How Startups Use Freemium Models To Acquire Paying Customers

Moving from free to revenue isn’t as easy as it looks

Should your product even have a free tier?

First, let’s dispel the conventional lure of the freemium model.

How to create a free tier

The current trend in freemium is to provide a tier that gives the customer a bare-bones-usability subset of use cases “forever.” There’s usually some sort of marketing badge or label attached to any output from that customer. This happens most often in software-as-a-service (SaaS), especially when that software is used to create something that’s ultimately shared with other potential customers — Bubble, MailChimp, Auth0, etc.

  • If the customer’s trial case is to provide real world functionality, that functionality can’t be limited, or else it will hamper their evaluation of your product.
  • If the customer’s trial case is to prove the viability of real world functionality, your product needs a method and mechanism to test that viability.

So where do you draw the line?

You have to have limits, not only for your own bottom line, but for maintaining the perceived value of the product.

Always get something in return

The primary goal of a free tier is the conversion of that customer to a paid tier. But there are secondary outcomes you should be chasing, and for that, you’ll need to make sure you have what you need from the customer before handing access over.

I’m a multi-exit, multi-failure entrepreneur. Sold ExitEvent. Building TeachingStartup.com & GetSpiffy. Former Automated Insights. More info at joeprocopio.com

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