The longest-running American TV game show host Bob Barker once said, “You can’t fool television viewers with dancing girls and flashing lights.”
The same mindset goes with prospects. The smoke and mirrors show won’t get you far when potential customers decide on who to pick when they come down to price. This is the fork in the road for every software company ready to sell their service or product. With the goal of getting on the right path to revenue, SaaS organizations are often thrown into a debacle of what pricing model to use because there are so many of them.
Do they require a customer to pay per seat? Or per active user? This is a relatively new pricing model and it’s gaining traction, with Slack at the forefront. What about offering tiers in which certain features and functions are unlocked with higher rates? There’s also pay-per-use, pay-as-you-go, monthly charges, or the option to cancel anytime. The subscription model allows the customer to unlock savings with longer-term commitments.
And then there’s Freemium, which I’ll explore further, given the latest resurrection in interest in this model, as stated in Mary Meeker’s long-standing Internet Trends report, and with Slack’s IPO, alongside other popular games and services that have done swimmingly well with the model, such as Fortnite, Dropbox, Spotify, and others.
The People vs. Freemium
Freemium is essentially a pricing strategy that aims to give no-cost access to basic but “sticky” features of a software, with the aim of demonstrating value to a potential customer and showcasing additional high-value features to convince purchase. This model has been around since the early internet days and has a number of variations.
There’s free full function, but for a limited time or limited use, or free limited features with a paid upgrade – otherwise free basic tiered premium. Others offer free single-use and then require a customer to pay after. One other model is free ad-supported, in which customers use the software free with in-line ad placement (user subscription is monetized via ad revenue), paid upgrade to ad-free (a common in-app model).
On a positive note, if you decide to go on the Freemium path you expose value and features to new buyers with low risk for customers and high conversion opportunities for the seller. Your brand would ideally create a “stickiness” with the user – once a user captures value initially, it becomes harder to live without. – Read more