
Lessons Learned: Three freemium strategies - jasonlbaptiste
http://startuplessonslearned.blogspot.com/2009/01/three-freemium-strategies.html
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patio11
There is also the option on segmenting your market into two groups:

1) Customers with whom you trade value for money.

2) Customers with whom you trade value for value.

There are a lot of businesses which end up doing this by default (by doing a
free trial model aimed at separating #1 from non-converting users) but I think
you get much better ROI on the effort if you explicitly take into account
those #2 customers in your design stages.

For example, in the traditional shareware model, the two major events in the
sales cycle are download conversions and purchase conversions. Downloaders
convert to purchases fairly infrequently -- the number most people give is 1%
but what they really mean is "we don't know a number but it is low".

The traditional model largely sees the non-converters as a) not differentiated
from purchasers except by their decision not to purchase and b) a cost-center:
they tie you up with support inquiries and cost bandwidth, but you don't make
anything off of them.

But what if you knew, a-priori, something about your market such that you
could predict who the purchasers would be? The traditional shareware model
might say "Great, avoid exposing yourself to the rest and you'll save time and
money". But rather than excluding them, you could instead use them -- they've
got blogs, they've got contacts in your group of core purchasers, etc. Instead
of thinking of them as a cost, you can think of them as customers who are
bartering things of value instead of money for your software/service/etc.

One example of a business which does this pretty well is github: they use
free-for-OSS pricing to get them exposed to people who will request their boss
to purchase paid-for-commercial services.

You can use the same basic concept with free trials, free plans, free content,
etc. Its the basic core insight that I use to organize my content publication
and limited free trial strategies for my downloadable software. Still working
on my blog article about that that I mentioned here earlier. The ROI is
wonderful if you get it right (remember, the traditional shareware model is
assumed to leak 98%+ of prospects as muda [1], so capturing any fraction of
that is powerful stuff).

[1] Muda is a Japanese word you'll hear a lot in certain management circles
because Toyota is institutionally obsessed with eliminating it. The closest
literal translation is "waste", but it relates to all sorts of process
inefficiency. I find it is a helpful frame of mind to have in the toolbox when
optimizing for conversions -- it sometimes is worthwhile to say not "Why did
Bob buy this?" but "What _prevented_ Suzy from buying this?"

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rustartup
I wouldn't call 'Free trial' the 'original freemium model' Surely, its the
original 'try-before-you-buy' model.

So we're left with only two options:

1) Active free users - adding value by doing something, like creating content

2) Passive free users - adding value by just using the service, like
attracting others on a dating site

Users that neither do something useful nor attracting others should be forced
out (?) or forced into the paying group (maybe by offering a fix length
period).

This will be another way to look at 'try-before-you-forced-out' model, where
one can prove her usefulness to the service

