Components of a SaaS Marketing Strategy with a Freemium Model
May 2, 2019
By Amber Kemmis
There are many things that make me happy and free stuff is one of them. I love free samples at Costco, free Wi-Fi at coffee shops, free cookies at the car dealership, free parking, free customer support, and free upgrades. But out of all the free things, there’s one free thing that I especially love: free software. Yes, SaaS platforms such as Instagram, Zapier, Gmail, and Vidyard are amongst some of my favorite free things, and I use them every day. We all love free stuff, and whether you realize it or not, you probably use a freemium product (and love it as much as I do) multiple times a day.
If you aren’t a tech brand with as much clout or as expansive an audience as Google or Instagram, how can you create a successful marketing strategy for a freemium model? There are several key components, but first, we need to answer this question:
What Is a Freemium Model, Exactly?
Although free is almost always awesome, the effectiveness of a go-to-market freemium model and the marketing strategy needed to make it happen vary. Here are the common models for free SaaS subscriptions:
- Free Forever: This model takes a key functionality of the software and gives it away for free forever. With this model, there are conceptions that no one will buy because there’s no need to, but the key is to grow paid users by unlocking powerful functionality with the paid version or another revenue stream such as advertising. Example: Evernote
- Free Features: While the core product is a paid subscription, key features are given away for free. This tactic is often used when rolling out new expanded features of a product in order to gain demand, but then often transitions into paid features or a higher base cost. Example: HubSpot has done this with several features including their CMS.
- Free Trial: A free trial gives, most commonly, the full feature set away for a limited time. For example, the user will receive a trial of 30 days and then be required to pay. In some instances, the user must provide payment information up front, while in others, the user will add payment information later or be locked out of the product at the end of the trial period. Example: Airtable
- Free by Volume: Similar to free features, free by volume gives away the product but only for a certain threshold of users or their amount of usage. Example: Atlassian Bitbucket
Is a Freemium Model Right for Us?
There are obvious reasons why freemium won’t work, such as high onboarding costs, but other factors to consider include:
- Is there a big enough market demand opportunity?
- Can your freemium users be your mass evangelists?
- Do you have a self-service customer support portal?
- Do you have a big enough advantage with the paid model?
- What’s the cost to support customers?
8 Key Components
- Great Product UX
- Clearly Mapped Customer Journey
- Demand Strategy
- Content Marketing Strategy
- Conversion Rate Optimization (CRO)
- Customer Marketing Experiences
If you’re still in the startup phase, you may be operating with limited resources because the reality is that, in today’s fast-paced economy, you can quickly scale from two dudes in a garage to a Fortune 500. But you’ll need to ensure that you have a solid technology infrastructure to support your freemium service users, because even the best marketing strategy can’t compensate for the poor customer experience that can happen from operational and infrastructure hiccups such as a clunky invoicing process, lack of technical development resources, or server issues.
2. Great Product UX
Throughout their free experience, your prospective customers or influencers need to feel great about their experience. If it’s difficult to navigate your product or understand the value behind it, you’ll quickly lose them. Make ease of use a top priority in the free experience. Some basic tips include:
- Ensure a smooth and consistent experience from your website to your app or portal.
- Have a plan for user testing to identify issues or gaps.
- Keep it simple, even if what you do is complicated.
- Guide users through the experience with guided tours, help boxes, and clear setup steps.
3. Clearly Mapped Customer Journey
Mapping out the customer journey is one of the first and most critical components of a marketing strategy for a freemium model. You have to know the channels that your customers will find your brand through, the touchpoints you’ll have, and the experience they’ll have throughout their interactions with you. From the moment your customer realizes they have a problem to the moment they fill out a form to become a freemium user, you need to understand what information they want, what they value, and how you’ll interact throughout. When you get to the nitty-gritty of the sign-up process, map the exact touchpoints you’ll be attempting to make with your users as shown in the example below.
4. Demand Strategy
How will your users find you? Looking at the customer journey helps inform this, but in what channels do you need to optimize and invest your resources in order to drive potential buyers to your website or app? If your potential buyers spend their time on social channels, leveraging paid ads might be in your demand strategy. On the other hand, if your buyers turn to search when looking for a solution like yours, SEO might be part of the strategy. It may even be traditional methods such as trade shows. The right mix for you is dependent on your buyers, but a demand strategy is a key part of success.
5. Content Marketing Strategy
Whether you’re driving demand at the top of the funnel or educating prospects about your product, a content marketing strategy is a must. Your buyer personas and a full understanding of the customer journey will inform each of the key pieces of content you need to prioritize as part of your strategy. Check out this post from the SmartBug team on how to create a content marketing strategy and plan.
6. Conversion Rate Optimization (CRO)
Throughout various points in the funnel, CRO, the practice of testing for improved performance, will help you drive more demand and sales. One of the most important things to test with a freemium model is the exact model you intend to use. As discussed above, there are multiple ways to give your product away for free. If you’re just getting started, you will want to test the freemium model with a small set of users before investing too much in marketing. Beyond the exact model and positioning you use for your freemium product, testing conversion points all along the funnel is important, especially the conversion from a free user to a paid user.
Remember the scientific method? It’s not just something you needed in your college chemistry class, but it’s an important part of creating effective CRO tests. CRO tools also help create CRO tests that make a big impact, but one of my favorites by far is this calculator that helps determine the duration of time you should run an A/B test in order to make conclusive decisions.
In order to complete effective CRO tests, you need to have the right analytics tools in place. Aside from CRO, you also need to understand key pieces of data throughout, including an understanding of which channels are most effective at driving new users, which content is most engaging, how freemium users are navigating the experience, and the overall performance of your campaigns. Some of my favorite reporting and analytics tools for a company using a freemium model include:
8. Customer Marketing Experiences
With a freemium product, customer marketing is equally, if not more, important than any other part of the funnel. Free users, although not technically customers, quickly want to be treated like a customer and need a five-star customer experience in order to stick around. Once they become a paying customer, you have to keep them paying, likely through a subscription that could be cut out of their expenses at any time.
Today, any marketer, especially a SaaS marketer, shouldn’t just be marketing; they should be creating experiences—and the customer’s experience is critical. This experience is made better in many ways, such as creating a customer knowledge base, sharing swag, or hosting an event just for them. When creating experiences, consider what you want your customers to feel when interacting with you and your free product. And build an experience to deliver that.
About the author
Amber Kemmis was formerly the VP of Client Services at SmartBug Media. Having a psychology background in the marketing world has its perks, especially with inbound marketing. My past studies in human behavior and psychology have led me to strongly believe that traditional ad marketing only turns prospects away, and advertising spend never puts the right message in front of the right person at the right time. Thus, resulting in wasted marketing efforts and investment. I'm determined to help each and every one of our clients attract and retain new customers in a delightful and helpful way that leads to sustainable revenue growth. Read more articles by Amber Kemmis.