The Journey of B2B Freemium, by Sanjay Sarathy

December 3, 2013

The freemium model is well known across a wide variety of different B2C industries and brands – gaming, entertainment, publishing and online storage. The B2B, enterprise world can still learn a lot from our B2C cousins, but companies such as LogMeIn, 37Signals and Atlassian have done quite well with the model. Additionally, there are experts in the field such as Lincoln Murphy, who share a lot of their experiences with B2B Freemium in many settings.

 

Companies launch freemium products for myriad reasons, but I will speak to my own experience. In the past, companies I’ve worked for introduced free products for two reasons:

  1. To create market visibility as a means of providing a way for prospects to easily evaluate the product service capabilities; and 

  2. To match what competitors already did.

In the world of B2B enterprise software, freemium is often one marketing tactic within an overall go-to-market strategy. In these situations, free products can certainly serve as a lead generation vehicle for sales teams, and as I’ll explain below, a sales team is critical to success in converting these free users to paying customers. For instance, at my current company, 60 percent of our existing paid customer base touched our free product at some point in the sales process. The freemium strategy is a critical enabler of our business, but doesn’t completely define our business model.

 

What We Know and Believe 


1. Align Your Free Product With Your Cost Model.

For many SaaS B2B technology companies, the primary marginal cost of delivering the service is related to the computation and storage for any given customer. So in order to control costs, companies should limit these two variables which will implicitly limit the cost structure for each free user. If you’re providing an on-premise product, then your marginal cost is effectively the bandwidth necessary to provide the free product.

 

2. Enterprise B2B = Sales Team = Hands-On Engagement.

Often, B2B products are not just bought, but have to be sold. If your product or service is the latter, then sales team follow-up is critical to its success. A sales team should contact every single free registrant to ensure that the users have a successful experience with the free product and understand if their business requirements would require a more robust or paid version of the same tool. The free tool creates a lead funnel that would otherwise be unavailable to a sales team. Enabling the customer to use the tool for free and then speak with a sales person is a valuable service to help the potential customer digest and understand the value of the product’s capabilities.

 

3. Track and Measure Every Aspect of the Product Experience.

It is vital to measure every component of the customer’s experience with the free product: the registration time, the experience of configuring the product or service, interacting with it (for example, how long does it take to discover relevant data sources for analysis), using different functional elements. By measuring every step, you can better understand where the customer experience requires improvement and subsequently improve the conversations the sales team has with the customer.

 

4. It’s A Way To Go International, Quickly.

I discovered that companies, no matter where in the world they are, will use a service if it meets their needs. The free offering is an extremely valuable method of tactically engaging with international customers over the phone when you are ordinarily unable to engage with them.

 

The Future of Freemium 


There was a time when giving away your product for free seemed counterintuitive to a business leader. But, I believe and my experience supports the notion, that a free product is a powerful vehicle to touch a broad base of potentially paying customers. Freemium products allow businesses to prove the value before the customer shells out any money. That’s a game changer. It is an ideal way to create converts if you take the time to ensure the entire experience is positive. And converts are the best long-term customers.

 

Sanjay Sarathy is the Chief Marketing Officer at Sumo Logic.

This article was released on CTR on TUESDAY, 08 OCTOBER 2013 14:37

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