before I jump in though, it’s worth pointing out that building things like good signup flows and virality features won’t help if the product isn’t good enough. Enterprise freemium products rely on voluntary user adoption to succeed. Bad products won’t retain users long enough for their adoption to be useful to the sales process.
- Having users sign up with their work email account is really useful because it confirms that they work for that business and you have a way to contact them for product or sales purposes. Something that we’ve learned from some of our signup flow tests is that shorter/less friction is not necessarily better. Shorter signup flows can result in a higher user throughput, but forcing users to do things in the signup flow has benefits also, like teaching them the product and improving their first-run experience.
- New user onbarding is pretty important for enterprise freemium products. Most users will have very little knowledge or understanding of what your product is or how it can be valuable to them when they are first signing up. Their first run experience needs to be answer the question “What is this?” and show them something interesting enough for them to come back. If you sign up for Yammer, you’ll see a noticeable lack of a training wizard or contextual tips, although we do have a Getting Started checklist. We made the conscious choice to focus on providing new users with a UI that is nearly self-explanatory. If we bombard our users with a training wizard as soon as they finish the signup flow, we’re increasing the time it takes them to see something interesting. If they leave before seeing an interesting piece of content or feature, they’re likely to never come back. You need to find that line for yourself in your products.
- There are a separate set of tactics that apply to products with “multiplayer mode”. Choose opportune times and places to ask users to invite other users. The cold start problem is really tough for products that rely on multiplayer mode. These are the products that are really useful and interesting when lots of people you know are using them, but very useless when no one is using them. Social proof is interesting because it can give your product the illusion of being used, even before it’s getting much usage. When someone signs up for a product and you can get them to import their contacts from the phone, LinkedIn, their Outlook address book, etc, and show them which ones are already using the product. Even if those aren’t actively using your product, users are more likely to give a product a chance if people they know are using it.
- Email notifications and digests are the types of emails that many users find useful. Notifications let the user know when something interesting happened in the product. Digests aggregate a set of activities that happened and deliver them as a single email to the user. Anytime you send email, you’ll get some percentage of users to click through, which is really good for reengagement. The main danger of digest emails is that users may think that your product is actually just a mailing list and never actually engage. Combat this by not providing too much content and prominently displaying CTAs to enter your product. As products grow, more and more users will lapse, meaning they will stop using the product. The MVP of trying to reengage them is to just keep sending them digest emails, hoping one of them will spark their interest. You can also build special emails meant to reengage users who haven’t logged in in a while. When users unsubscribe, give them the options to just unsubscribe from the type of email they received.
- So those were some tactics for helping enterprise freemium products succeed. What we’re looking at now is an equation that shows you how to make money from the product adoption that you’ve been driving. I cribbed this slide from a talk that Peter Fishman, our Director of Analytics gives on the Economics of Freemium. He’ll periodically give the talk here and other places and I highly recommend that you attend it if you can. The equation incorporates top line growth, on the far left, links it to engagement, and then paid conversion rate. Since freemium business models are really easy to model economically, they really lend themselves to a data-informed product development. Building product in a data-informed way removes a lot of the ambiguity behind feature prioritization and measuring success and is a distinct competitive advantage for companies that use it.
- I do another talk that illustrates Yammer’s data-informed methodology, so I won’t go into to deeply here. The main point I’m making is that offering products as Enterprise Freemium allows vendors to use the data informed methodology to iteratively improve their products. The high level benefits to the product are clear feature goals, better prioritization, and accurately determining success.
- Ok, so now we know some things about voluntary user adoption and how to build an enterprise freemium product. The next topic is how to sell the product once it’s gained some traction with users.
- As we saw in Peter’s equation, engagement can drive revenue for freemium products. When selling to users and small teams, often the users and the payors are the same. With that type of product, you’ll be able to directly correlate your feature changes to revenue. When selling to a whole company, even a whole company that’s not very large, it will be harder to correlate feature changes to revenue, because the traditional enterprise acquisition process abstracts the purchasing process from the users. Luckily, the consumerization of the enterprise movement is not new and many buyers are actively participating in a way that helps freemium products succeed.
- An enterprise freemium product’s unfair advantage is the adoption they already have when the sales cycle begins. Vendors should start by selling the value of existing adoption and how even more users will adopt when they do an internal launch event. If you’re talking to IT, try to find out if they have any painful memories of products that took too long to implement or that they implemented and no one uses. This is ammunition to help you get past the unique sales objections that come up when you’re trying to sell a freemium upgrade. Another part of the freemium vendor’s unfair advantage is that they can create bottoms-up pressure in favor of their product. They can look at which users are using the product the most frequently and gather anecdotes to use during the sales process. Users may even directly contact buyers to express their desire to keep the product they are using.
- Objection handling “Your product is not secure.” Ironically, enterprise freemium options are objectively more secure than the most likely alternative, which is that users will just use their consumer accounts for storage and collaboration on company data. “We already have a product that does x” I like to call this the “one-app-fits-all” fallacy and there are a couple of examples of this fallacy coming into play as Yammer launched features. When we announced that we were going to launch Yammer Notes, we immediately got push back from some very large customers. They would say something like “our users love Yammer, but we already have a Wiki product so we need to be able to turn off Yammer Notes”. If we were to respond to this objection by allowing admins to turn off the feature for their users, we’d be adding complexity to our own product to build something that reduces user autonomy. That’s totally counter to the values that we use to justify voluntary adoption. An example in the consumer world that we’ve seen recently is messaging. I have a whole folder of messaging apps on my phone. They can all ostensibly be used to satisfy the one fundamental need of sending a short, interruptive message to someone that needs a fast response. There are tons of reasons that users adopt multiple products for the same use case - that’s probably the subject for another talk. When a person walks into their office and sits down at their desk, they don’t become a different person. They don’t magically forget how to choose their own apps for their own use cases. However, this “one-size-fits-all” approach still exists in corporate technology thinking. “We don’t have the resources to support your product.” I referred to this objection before when talking about IT’s role in supporting technology. The best counter point is that users are using the product now and thus are probably requiring little to no support. It would seem a strange ROI decision to cancel the usage of a product that users are getting value from to save a small amount of money on support costs.
- Common sales requests POC There is usually no point in doing a proof of concept for an enterprise freemium product. The users are already using the product. The exception to this is if the customer wants a small group of users to be able to test the features that are behind the paywall without affecting the usage of normal users. Turning off features The rebuttal to this argument is that users should be allowed to choose not only any product they want to use to satisfy a single use case, but as many products as they want that can all satisfy that use case. As I mentioned earlier, people use many messaging products in their personal lives, despite the fact that they are pretty interchangeable. This is evidence that humans have micropreferences and removing their autonomy to make choices based on micropreferences is bad. Turning off virality and reengagement features It’s not safe to turn off these features. It puts the buyers back in the business of driving their own adoption, which is something that the vendor has proven that they’re good at. Consumer-style virality and reengagement techniques generally don’t work because they’re spammy or tricky, they work because they’re principles accurately model human psychology. Putting the responsibility of making sure the usage of your product continues to be healthy into the hands of corporate buyers is not safe.
- With that said, the goal is not to disrupt the customer’s operations in a negative way. Ideally, you want the buyers to be so bought in that they promote the usage of the product with some of the methods on the slide. People are more likely to use products when they think other people are using them. When organizations start encouraging employees to use products, more usage will occur, and that benefits everyone. When I was at home for Christmas a few years ago, I was trying to explain to my mom what Yammer is. I thought it would be easier to just show her, so I asked her to sign up with her corporate email address. It took me 10 minutes to talk her into it because she was afraid that her IT team would be mad at her if she signed up for an unsanctioned product. All this to illustrate that getting the buy in of groups like IT, business owners, and the executive team can be very valuable and may even be required for long term success at a company.
- So I’m obviously very passionate about enterprise freemium, but I recognize that not all enterprise products would be better off as freemium. Examples of products that might not be right for freemium Email servers because they usually require DNS registration, which requires IT Enterprise infrastructure products, like a firewall Examples of products that I think work well for freemium Collaboration products, like email clients Personal productivity products File storage products Niche workflow products, e.g. Expensify