What is a Freemium Strategy?

freemium equals free plus premium

A freemium strategy forms a foundation for SaaS marketing, but it’s often used without being understood. Here’s a closer look at the basics. We’ll define what a freemium strategy is. We’ll contrast it with the similar-sounding but distinct concept of a free trial strategy. And we’ll consider the role automation plays in deploying and optimizing freemium strategy.

What Is a Freemium Strategy?

A freemium strategy uses a free version of a SaaS product to promote a premium version. The free version of the product combines enough functionality to make the product appealing with enough limitations to make an upgrade to the premium version desirable. Limitations in the free version may include restrictions such as:

  • Limits on use of advanced features
  • Limits on the number of users
  • Limited the number of times the product or a feature may be used in a given period of time
  • Limited storage space
  • Limited customer support
  • Limited ad-free use of the product

Offering a limited free version of a product serves a number of important marketing and sales functions, including:

  • Providing a promotional tool to build brand awareness
  • Driving traffic to websites and landing pages
  • Incentivizing prospects to provide contact information
  • Convert more website visitors into engaged prospects
  • Giving prospects an opportunity to experience the benefits of the product
  • Creating opportunities for premium upsells

These uses make your freemium strategy a powerful and versatile marketing and sales tool.

Freemium Strategy vs. Free Trial Strategy

A freemium strategy differs from strategies that rely on free trials. An essential difference is that a free trial limits the amount of time a SaaS product may be used, which is not a characteristic of a freemium strategy.

Each strategy has its pros, cons, and uses. Freemium products are easy to promote because they require little commitment from prospects. However, they may lack enough functionality to showcase the benefits of your premium product, and they lack the time urgency of a free trial. On the other hand, free trials have the virtues of demonstrating your full product and instilling a sense of urgency, but they require users to provide more information, which can deter some prospects.

Freemium strategies and free trials are not mutually exclusive but can be combined. For example, you can offer freemium users a 30-day free trial of your premium product.

Deploying Freemium Strategy through Automation

As a SaaS strategy, the freemium approach is inherently tied to technology, and its effectiveness can be enhanced by using the right technology tools to promote conversions from freemium to premium users. A key to motivating freemium users to upgrade is providing a satisfying experience of your free product marked by smooth onboarding, high engagement, and minimal support issues. This creates the opportunity to deliver an appealing upsell offer inviting users to try your premium product.

The Totango Spark Convert Freemium SuccessBLOC module is specially designed to automate best practices that promote the activation, conversion, and retention of freemium customers. It enables you to monitor freemium user behavior for insights into how your platform is being used, providing a basis for data-driven actions and adjustments. You can automate tasks that promote onboarding and adoption, increasing user engagement and setting the stage for an upsell offer. Automated email campaigns tailored to individual user data help you guide users through the activation and adoption process to convert them into paying customers.

Use the Right Technology to Optimize Your Freemium Strategy

Freemium strategy is a SaaS marketing and sales tactic which uses a free version of a product to promote a premium version. The free version may limit elements of the premium version by placing restrictions on features, the number of users, frequency of usage or other items. Offering a free version of a product serves purposes such as building brand awareness, driving traffic, generating leads, and creating upsell opportunities.

Technology plays a key role in providing a customer experience that promotes upgrades from freemium to premium products. Totango’s Spark platform with its Convert Freemium module is designed to promote smooth transitions from freemium to premium experiences. Try it free to see how automation can help you optimize your freemium strategy.

Share Post:

    Get the latest in customer success best practices

    Ready to get started?

    Learn how Totango can help you achieve your customer success goals.