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When you are a marketer, there are terms used within the profession that only other marketers may know. If you’re a marketer, you need to be able to speak the universal marketing language. One such marketing term, especially known within the SaaS (software as a service) industry, is the term “freemium.” Freemium is a combination of the words “free” and “premium” that is used to describe a business model that offers basic products or services at no cost while the premium products are available for an additional expense. SaaS companies such as Hootsuite, HubSpot, Snapt and Dropbox are all great examples of companies that offer a free trial or a basic package for free to hook new customers. This type of business model has both advantages and challenges when it comes to overall marketing strategy.
The biggest advantage of offering a freemium product or service is that you are allowing new customers to try the product out for free. The hope is that the customer will fall in love the product or service and make additional purchases based on their new relationship with the company. If all goes well, the customer will be happy and loyal, and refer new customers to the company. In turn, the company gains new customers and drives revenue by selling their customers additional products. Sounds like a win-win situation, right? Well, there are some marketing challenges associated with this business model, particularly in the SaaS industry. Let’s discuss them.
One challenge many companies face within the SaaS industry is determining the differences between free products and paid products and creating a detailed promotional plan to execute ongoing marketing communications. Within the content marketing plan, it is important to focus on transparency. Within the marketing collateral, you should outline the features and pricing available among all of the different products offered by the company. By being transparent, you’ll gain the trust of new customers and maintain loyalty from current customers. One way to accomplish this is by creating a product comparison chart, a checklist, or a detailed pricing page. HubSpot’s pricing page is a great example of how to highlight the features and tools associated with their free products compared to the premium products.
A second challenge faced by many marketers promoting a SaaS freemium product is how to differentiate themselves from competitors offering a similar product or service. Try creating a competitor comparison sheet for new customers that showcases the benefits of your product over your competitors’ products. Keep in mind that you should stick to the facts within the comparison sheet. Never bad-mouth one of your competitors; if you do, new customers may question your authority and intent. You may also want to monitor online reviews of your competitors’ products and yours, and respond to reviews and the community directly. By communicating with potential customers on social media, review sites, and chat rooms, you are building relationships and hopefully winning their business.
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The third challenge, and probably the biggest challenge, is once you have offered the product or service for free, how do you convince the customer to spend money? The answer lies within the features available. Basic packages tend to only include the bare minimum. Advanced, or premium, features start to become available with additional cost. These features must be worth the additional cost. Therefore, the marketing efforts must convey the value proposition for making the additional purchase. The customer must know the additional value that they will receive and feel comfortable moving forward with a purchase. Detailing the premium features within marketing collateral is a necessity. Providing an ROI calculator, case studies, or a webpage showcasing the benefits of the premium product will help demonstrate the value of the product or service.
At the end of the day, all marketers face similar challenges no matter what the business model may be. It is important to do your homework by researching your buyer personas and learning what is most valuable to them. Be sure to provide top-notch customer service for all of your customers, regardless of the revenue generated from them. If all of your marketing efforts are customer-centric, rather than company-centric, your likelihood of success is much greater and you can overcome a variety of marketing challenges.