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- Three things that freemium companies do right.
Today, I don't know, if you've ever thought
of building a freemium company,
if you want to know what the best do to win
or how you should prioritize your resources,
that's what I'm going to share in today's video.
I had the privilege of being asked to formally advise
one of the largest freemium companies
out there, Hootsuite.
They're a billion dollar plus company,
and I've been working with them for the last seven years,
so I've seen them go from thousands or hundred thousands
of users to millions to tens of millions,
and how they've really leveraged their
freemium business model to extract the most value.
You know, I'm also blessed to be friends
with a guy named Mike McDerment
who built an incredible company called FreshBooks,
and over the years watch him how he's evolved
his product to really leverage that business model.
When I was building Flowtown, my company
it was a social, email marketing tool.
We integrated with MailChimp and we worked with Ben,
the founder and CEO, and I understood and we watched
that transition from when they were only paid
to freemium, and it was incredible to watch
and how he explained it on his blog
and the data that they used to make that decision.
I just think that as I've seen all these companies operate
and scale, there's really three things that they do right,
and that's what I want to share with you in this video.
The first one is their free to market
and really educate to win mind share.
At the end of the day, Dropbox
and other great freemium companies,
they do everything they can to educate the market,
to get press, to talk about integrations,
to talk about how their product works with other companies,
so that people recommend them when there's a need.
You know, recently my dad reached out, and he's like
hey, Dan, I'm thinking about starting a newsletter
or an email, what tools should I use?
Well, obviously, MailChimp.
I mean you get 2,000 contacts for free,
so if you ever grow past that then he's going
to be willing to throw down a few dollars to pay for it.
That's the paid part.
I just think that the best freemium companies out there,
they really educate the market, they talk about it,
they get mentioned in press.
Think about Evernote, all these incredible companies,
they're talked about all the time
because it reduces the barrier when you're free
to having other people adopt it, right?
It needs to be a very simple, focused solution.
The second thing they do is they use data
to improve their product, right?
So, think about segments, cohorts, A-B tests.
Because they have so much volume,
because the product doesn't cost anything to use,
you have so many users coming into the funnel,
they're able to run experiments way faster
than any other company and get statistical significance
on those tests.
Because of that, their product is evolving
and testing and growing and improving
at a rate that you wouldn't otherwise be able to do
if you didn't have a freemium business model,
so that is, when you think about resources
and where you should allocate them,
you want to make sure you take advantage of that.
The third thing they do is they use customer data
to improve their sales process.
If you've got a bunch of different accounts
within a company, if you look and you've got
27 users from a big enterprise corporation
and there's like four different departments,
it makes a lot of sense for your sales guy to reach
out to that company and say,
hey, you've got four different departments
using this product.
All separate accounts, and wouldn't you want
to consolidate billing, save some money, provide you
with some extra features like security management
or enhanced support or service level agreements?
All of these things because you have the data
on the users and how they're using it,
feeds into the sales process.
It helps qualify.
It helps create the lead list.
It helps ensure that they have the data
to talk about the benefits and the features
that are going to be most attractive to those customers
that I've seen companies totally dominate.
Yammer was one that did this at scale.
They talked about it, how they looked for the domains
of those different company emails,
and then reached out to those businesses
that were high priority, that were very probable to buy,
and that is the third one.
So, real quick, free to market, educate,
and win mind share.
That's number one.
Second is use data to improve the product
through segments, cohorts, and A-B tests,
and third, use the customer data
to improve your sales process because if you think about it,
free gives you traffic.
Then, you want to make sure your product rocks,
so you want to use that data to run your experiments,
and then third, once you've got them,
you've got to convert them from the free part
to the -emium or the premium part of,
you know, you want 4 or 5% of your users
to end up upgrading to a pro account,
so you want to use that data to ensure your salespeople
have qualified leads all day long.
That's what I want to share with you.
If you want access exclusive content
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and, as per usual, I want to challenge you
to live a bigger life and a bigger business,
and I'll see you next Monday.