The internet era has made us skeptical of all things free and it’s become almost second nature to steer clear. The promise of receiving something for free has always caught our attention, but, deep down, we know there’s a catch, usually in the guise of sign up forms, mailing lists, credit card requests, and sometimes the odd virus or two.
Free things, however, are making a comeback. Marketing departments and growth teams have realised that giving things away without the initial expectation to buy, join, or like, has proven, long term potential. For Saas businesses, the practice is colloquially referred to as having a ‘freemium’ service. For example, Mailchimp gives you a stripped back,
Take the win in the short term that they converted, free, low tier, whatever. Freemium is a long game. – Shaun McAvinney
free email marketing service which provides free access to some useful features, but not all. There is the catch – if you want access to everything, or the bits you actually want, you’re going to need to upgrade your account. For growth hackers in particular, getting the right recipe for a freemium service can lead to rapid growth and a high retention rate.
The psychology of doing things for free is deeply rooted in the human psyche and is one aspect of what social psychologists refer to as ‘pro-social behavior’ or ‘altruism’. Pro-social behavior can refer to an action that benefits both the giver and the receiver , regardless of the motive. Pure altruism, on the other hand, is defined as an act of kindness given without any benefit to the giver. Some of the reasons we might help others or offer something for free are; guilt, obligation, duty, or reward. It is often argued that no human act can be completely altruistic as some link can be made to one of the above examples, whether we are consciously motivated by it or not.
The growth potential of an altruistic style freemium strategy can become exponential when users have on-going access, engage longer and have the opportunity to ingrain the usefulness of the service into their work or life routine. The real driver behind this strategy isn’t just to gain a new user, rather, to also turn that user into a vocal evangelist, preaching to their like-minded peers, in a pro-social way.
Deciding if ‘freemium’ or ‘premium with a free trial’ is best for your business requires insight into how your current power-users are interacting with your service. These findings can not only shed light on what makes your service useful and essential, but it can also give you clues on the free sweetspot for your business. For instance, Buffer, limits its users to 3 social media channels, Dropbox gives you only 2GB of storage, and Surveymonkey only allows you to send and analyse small sample sizes of data.
We killed the free product and increased the price on the premium product. We increased the price multiple times and grandfathered old people in. – Sean Ellis
Netflix on the other hand gives you a 30 day free trial with no freemium service afterwards. These platforms’ fremium and free trial offerings provide just enough free services to entice new users, and this eventually leads to habitual use of the platform to the point where upgrading accounts is inevitable. This however, isn’t true 100% of the time. In a recent interview, Sean Ellis discussed how the freemium model didn’t actually work out for Qualaroo, due to not fully understanding the price sensitivity of customers after reaching their A’ha moment.
In my current workplace, I am testing a freemium offering, designed to kick in only after a premium free trial has been completed. I am hoping to activate dormant users who have had a lackluster free trial experience or who have been through the free trial experience before marketing automation was in place to work its magic on the customer journey.