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How to Get Good Out of the Bad Side of the Freemium Model?

If it is difficult for you to digest the idea of giving your product away for free to your users, this is how you can make the freemium model work for your SaaS.

Prithvi Manjunatha
How to Make Freemium Model work for your SaaS?

SaaS selling is tough, to say the least. That's why it's important to gain customer loyalty and find ways to differentiate a software from others. It's not just about quoting a price for SaaS subscription and promising certain product features, it's also about showing users what you have to offer. As a result, many service providers are adopting the "freemium" model of SaaS pricing models in order to attract new customers to their platforms.

If you are someone who just started out in the world of SaaS, it may be difficult to digest the idea of giving your product away for free to users. Something that took your blood, sweat and tears to be what it is today, sure needs to bring back some reward home, but you may feel that the freemium model takes that away from you. Even if you wrap your head around offering the software via freemium model you are intent on giving away monimal amount of functionality for free? Dont be reluctant, the freemium model is supposed to give new users a taste of the service before they decide on buying any of its paid plans

Why should I incorporate a freemium SaaS model?

Who doesn’t love free stuff? Just the thought of getting a free container of dip on the purchase of a packet of nachos makes me want to buy a pack of nachos! 

Now, what if you got premium features of any software or service for free even without paying anything for it? It’s a pretty appealing idea, right? So, it is for your target set of audience.

If you’ve used Spotify, Google Drive, Slack, or Evernote, they’re all perfect examples of freemium SaaS. These platforms have a lot to offer to anyone for free. Some features might be held back but nothing essential.

Types of Freemium plans

Limited Features:

Free video chat software may not include 3-way video calling. Most free games fall into this category because they offer virtual items that are either impossible or very slow to buy with in-game currency but can be bought directly with real money.

Limited capacity:

Your plan can offer your users a limited storage feature on their projects. For example, Dropbox, a popular cloud storage platform offers 2Gb of storage. 

Limited Use License:

For example, most full Autodesk or Microsoft software products are free to students with a study license. (See: Microsoft Imagine.) Some programs, such as CCleaner, are free for personal use only.

Limited Usage Time:

Most free games allow the user to play the game sequentially for a limited number of levels or maps. The player either has to wait a while to play more or buy the full game.

Limited Support:

Priority or immediate technical support may not be available for non-paying users. For example, Comodo offers all of its software products free of charge. The premium offering just adds a variety of technical support.

Risks of freemium

Freemium carries significant risks. If not handled wisely; it can lead to overhead and negative product placement and ultimately systemic failure. This blog helps understand the risk factors for the "freemium model" in SaaS software.

Most freemium founders consider it a revenue model in the back of their minds. Freemium isn't a source of income - it's just a marketing tactic. The company's revenue has to come from somewhere.

Sometimes, when the wrong message is spread among users, free items damage the brand or position in the market. Some companies may not consider the product as part of their evaluation process.

The “Try, Before You Buy” model, has a different influence on the user's purchasing decision than the freemium model. In Freemium, users can use the more or less complete functions of the product forever. But in the try before you buy, the user can have full paid functionality of the service for a limited time, usually one or two weeks before their trial expires.

Here’s an article on what your SaaS should cost to know the things to keep in mind before pricing your SaaS.

How to monetize when you opt for freemium?

In-app ads

The most common way to monetize freemium users is to show them only in-app ads. This provides a valuable source of income for apps that want to stay on the App Store for free. You can join an advertising network like Google Admob or talk about a marketplace where your app sells advertising opportunities.

Subscription service options

You can create some premium options that are separated by layers. You can set up a standard, professional, and enterprise subscription. The enterprise plan can be the highest with features and the business plans can be a dialed down version of the features. 

Feature pricing:

Function-based pricing takes pricing personalization to the next level. With this pricing model, SaaS companies can charge their services based on the features of the service the customer wants to use. This dynamic pricing model allows customers to choose their payment method and ensures that no revenue flows through the holes.

Price bundling

In the SaaS world, it can be hard to upsell services individually. Price bundling is a creative way to combine offers to get the customers to buy them as a collection. By bundling two or more services together, SaaS providers can offer a price advantage to their customers and make their services more lucrative. SaaS companies just need to select, group, and price their product/service features appropriately to make their offering more lucrative.

To wrap it up…

In general, freemium is an important strategy to reach and promote the business that should not be given up until it is too late to achieve international dynamism. The world is shrinking and it is very easy to use localization tools to get the benefits that are easy to get abroad. It’s an early bird’s worm at this point.

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