As technology continues to evolve and provide conveniences to the business world, companies are always on the lookout for new solutions that can help streamline their processes. As such, freemium software-as-a-service (SaaS) has become one of the most competitive industries today.
For SaaS businesses, finding ways to make their software solutions stand out from the rest and win the loyalty of their customers has become a priority. As a result, most providers have started to adopt a freemium model that allows users to see what your offer is all about.
This guide takes a closer look at the freemium pricing model, its benefits, and how you can leverage it to increase customer conversion.
Derived from the terms ‘free’ and ‘premium,’ a freemium model refers to offering a product with limited features for free, without a time limit.
Under a freemium model, you’re essentially giving away services at no cost. This is a way to build the foundation for future transactions. When you offer basic-level services for free, you can establish positive relationships with customers, eventually providing them with advanced services, an ad-free user experience, or add-ons for an extra cost.
At first, a freemium model may not seem like a good way to run a business. However, there are proven advantages to trying this approach.
You can create numerous marketing campaigns to showcase how amazing your product is, but there’s no better way to prove its value than letting your potential customers experience it firsthand and on their terms. This is what product-led growth is all about. It lets your software do the talking.
Since you don’t have to spend time explaining to every potential customer what your product does, it frees up commercial resources to focus more on converting for bigger opportunities and nurturing existing users to upgrade.
By establishing a pipeline of active users that are a few steps away from conversion, product-led growth can help you grow faster.
Everyone loves a good discount. But getting access to a free product? Who wouldn’t want it? Offering a freemium product allows you to increase your customer acquisition rate with ease. What’s more, it gives you an edge against competitors that aren’t offering a free plan, ultimately attracting more users to your business.
With a ‘try before buying’ offering, you allow new users to get a handle on your software functionalities. This can help them make a fully informed decision to pay or upgrade something. As a result, it can positively impact your churn rate, which ultimately improves your customer retention rate.
A freemium model is a great way to boost your revenue—but only if you can push users to become paying customers. Here are some tips on how to get freemium users to upgrade to a paid plan.
If your freemium SaaS service offers too many useful features, why would a user want to upgrade to a paid version? As such, you want to set the right product limitations for freemium software.
To do this, you need to monitor customer usage and determine which features they’re getting the most value. This can tell you where adjustments can be made. Just make sure that you’re leaving enough of the value gap to help users recognize the benefits of buying a premium plan.
Sometimes, people just need a little nudge to finally upgrade. So, make sure to always remind customers that they’re on a limited plan. Show then that there are better features for the paid version.
Some ways to remind users are adding in-app notifications that highlight specific paid plan features. You can also compose periodic email notifications. These can remind users to upgrade and what they could have from upgrading. Add a clear call-to-action (CTA) section in your support and onboarding messages.
Such a tactic can help convince freemium users that are on the edge to take the final step. Thus, convert to a premium account to enjoy the features they need.
Freemium means you offer your services for free without a time limit. However, it doesn’t mean that you can’t create a sense of urgency and get freemium users to act quickly.
You can try offering one-off gift vouchers or promotions to give your customers a little push to upgrade their plans. If you add a deadline to your offering, it can rush your customers to sign up to take advantage of the discounted price.
Although there’s a broad array of Freemium SaaS business available today, the ultimate goal should be to come up with one that hits the sweet spot, balancing price with value. And with a freemium offering, you can entice users into trying out your products. You can provide them with value while leaving them wanting more, ultimately pushing them toward conversion.
