Freemium Pros and cons
Recently, the utility model Freemium quite actively discussed. Two domestic and one western service spoke on this topic.
Despite such ambiguity, a completely free tariff has recently appeared in My Store. What for?
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Analyzing our customer base for individual tariffs (more about financial metrics of cloud service), we saw that the cheapest tariff for 400 rubles per month looked unconvincing. He suffered from a very high user outflow, and the client’s lifetime was 4 times less than at a more expensive tariff for 2,400 rubles. The customer value (CLV) between these rates already differed 27.5 times.
Due to the large churn, the number of customers at a cheap rate at some point simply ceased to grow. As a result, there was a strange situation when the cheapest tariff was at the same time the smallest in terms of the number of users.
Why did this happen?
First, beginner businessmen are most often the users of cheap tariffs. It happens that the work in the service ends simultaneously with the closure of a non-profit business.
Secondly, the base rate has a powerful competitor - Excel or its cloud option in Google Drive. In combination with a smart head, these products can replace the basic functions of our service absolutely free. In fact, this is a typical example of how alternative solutions to a specific task limit the price that a customer is willing to pay for your product.
As a result, we got a large enough, but very unstable audience, working with which in terms of making a profit was seemingly unpromising. At this point, we concluded that, by making the junior fare free, in the short term we lose only a few percent of the revenue, and in the long run we create a large loyal audience.
The purpose of the new free tariff is to give the user the opportunity to work comfortably, without any restrictions and pitfalls. In a year or two, successfully growing businesses will naturally switch to one of the paid tariffs.
Quite unexpectedly, there is an emotional side to this decision: giving is very pleasant. Especially the fact that we think it makes the life of users a little easier.
When freemium use is not worth it?
It is clear that this model is not suitable for a service with a high cost of customer service. For example, if it includes the services of living consultants, with all the costs involved. Therefore, the freemium would not work for the Button, but it works fine with JivoSite.
The company must have a certain financial stability. Starting a freemium can reduce revenue for a certain period and this can finish off a startup balancing on the verge of payback.
Our position coincides with the case MainChimp. In any case, you first need to learn how to sell, debug processes and a financial model, and only after that, perhaps, launch a free tariff.
It is still too early to sum up, since a little more than a month has passed since the launch. However, during this time we have already received more than 400 active users at a free rate. At the end of 2014, we will definitely tell you about the first results of this freemium project and give specific figures on how the free tariff for conversion and customer base growth affected.
- Button: free users need to drive .
- JivoSite: freemium works for us.
- MailChimp: freemium is cool, but first we learned how to sell .
Despite such ambiguity, a completely free tariff has recently appeared in My Store. What for?
')
Analyzing our customer base for individual tariffs (more about financial metrics of cloud service), we saw that the cheapest tariff for 400 rubles per month looked unconvincing. He suffered from a very high user outflow, and the client’s lifetime was 4 times less than at a more expensive tariff for 2,400 rubles. The customer value (CLV) between these rates already differed 27.5 times.
Due to the large churn, the number of customers at a cheap rate at some point simply ceased to grow. As a result, there was a strange situation when the cheapest tariff was at the same time the smallest in terms of the number of users.
Why did this happen?
First, beginner businessmen are most often the users of cheap tariffs. It happens that the work in the service ends simultaneously with the closure of a non-profit business.
Secondly, the base rate has a powerful competitor - Excel or its cloud option in Google Drive. In combination with a smart head, these products can replace the basic functions of our service absolutely free. In fact, this is a typical example of how alternative solutions to a specific task limit the price that a customer is willing to pay for your product.
As a result, we got a large enough, but very unstable audience, working with which in terms of making a profit was seemingly unpromising. At this point, we concluded that, by making the junior fare free, in the short term we lose only a few percent of the revenue, and in the long run we create a large loyal audience.
The purpose of the new free tariff is to give the user the opportunity to work comfortably, without any restrictions and pitfalls. In a year or two, successfully growing businesses will naturally switch to one of the paid tariffs.
Quite unexpectedly, there is an emotional side to this decision: giving is very pleasant. Especially the fact that we think it makes the life of users a little easier.
When freemium use is not worth it?
It is clear that this model is not suitable for a service with a high cost of customer service. For example, if it includes the services of living consultants, with all the costs involved. Therefore, the freemium would not work for the Button, but it works fine with JivoSite.
The company must have a certain financial stability. Starting a freemium can reduce revenue for a certain period and this can finish off a startup balancing on the verge of payback.
Our position coincides with the case MainChimp. In any case, you first need to learn how to sell, debug processes and a financial model, and only after that, perhaps, launch a free tariff.
It is still too early to sum up, since a little more than a month has passed since the launch. However, during this time we have already received more than 400 active users at a free rate. At the end of 2014, we will definitely tell you about the first results of this freemium project and give specific figures on how the free tariff for conversion and customer base growth affected.
Source: https://habr.com/ru/post/239203/
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