adventures in freemium
TRANSCRIPT
Adventures in Freemium
Navin S. Ganeshan March 13, 2013
Get a ta&oo for one year of free movies? 18 people did…
Lindt Hershey They Chose
$0.20 $0.05 76% Lindt $0.15 $0.01 73% Lindt $0.14 $0.00 14% Lindt
The Penny Gap -‐ Lindt Truffles vs Hershey Kisses
“Free” is a special price – creates non-linear demand & drives irrational purchasing behavior
“Making money around free will be the future of business” – Chris
Anderson
Free Messaging Free Components
Free Trial Freemium
Freemium is one of many ways to capitalize on free
Freemium is about…. capitalizing on the inherent sFckiness of your product
…not just behavioral manipulaFon
Is Freemium Right For You?
Broad Solution, Big market?
Low marginal cost?
Does your product rock?
Freemium (See execution)
Paid or Free-Trial
Work on product and come back
when you’re ready
Yes
Yes
Yes No
No
No
1. Streamlining Signups
2. Compelling Conversion
3. Meaningful Marketing
4. Controlling Costs
5. Managing to Metrics
Executing Freemium
Streamlining Signups Find Channels that can free
qualified users (“psst..want to give away a free product?”)
Invest Early in Organic Search
(Freemium can’t support paid search)
Referrals/incentives (leverage network effect)
Compelling Conversion
Good • Usage-‐Based • Feature-‐Based • Component-‐Based
Bad • Time-‐Based (not Freemium!) • Views or Paywalls (#%@$)
Ideal conversion drivers are those that occur naturally with increased consumer investment and value delivered
CreaNve • Ad-‐Removal • Service/Support • Mobile • Humor/Goodwill?
CreaFve!
Meaningful Marketing
Build a communication plan – a matrix of… • Who – target users • When – times/triggers • What – message, content
(but you already knew this….)
Controlling Costs
Service/support Rely on email/self-service
Help users help other users
Overuse/Abuse Monitor, monitor, monitor
Use the big-stick – service-
agreement
Managing to Metrics
Metric Explanation
Acquisition cost Marketing/Advertising cost per signup
Effective Acquisition cost
Marketing/Advertising cost per paying customer
Lifetime Value/PV
Customer Lifetime Value (e.g. Avg Tenure X Price)
Daily signups Number of signups per day
Conversion rate Percent of free users who convert to paid
“Free” Operating Costs
Product, Support costs per Free user
Acquisition Visitors to Users
Conversion Users To Customers
Lifecycle Retention & Churn
2% varies widely
1-‐3%
>90% retenNon
Terminology may vary Your mileage WILL vary
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
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.
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
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”
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
Interesting Case Studies Experimented with Free Trial w/out CCard
Moved from Freemium to Free trial
Good learnings on sFckiness and cost-‐control in Freemium
Moved from Free Trial to Freemium
Great case study on virality and sFckiness
Moved from Freemium to Free Trial
Good Reads Predictably IrraNonal The hidden forces that shape our decisions Dan Ariely
Free The future of a radical price Chris Anderson
