A freemium strategy is one of the best ways to sell a SaaS product. However, common freemium SaaS mistakes can thwart this otherwise effective approach. Here we’ll help you steer clear of the most frequent pitfalls SaaS companies encounter when deploying a freemium sales model. First, we’ll consider why a freemium approach works so effectively when it’s executed correctly. Then we’ll look at three of the most prevalent freemium SaaS mistakes, along with some ways to avoid them.
What Are the Most Common Freemium SaaS Mistakes and Their Solutions?
While a freemium strategy is a powerful method, it has potential pitfalls. Some of the most common errors involve not delivering enough value to motivate a purchase, delivering so much free value that there is no incentive to buy, and failing to deliver enough support for freemium users to experience your product’s value. Fortunately, there are solutions for each of these common mistakes.
Mistake #1: Not Unlocking Enough Features to Showcase Product Value
One common mistake is being too stingy with the freemium version of your product. This can stem from concern over giving away too much for free. While this is a genuine concern, as we will soon address, giving away too little is an equally risky approach. If you don’t unlock enough features in your freemium version, this can dilute the value customers experience from your product. They may wrongly conclude that your premium product similarly lacks value.
The solution to this is to make sure your freemium product delivers enough value to showcase some compelling highlights of your premium product. One way you can identify which features to include in your freemium product is to monitor the usage patterns of your premium users. Note which features are most commonly used and might serve to introduce freemium users to the value of your product. Keep track of the version your user came in on so you can provide the appropriate content based on the offer available when they signed up for your freemium product.
Mistake #2: Giving Away So Much Value Free There Is No Incentive to Buy
This error is the opposite of the previous one. While giving away too little value can fail to motivate premium upgrades, giving away too much can be equally damaging to sales. If customers are getting everything they need from your freemium product, why should they waste money on a premium purchase?
The solution to this is to strategically select which features to withhold from freemium users so that they feel an incentive to upgrade and convert to paying customers. Ways you can limit freemium products include:
- Limiting access to advanced features
- Limiting the number of users
- Limiting the number of times a product or feature may be accessed in a given time frame
- Limiting storage space
- Limiting customer support
- Limiting ad-free access to your product
Which of these approaches makes the most sense for your SaaS product will vary based on the nature of your product and the habits of your users. Study your customers’ usage patterns to identify which items might make good candidates to withhold from freemium versions. Survey your customers to identify which features played the biggest role in convincing them to buy your product.
Mistake #3: Failing to Provide Enough Customer Support to Deliver Value
A third common mistake is failing to provide enough customer support to freemium users for them to experience your product’s value. This may happen if you don’t view freemium users as customers and you don’t give them the kind of attention you would give paying customers. It can also happen if you incorrectly assume freemium users can access your product’s value without support.
The problem with failing to provide support to freemium users is that they can experience the same types of problems as paying customers. They can also experience the same frustration with your product if they fail to receive support.
The solution to this is to provide sufficient support for freemium users to use your freemium product’s features and enjoy its value. This support can take such forms as automated messages, tutorials, knowledge bases, ask me anything sessions, product office hours, and chatbots. Automation can allow you to monitor the usage patterns of freemium users the same way you would monitor premium users so that you can intervene with users who are experiencing difficulties. Of course, you don’t necessarily have to provide freemium users with the same level of support as you would provide for paying customers, but you should still provide enough support that they experience your product’s value, otherwise you freemium strategy will be of little value to you.
Use Technology to Help You Prevent Freemium SaaS Mistakes
When done the right way, a freemium sales strategy enjoys several major advantages. It helps you gather valuable data on your customers which you can use to refine and optimize your product marketing and sales strategy. It provides an offer you can use to drive traffic to your site and your product. It gives freemium users an opportunity to experience the value of your product, setting them on the path to becoming a paying customer.
However, to realize these benefits, you must avoid common freemium SaaS mistakes. The most common errors include failing to showcase enough value to motivate buyers, giving away so much value that users see no need to upgrade to premium, and not providing enough support to deliver compelling value. Avoid these mistakes by carefully selecting which features to unlock in your freemium version and which to withhold for premium users, and by delivering sufficient support for freemium users to experience your product’s value without frustration.
Why Is Freemium a Good Sales Strategy (When Done the Right Way)?
When deployed correctly, a freemium SaaS sales model can be one of the most effective promotional strategies for selling software products. The freemium strategy enjoys several compelling advantages which have helped make it one of today’s preferred SaaS sales models.
Gather Freemium User Data to Refine and Optimize Your Marketing, Sales, and Product Strategy
One advantage of a premium model is that it provides data you can use you optimize your marketing, sales, and product strategy. When a prospect becomes a freemium user, you gain valuable data about their demographic background, usage patterns and support issues. This information can be used to improve your marketing slant as well as the delivery of your product, making your sales strategy more effective. You can use this data to refine and optimize your product offering. Not only can you gather data on customers as a whole or in segments, but you can use personalized data about individual freemium users to extend a customized premium upgrade offer which would be more compelling than a generic offer.
Use Your Freemium Offer to Drive Traffic
A freemium offer can serve as a valuable marketing tool. You can promote a freemium offer more easily than you could promote a premium offer since prospects don’t face a price barrier. This makes a freemium offer a versatile promotional tool you can promote through blogs, search engine ads, social media posts, videos, and emails, all of which serve to steer traffic to your site.
Provide Value to Guide Freemium Users on the Path to Premium Purchases
A freemium offer gives users an opportunity to experience the value of your product. This makes it more persuasive than a sales pitch or even a demonstration. If your freemium product delivers compelling value, your premium product effectively sells itself. A well-designed freemium experience opens the door to product-led growth.
Totango’s Spark platform helps you avoid these pitfalls by providing out-of-the-box tools to promote premium upgrades. The Convert Freemium SuccessBLOC module automates best practices that promote higher activation, conversion, and retention of freemium customers. The Detect Risk module helps you identify customers who need attention so you can deliver proactive support. Try it free to experience for yourself how smooth the freemium upgrade process can be.