The SaaS Freemium Model

Freemium has become the industry standard as well as a highly successful marketing strategy for many developer-facing SaaS applications. For developers, it’s extremely important to be able to test drive a product before buying it and not to have to feel pre-committed until it has been approved.

The Freemium model has been tried and tested for decades and we have seen many companies such as Dropbox, Evernote, LinkedIn, Pandora and SurveyMonkey all thrive while using the freemium model, each one boasting success stories of their own. This is not necessarily the case for many other companies who have fallen prey to the Freemium trap and have proven unsuccessful in the long run. In order to attract, onboard and close a paying contract or pricing agreement with a potential customer, there are different steps you will need to take to make the Freemium magic happen.

Customer Onboarding Basics

Before we talk about your basic SaaS product, let’s address its usability. You want to make sure that you have a product offering in place that will start the engagement with your customers today. But how do you bring them onboard?

Selling is all about the test drive. If you’ve ever gone for a test drive in a car you really loved and desperately wanted to buy, then you can definitely relate to that feeling of tightness in your chest that you may have experienced when you had to drive the car into the dealership and hand back the keys. Because nobody wants to give up on something that makes them happy or feel good. 

The Test Drive: 

Being able to test drive a SaaS product before committing to it, is something that has become an industry standard for SaaS products and a basic expectation of customers. Make sure your customers have access to the bare minimum of features for a time limited period, thereby allowing them the ability to assess and decide regarding their next steps towards full integration. On your end, decide on the number of users you want to give access to, data allowance and maybe take the opportunity to integrate a branding message into any reports, emails or messages they send out during this trial period.

The Freemium Model:

Another option will be for you to offer the Freemium model of your SaaS product. It’s true that your users might seem to be mooching off of your product essentials. Try to remember that this scaled back version enables your customers who are unsure of their next steps or fearful of commitment, to continue to trial your solution for an extended period of time. Remember to keep in mind the tipping point. The key to a winning Freemium SaaS offering is to offer just enough value up to the tipping point, a place in time and usage where the user is ready to start paying for more. 

In order for the Freemium model to work, there must be low marginal distribution and production costs in place. That is possibly why this model is so successful in the SaaS industry, because the cost of every additional user is nothing more than a database entry. That being said, you have to be careful not to invest in additional infrastructure to handle these new users without making sure that you are generating the revenue you need to support these growing costs. You must also make sure to avoid overuse of the existing infrastructure by free users, thereby driving your paying customers to frustration and ultimately to your competitors.

Bottom line is to remember that the basis of the Freemium model’s success, you should ensure that you have

  1. A proper business model to support it 
  2. A way to balance your Freemium and paying customers
  3. Open multiple channels that can regularly communicate the benefits of transferring to a paying plan
  4. A plan to keep your infrastructure manageable and maintainable.

At Frontegg, one of the capabilities our customers regularly ask for is the ability to enforce certain application features based on their customer’s pricing plan. We know how important it is to our customers to be able to maintain different tiers of features within our products, and to be able to enforce different capabilities when needed and we constantly aim to offer these features in an affordable and yet easy to use and intuitive way. At Frontegg we want to offer a plan that suits everyone so feel free to reach out and let us know how we can help you get started on your SaaS development journey today.