Freemiums: Are They Right for You?

- September 3, 2012

Smart Monday/Promotion

Hello, I’m Jim Glover, That Branding Guy for Once a Day Marketing.  Today is Smart Monday and I am going to talk about a term I read about recently in the Wall Street Journal called Freemiums.

Freemium is the strategy of giving your product or your service away free to build a customer base.  Companies like Skype, LinkedIn and Dropbox have all successfully used the Freemium strategy; the question is: will it work for you?  It’s simple to implement and it will attract followers, but does the conversion rate to paying customers make sense for your business?

There is no strategy that I know of where you can give your product away forever.  You have to eventually convert free customers to paying customers.  Here are a few processes you can use to accomplish that.

First you should limit your free offerings.  Next, promote both free and paid products/services at the same time.  Put a referral system in place to encourage free users to refer others to your company.  This will enable you to continue to grow your data base.

Clearly distinguish between your free product and your paid product.  Ensure there is a clear differentiation.  Let customers know they receive additional value when they pay something.  Lastly, establish a natural progression moving from free to paid and share that with your customers.

The data shows the conversion rate may be rather low.  It could be as high as 5% but more likely 1-2%.  The data also indicates you need 1 million subscribers to be able to create a worthwhile Freemium campaign.  So it’s not for every business.

I also distinguish between something like a blog, my blog where I am sharing information to get to know you vs. giving away a product.  Review the pros and cons carefully whenever you are looking at a promotional strategy to attract new customers.

That concludes Smart Monday.  Join us tomorrow for Strategic Tuesday.  To discuss an online or face to face service engagement and enhance the marketing and branding for your organization, contact James Glover: (505) 501-1330 or  I’m Jim Glover, That Branding Guy, for Once a Day Marketing and we’ll see you next time.

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