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Tech + Startups

For SaaS Startups, Freemium Beats Free Trials

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Let’s get one point out of the way — your customers don’t really care very much about your aspirations for an IPO and shareholder liquidity. 

It’s an intuitive statement, but one that, in my experience as an investor, entrepreneurs often overlook when bringing a Software as a Service and other subscription-based startups to market. Just the other day, I was advising a pair of co-founders for a European startup who are expanding into the U.S. market. They were primarily focused on setting up their go-to market strategy to get to profitability within 18 months and then pay dividends to their investors. These founders made plans to build their business on a platform of paid subscribers and walled off any interest from a free user base that might last beyond a brief trial.

Theirs was a viable strategy, but not one suited to sustainable and strong growth. When founders for SaaS startups focus solely on free trial or paid only models that will allow them to repay their investors as quickly as possible, they curtail their company’s potential growth and can actually underrepresent the interests of their consumers. To succeed with a SaaS model, entrepreneurs should make a case for why customers should even bother to sign up or pay in the first place — and frequently the best way to accomplish that is to hook their users by demoing their services on a freemium model.

The Value of a Freemium Hook

When I spoke to the co-founders mentioned above, I pushed them hard to turn their free trial plans into a full-blown freemium model. It’s simple math; as marketing researcher Vineet Kumar put the matter in an article for the Harvard Business Review, “All other things being equal, you would do better to convert 5% of 2 million monthly visitors, for example, than to convert 50% of 100,000 visitors.” 

The research backing the freemium approach is compelling. Researchers have found that a free user is typically worth as much as 25% of what a fully-paid user is, and often brings significant value in the form of referrals. According to findings circulated by Kuman, these referrals plus a free-first approach can create a moderate conversion rate of between 2% and 5%. Those percentages may seem small, but when a SaaS startup’s cultivated user base counts in the tens of millions, they can bring in significant funds. 

That’s the value of a freemium model, and we see examples of its success everywhere — from our Hulu channels to Dropbox accounts and Linkedin profiles. 

However, such a model won’t find viral success immediately. Going freemium isn’t just about offering your product for free, it’s about how you do it, what you share, and what you withhold from free consumers. Why should people take the time to sign up for a free account? What makes your freemium model compelling, and how are you retaining or extending your Premium features to make your product the best in the pack? It’s not enough for SaaS startups to have a solid product and an accessible subscription model — they need to know which features to include in the free version to make it useful enough to demonstrate value, and which features they should offer to make signing up for a Premium subscription not just an attractive choice but an inevitable decision. 

Let’s consider Spotify as a case study. 

Spotify – A Case Study for Viral Freemium Success

Spotify was founded in Stockholm, Sweden, in 2006. Its founders, Daniel Ek and Martin Lorentzon, intended the platform to be the legal answer to the digital piracy that had plagued the music industry at the time. Their subscription streaming services proved to be precisely what consumers at the time needed, and Spotify came to revolutionize streaming music. It continues to dominate the industry today; according to the company’s 2019 Q1 earnings report, the platform now boasts 217 million monthly active users and 100 million (46%) paid subscribers.

It’s worth looking at the numbers, here. Spotify’s percentage paid rate stands out as a far cry from Kuman’s average 5% free-to-paid conversion rate. There are several reasons for this; first, Spotify found its niche and established itself as a foremost service provider early on in the streaming era, allowing it to gain a high number of subscribers before its competitors found their footing. Secondly, (and more relevantly for SaaS entrepreneurs) Spotify carefully designed its free packages to provide exactly what consumers needed — but not what they hadn’t yet realized that they wanted. 

Spotify’s free package offers users the wide music selection and on-demand features they want. However, it does so at lower sound quality than its premium offerings and only when the user has an internet connection. Spotify Free also interrupts users’ music streams with periodic advertisements. Premium, on the other hand, is entirely ad-free — and comes with higher sound quality and download capabilities to boot. Premium offers an answer to all the grating inconveniences that subscribers didn’t realize that they had until they tried Free and realized that they could have an ideal experience by upgrading. It removes the ads, the service interruptions, and low-quality offerings. For many subscribers, the convenience that those top-tier features provide is well worth the price of a premium subscription. 

The company has also found creative ways to hook users on their Premium offerings without first signing on to Free. In the last year, Spotify made a deal with Samsung to ensure that all consumers who purchase Samsung’s Galaxy S10 will receive a six-month free trial for Premium and the app pre-loaded on their phone. This deal will allow new customers to become accustomed to the conveniences of their Premium offerings and — when the trial comes to an end — either struggle with the now-unfamiliar inconveniences of the free package or sign on for a subscription. 

For early stage founders focused on liquidity, a freemium model may seem not adept enough at gathering paid subscriptions and reaching profitability quickly. In particular, as the market for capital formation tightens and the IPO window gets more challenging, controlling cash burn is important. In practice, however, freemium platforms aren’t centered on giving a service away for free but scaling quickly and efficiently. Your platform and message can reach a much larger base faster and if you have strong marketing and conversion strategies you can persuade a tangible portion of the subscriber base that your premium package is worth the upgrade. Successful freemium services achieve impressive, long-term gain by building on a bedrock of carefully-selected free services. This ultimately can make them more beneficial for investors and customers alike.  


When founders build SaaS businesses, they can’t focus solely on providing returns to their investors. Instead, they need to strike a balancing act that weighs the needs of consumers, investors, and the business itself. Freemium models can help founders accomplish this — but only if they can hone in on the why behind their business, find out what their customers will value the most (preferably before they have to ask for it), and craft premium and free packages that make upgrading a necessity, rather than a luxury.

Ed Sappin is the founder and CEO of SGS (Sappin Global Strategies), an investment and advisory group building the next generation of global innovators. SGS focuses on its core verticals of technology and energy, as well as emerging areas including AI, blockchain, digital healthcare, and big data.

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Tech + Startups

AI: The Solution to Employee Stress

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Work and stress — the two have become synonymous.

You’d be hard-pressed to meet an American worker in today’s business landscape who wasn’t. I get stressed out, so do you, and so do the greats of every industry. Marc Andreessen, co-founder of Netscape, describes stress as an emotional rollercoaster where you flip-flop from a day when “you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again.” Elon Musk equates stress to “chewing glass and staring into the abyss.”

The point is, stress is imminent. It doesn’t care where you work or how much money you make, you’re working in the country with the most stressed workers in the world. The global average is around 35 percent, but Americans register at around 55 percent. This really shouldn’t come as a surprise. Today’s dog-eat-dog business landscape breeds companies that believe you can weed out top talent by putting such high pressure on employees that only the most competent will stay. Basically, survival of the fittest.

But stress has sobering consequences. One million people miss work every day, citing stress as the reason. And this doesn’t only affect employees, either. Absenteeism costs companies up to $300 million a year. Being under constant pressure to live up to high performance standards doesn’t separate the overachievers from the underachievers, it slowly corrodes the abilities of your most skilled staff members.

When your employees are too stressed, they pay for it, but so do you. As companies figure out how to run leaner and more efficiently, it’s also important that they continue to implement internal methods to curb increasing stress levels. Appster, for example, will fund their employees’ after-work outings every so often and companies like Google offer in-house mindfulness courses so employees can meditate during the workday. Other tactics like flexible working hours and employee-assistance programs are valuable, but we now have unfettered access to the perks of technology, so why not tap that market too?

Artificial intelligence isn’t the office bad guy; it’s not there to threaten your job security or compromise your privacy. It’s assumed that AI will dehumanize the workplace, but I would argue that it does the opposite. When we use artificial intelligence intentionally, we make the workplace human again.

Automating the mundane and menial

As company’s have begun gradually introducing technology into their operations, we’ve become familiar with how automation can save both time and money. Repetitive and seemingly inconsequential tasks will always be a part of the job, but now employees don’t have to be the ones to support these daily duties — and who isn’t excited about being able to use their brainpower elsewhere?

Many businesses choose to start with chatbots because their benefits are overt and pervasive across every industry. These automated messaging platforms intercept tasks such as filling out documentation and replacing simple customer service requests so employees can focus on what AI can’t automate, like creative strategy and important decision-making. Another great use of automation is Feebi, a chatbot that can field 90 percent of common restaurant questions, like what your hours are or what’s currently on the menu. Your employees don’t need to be bogged down with these incessant, unimportant tasks.

Create their in-office ‘happy place’

Company culture is more than just the relationships between team members, it’s also about the environment you create. Think about it: who wants to come into a cluttered, dirty, bare-walled office every single day? We spend more time at work than we do our own homes, so it’s important to incorporate the same elements in a workspace that you would want to surround yourself with at home — more natural light, vegetation, etc.

There are automated sensors you can build into your workplace that can analyze a certain employee’s mood and assess whether or not adjusting environmental conditions could directly enhance their productivity and happiness levels. There are smart temperature controls that can automatically change the temperature of an employee’s office to their preferred comfort level and there are automated systems that can even water your office plants for you (yes, plants play a vital role in elevating employees’ moods).

Stress-detecting software

Wearables such as Fitbits have been around for quite some time now and are renowned for their ability to accurately track your health and fitness data. So, why not have something similar for the office? AI-enabled tools can monitor an employee’s emotions and behavior and watch for signs of stress, anxiety, and even depression.

Cogito is a platform that can listen to sales and service calls and offer feedback on the interaction. Not only does Cogito guide you with real-time advice on how to improve your calls, but it can also identify stressed customer service agents that could be on the verge of burnout. Affectiva, a ride-sharing service, can do the same for their drivers, assessing facial expressions for emotional cues like anger or anxiety.

Employees are often too afraid to come forward when they are under too much stress because the business landscape has taught them that they are easily replaceable. Leaders are often so preoccupied with their own schedules that they rarely see signs of stress before it’s too late. Don’t let human error support stressful working conditions. Instead, let AI give us our happiness back.

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Tech + Startups

7 Tips To Get More Clicks On Your Facebook Ads

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It’s no secret that many companies struggle with Facebook ads. Nevertheless, while there are many different conclusions as to what went wrong, the most common reason is a lack of clicks on their ads. Does this sound familiar? Well, there’s no need to pull your hair out. There are many things you can do to improve the CTR (click-through rate) of your ads.

 

7 Tips To Get More Clicks On Your Facebook Ads

 

#1: Try Carousel Ads:

One of the latest trends that are getting great results is carousel ads. Carousel ads allow you to use multiple images instead of a single creative. So, when you are promoting a product for sale, you can display different images of the product instead of just one. Additionally, this also allows you to display a range of products side by side in the same ad. Why does this work? You’re giving your customers more choice and so they’re far more likely to find a product they like vs regular ads.

 

#2: Make Good Use Of Customer Testimonials:

Now hopefully, you already keep your customer testimonials updated on your company’s website. So, why not display them on your Facebook ads as well?

The reality is that people are always looking to confirm that they are making a good decision. So when you add a customer testimonial to your ad, you are providing the confirmation they need to click on your ad and more importantly, trust your company enough to purchase.

 

#3: Use Urgency On Your Ads:

Urgency is one of the most powerful motivators that leads people to click on your ads. But,  whilst you may not be able to use urgency in all your ads, you can certainly use it in some.

No matter if it’s a limited-time offer, a price increase or an expiration date, make sure that you display this sense of urgency prominently on your Facebook ad. This engages your customers to act quickly before it’s too late!

 

#4: Try Out Different Images:

As the old saying goes, “an image is worth a thousand words”. So, testing different images makes perfect sense. You may feel without a doubt that you’re using the best image you could find, but maybe your target audience doesn’t feel the same. And maybe this is why they aren’t clicking your ad. So, split testing multiple different images allows the Facebook algorithm to test each one and give you the best performer. This incredibly important step should never be overlooked! Each campaign you run should have at least 10 different creatives and you should never fall in love with a particular one. Let facts and numbers decide which creative you continue to use for the duration of your campaign.

 

#5: Test Different Color Schemes:

Since we just mentioned trying out different images on your ads, why not test different color schemes as well?

The truth is that some minor changes in your colors can make a huge difference to your click-through rates. It’s worth researching the market psychology behind different colors and testing a few that fit the image your brand is trying to portray.

 

#6: Offer Something For Free:

Who doesn’t like something for free? Nobody.

When your goal is to get more clicks on your Facebook ads, a sure-fire way is to offer something for free. Let’s face it, this is no secret, but you’d be surprised by the results it can achieve.

‘But wait, my business wants to make money’

Well of course, but by offering something free, you’re establishing that important initial relationship with the customer. This allows you to retarget them again in the future and sell them your product with an already established level of trust.

 

#7: Always Include A Call To Action:

No matter if you’re looking to make a sale or to get people to sign up for your newsletter, you always need to have a crystal clear call to action displayed on your Facebook ad.

The truth is that just like with your website copy, you need to drive people to do what you want. In this case, you want them to click on your ad. So, make it pretty clear if you don’t want to miss out on clicks.

 

Want more tips and advice on Facebook Marketing? Head over to GeorgeMcCormick.com

 

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Tech + Startups

Meet Jerry and Sherri Nourse: The Power Couple Helping Build Up Brands With Their Social Media Firm

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Entrepreneurs Jerry and Sherri Nourse have built their multifaceted business, Ambition Media, from the ground up. They run a full service social media firm that builds brands, builds and manages social media campaigns, runs influencer marketing campaigns and social media ad campaigns. They create social media content, video content, and develop brands as a whole from ground up or brands that are already built and need social media presence and marketing. Their large platform on Instagram allows them to hit over 300,000,000 impressions per week. Their amazing portfolio of accounts include some of the very best in the industry such as @motivationmafia, @positivevibesquotes & @agentsteven. Just in the last few years alone, they have grown these accounts to over 5 million followers.
When Jerry and Sherri first began, they did so with the idea of developing pages to better the lives of their audiences, for them to have a place to discuss and learn and grow. Then came their social media marketing firm to help companies develop their brands and expand their digital footprint with new audiences by providing customized individualized development including everything from visual content development to execution and conversion. Jerry and Sherri realized the power of social media and how far they could reach audiences in all communities, all over the globe. Their mission became helping others in their daily life through their large network of pages.
“The ability to help companies grow and promote on social media is something we are passionate about. Helping media and entertainment companies promote their product–movies and television, helping large and small brands promote everything from clothing, cars and luxury to alcohol and travel,” shared the entrepreneur couple.
Their secret to their massive success has everything to do with hard work and their mindset. Jerry and Sherri run a business with over 110 million followers. This requires them to have a business plan that is detailed, realistic, and contains all the details to make them succeed. This along with getting honest, motivated, and trustworthy team members. Finding individuals with a strong work ethic and the drive to make things happen has been a huge factor to their success.They carry the right mindset with them, focused on the path in front of them, never getting discouraged.
“We are building a brand that truly help others. We are teaching and growing companies that are not able to get the exposure they need on social media,” they share.
Their advice to others looking to become entrepreneurs is to make sure that they spend time creating a very detailed plan of action that is attainable with steps, progress, and execution that is realistic and attainable. They also emphasize the importance of having adequate funding because of the many hidden costs that you never think of when you are diving in at the beginning.
“Think outside the box and think bigger than you are right now,” they say.
The next step for Jerry and Sherri is to continue to expand and exponentially grow the company–growing and building brands on social media and extending that into the charitable arena. They want to continue developing a teaching arm to help others grow their presence on social media. With their huge following on social media, and the brand and platform they have built for themselves, Jerry and Sherri have managed to build a successful business that is transforming the lives of their clients. They have built an audience and a community that follows and believes in their work and what they stand for. Ambition Media is truly where to go when looking to take it to the next level, and that is thanks to all of the hard work and knowledge from Jerry and Sherri.
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