Freemium Success Extends Beyond Exceptional PPC & SEO

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Robert | Friday, September 24th, 2010

Filed under: PPC Tips & Advice, SEO Tips & Advice

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Freemium Defined

Wikipedia defines Freemium as “a business model that works by offering… a basic downloadable digital product, for free, while charging a premium for advanced or special features.

There are many Freemium based-business models, some of which succeed while many of which do not.

Why Some Freemium Companies Succeed & Others Fail

Having worked with many Freemium companies I’ve analyzed those that are successful and those that are not. In doing so I’ve identified five critical success factors and would like to share them with you. Tweet this.

Freemium Success Defined

Although others may offer different definitions of Freemium success, there’s one undeniable metric that defines Freemium success – does the conversion and retention rate of paying subscribers result in a customer lifetime value such that the Freemium model results in a positive return on investment (ROI)? If a positive ROI cannot be achieved, it doesn’t matter how many downloads or prospects initially adopt your product, the Freemium model is deemed a failure. Here are the essentials to achieving a positive ROI.

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Step 1: The Silver Bullet

Unfortunately, as is often the case there is no silver bullet that results in Freemium success. However, Freemium success starts with a good PPC & SEO demand generation model and extends into activities that are very process and customer-centric driven.

Effective PPC & SEO demand generation initiative should work hand-in-hand. SEO should be used for those limited number of keywords that a) you want to “own”, and b) are frequently searched, competitive keywords (otherwise known as short-head or short-tail keywords that result in high average cost per click (CPC) in a PPC campaign. SEO should then integrate with a long-tail PPC campaign that includes many thousands of keywords, including keywords derived from nomenclature that your company may not use, but that your prospects and customers use to refer to your product or service.

Step 2: Free Is Not Always Perceived As Free

Although the free edition of a Freemium based product may not cost any money, customers immediately evaluate the opportunity and learning curve costs. Try to see your product from the perspective of your prospects and customers. How long does it take to download the free edition? How much time does a prospect have to invest in learning how to operate the free edition? (a technical audience tends to be willing to spend more time to learn the use of a product than does a non-technical or consumer audience.) Does the free edition deliver sufficient value to get the prospect “hooked” enough to use the product in his/her daily life? Is the user interface and operation of the free edition attractive, easy to understand and easy to use?

If after critically reviewing the free edition of your product you determine that the answer to these questions is predominantly “no”, then you MUST get the product development team to recognize the critically of this issue so that changes can be made to meet these specifications adequately.

Step 3: A Delicate Balancing Act

Having worked with many Freemium companies I know that there’s a delicate balancing act between providing sufficient functionality in the free edition while not “giving away the store”. Another way to say this is where do you place caps or ceilings on the features and functionality in the free edition.

I’ve observed that those Freemium companies who succeed have found the “right mix” of features and functionality such that customers of the free edition can use the product and derive useful value in their daily life, yet will hit a cap or ceiling as their use of the product expands. My advice is to err on the side of setting lower, rather than higher caps, especially to begin with. Keep in contact with free edition customers and use that feed back to determine if the cap is set too low (or too high). Always remember that the definition of Freemium success rests on achieving a positive ROI. If customers of the free edition rarely hit the caps and ceilings you’ve set, the rate of converting free edition customers to paying subscribers will suffer greatly.

I find that Skype serves as a good example of setting a proper balance. The free edition of Skype is very useful in many ways, but one useful feature is the free Skype-to-Skype conference calling capability. As you begin to use that feature it permeates your daily life more and more. Soon you begin to rely on it. Shortly thereafter you will soon hit the ceiling that limits the number of people who can participate in a conference call. The limit is five. When you try to connect to a sixth you receive a message indicating that you need to upgrade to the paid version of the product. Using this example, Skype users easily get “hooked” on the Skype-to-Skye conference call functionality and its ease of use. They enjoy and even come to rely on the product and its features so that by the time they hit the ceiling the decision to upgrade to a paying subscriber is leaning in Skype’s favor.

Step 4: Touching The Customer

The decision about when to reach out to a free edition customer is one that most companies struggle with. However, I’ve discovered that Freemium companies who contact their free edition customers sooner tend to be more successful than those who wait and contact their free edition customers later. The reason is simple. Rarely is a product so simple to learn that it requires zero hand-holding. To the extent some degree of hand-holding accelerates a users learning curve and satisfaction, as soon as a free edition customer has gotten frustrated and doesn’t fully understand how to use the product – you’ve lost them. If you contact them after that point, the number of prospects you can win over is substantially lower than those who you can win over if you contact them while they are still “hot” and experimenting with your product.

So how much time should elapse before contacting a free edition customer? The answer is “anytime between immediately and within 24 hours of the download”. This may seem to be a very short amount of time to many, and in some instances a small percentage of the free edition users might initially be “freaked-out” by an immediate call, but if the tone and message delivered by the caller is the right one, that initial reaction is quickly defused.

When contacting free edition customers immediately, or no later than 24 hours from time of download, the message should include some critically important components: 1) introduce yourself as a dedicated, personal coach, 2) thank the customer for trying your product, 3) ask the customer what their objective is, 4) confirm that your product will allow the customer to achieve their objective(s), 5) offer to spend time right then, or at some future time, to hold their hand and walk through the product’s features and functionality, 6) provide your contact information and remind the customer that you are their personal coach whose job it is to be there every step of the way.

Step 5: If You Don’t Measure It You Can’t Fix It

With the exception of Step 4 (which I believe to be universal across all Freemium companies), there is no “cookie-cutter” approach to Steps 1-3. The mix of PPC and SEO (and more recently, Social Media marketing) initiatives, ease-of-use and product feature/functionality caps are often a puzzle whose pieces must work in concert. Orchestrating a successful “concert” requires frequent changes to see how the conversion and retention rates are affected. In order to determine the effectiveness of changes you make to the puzzle, a system of measuring the conversion and retention rates has to be implemented. Keep a detailed log of the changes made, when you made them, and who they affected. If possible, try to limit the number of significant changes to one at a time. Allow that change to permeate through the user base over a long enough period of time so as to get an accurate measurement on the effect the change had on conversion and retention rates. If you suspect or determine other changes to the puzzle are warranted, again, keep a detailed log, try to limit significant changes to one change at a time, and measure the effect on conversion and retention rates.

What Do you Think?

We’d like to know your thoughts. Have you found other key Freemium success factors, and if so, what are they? Do you agree with the points raised in this blog or do you have issues with any of them? Please let us know what you think by using the comment section below – we’d love to hear from you.

As always, if you have any questions about anything in this blog you should feel free to also use the comment field below – we’re more than happy to address your question(s). And please feel free to let us know if you would like a free consultation about your PPC, SEO and/or Social Media Marketing initiatives. We wish you the best of luck in your endeavors.

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