The article doesn't answer the most important question about the fremium model -- how to balance it? Because the best possible conversion rate is only possible when the fremium is balanced correctly. I've been experimenting with fremium models for a few years and understood that the key to balancing freemium correctly is to precisely understand the value that your product creates. Then the balancing becomes simple: if a user doesn't see much value in the product then it's free. If the product creates significant value for the user then it's premium.
Giving away for free a product that creates significant value is charity.
Trying to charge a user for a product that offers little value will limit your user base and market awareness.
If you don't understand exactly the value your product creates then you are in trouble and not being able to balance fremium correctly is only one of the problems in this case.
We attempt to do what you describe: charge users for whom we create lots of value (power users), and give it away for free to others (casual users).
The difficulty is that if you want word to spread among communities of people that contain your power users (and would-be power users), then by charging them money, you're constraining growth in those key communities. Any thoughts on how to deal with this specific tradeoff?
I'd be interested to hear more of your insights, especially about how the balance might change over time. Do you give away more for free in the early days, to raise more awareness? How do you know when it's time to stop giving it away for free?
>The difficulty is that if you want word to spread among communities of people that contain your power users (and would-be power users), then by charging them money, you're constraining growth in those key communities. Any thoughts on how to deal with this specific tradeoff?
We gave away premium licenses for free (no strings attached) to some socially active power users. It helped us to increase awareness.
Also, I found that premium users are more loyal in general and more willing to share the knowledge about our product.
>Do you give away more for free in the early days, to raise more awareness?
We surely did give away more for free in the early days. Partly, because we still figured out the product/market fit. As we pinpointed the PMF and added new features we periodically rebalanced the free offering. Since many new features became also available in the free edition we reduced some limits and capabilities of the free edition.
>How do you know when it's time to stop giving it away for free?
We never stopped. We still have a freemium model [1].
Overall, we try to keep the ratio of premium to free users at around 1:5. With my previous product, the ratio was 1:50 which was too unbalanced as I realized later.
How much do you think the ratio of free/premium should depend on the cost of providing services? Obviously if there are large hard costs associated with each user, the ratio can only be so high. But if there is a low cost of service to free users, what's the next step in figuring out the right ratio? Is 50:1 always too high?
I believe the answer is not in the cost of providing service but rather if your product creates value more than its price or not. Just a few questions to think about: why are there so many free users? Is it because the premium can't provide enough value for them to justify purchase? Is it because the need in general is not significant so no matter how good your product is its conceptual value is not significant? Is it because the free users simply are not aware how to extract more value from your product with the premium version?
I suppose having answers to such questions would give a better understanding of the most efficient free/premium ratio.
Feel free to reach out to me by <username> at easymorph dot com for a chat.
Curious to know if you've seen/used it before, or if you just saw it now. FWIW, we have a server-side widget that can be installed on blogs, in case you're interested. Helps maintain attention, and a study done by CNET found that readers were 35% more likely to finish an article when reading with BeeLine.
We have some info on the Partner page [1]. We are looking into making a WP plugin but have to figure out the IP issues related to different avenues for distribution. It's been deployed on WP pages as a JS widget already, including http://unreasonable.is. I don't know how much more trouble it is to do these manual integrations than having a manually-distributed WP plugin.
the article is aimed at someone who already understands what value their product offers. I get where you're coming from. The way I think it should be balanced is by charging a shitton on the premium side - so much that it covers the cost of running all this freemium.
Yes, not everyone will be able to do it. Yes, it's way way easier to do so in a blue ocean. I do branding work as part of my agency sometimes, so I definitely feel what you're saying when it comes to "free is low value, premium is high-value"
To find the balance is to experiment, just like I'm 100% sure you've seen along the years. I'm not advocating for charity, I like businesses, making money and unlocking value. The point of freemium was to give equality of opportunity: if a business is using your product, they're starting something.
By offering them the chance to have a lean start, eventually when they get to win (because that's why they use a product, right? To create more value, either financial or of some other kind), they're already locked in to your service and grateful for you helping them in the beginning.
And that's not only about new businesses. It can be applied to big corporate companies that start testing a new thing — obviously they're going to go with the less stressful and time-consuming option (if there is one) and test it at a small scale before biting the bullet
Giving away for free a product that creates significant value is charity.
Trying to charge a user for a product that offers little value will limit your user base and market awareness.
If you don't understand exactly the value your product creates then you are in trouble and not being able to balance fremium correctly is only one of the problems in this case.