Let talk freemium
You are in the market shopping for groceries and asked for a free sample of new particular product to test it before buying, this is exactly the concept of freemium. How can this apply to your business you may ask, if you are offering a product that people didn’t know they needed until they tried? then yes freemium is a good pricing starting point.
Freemium price is just like doing drugs for the first time. They give you a small sample to try then you return requesting for more to get high. In SAAS or other business model, the basic services are given free and you're charged when you ask for more. Free makes people think that they have “nothing to lose” since many ignore time as an investment. The whole “Get us addicted, jack up the price” trick as in the case of drug dealers.
The flip side of this is that after using the product for free, it is very hard to get the customer to start paying for it. But some companies have made it work. Skype, dropbox, LinkedIn, slack, trello and Listbuy.
This is why it is so critical to choose your premium features wisely.
If the free version features are good, the premium version must be excellent. Just like a mini skirt, it must be good enough to arouse curiosity and excitement for customers to want more. Free version should be a starting point for people to try your product. It should get people’s attention and show some of the possibilities of the premium version making the paid version of your products irresistible.
The basic premise that the freemium business model operates is that several hundred thousand of users sign up for the freemium plan, and then convert some into paying customers.
So, for the freemium model to work out, low marginal distribution and production cost must be ensured to avoid loss. Only if you can keep the cost as low as possible, an additional free user will cost you nothing more than a database entry.
B2B Freemium is still uncharted territory in the B2B world and I’m looking forward to learning and experimenting more with this approach as we launch Listbuy premium.
Our freemium model is novel, it runs on a transaction-based model with no upfront cost. Basic features ensure that customers have all they need to sell online and we still make a tiny fraction of their sales. For our premium version which runs on a subscription model, we are taking the customers experience further by personalizing their store experience and giving them more capabilities. With premium for example comes astounding mobile first template that makes buying so smooth and easy for online shoppers.
The freemium is usually a growth and branding strategy rather than a business model. You should consider it for your new product.