Freemium is certainly a better model then "we'll figure it out later", but I think it is very dependent on specific markets. The reason I say this has a lot to do with my own project.
I'm working on software that builds and maintains business websites. Sorry for being vague, but I'd rather SHOW you guys when it's up. So in this case I think the freemium model will hurt my business and my customers, here's why:
No lead qualifying -
If you are targeting a specific niche having a free product encourage anyone and everyone to sign up. This drastically reduces the conversion rate. I know the argument here is one of marketing, but if a client signs up for a pet application and does not have a pet, is he really going to be an effective marketer? How many accounts have you set for free services you just wanted to "test out". For me I'd say about 20, and I've never been back since. I'd imagine they still have my accounts though.
No client incentive -
In my specific case my clients (businesses) will use the software to create a website. If the service is free, they essentially have no incentive, no motivation, and no time limit to proactively use the system.
Consider the case where everyone had to pay the monthly fee up front, but came with a money back guarantee. "Did we not prove our product was useful? No problem, here's your money back". If a customer pays for your services, he definitely is going to spend time given it an authentic test run - his money is on the line!
Paying customers cover free versions?!
Again, depending on the product, and payment structure, your much more likely to generate more revenue from EXISTING customers, than you will be acquiring new ones.
This is a very fundamental business/marketing principle.
Low efficiency -
If your business requires any type of customer support, the price for free jumps dramatically. Resources would be better spent servicing pre-qualified leads.
Paying customers are customers that value you.
Doesn't that just sound like its a nice thing?
I know we ought to work hard for our customers, but if you ENCOURAGE people to place no value in your service, you are asking for trouble no?
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So seeing as how my business is not launched yet, these are all just theories in need of testing. They also, as I said, may or may not apply to certain industries and products. But overall I think its worth mentioning.
I'm working on software that builds and maintains business websites. Sorry for being vague, but I'd rather SHOW you guys when it's up. So in this case I think the freemium model will hurt my business and my customers, here's why:
No lead qualifying -
If you are targeting a specific niche having a free product encourage anyone and everyone to sign up. This drastically reduces the conversion rate. I know the argument here is one of marketing, but if a client signs up for a pet application and does not have a pet, is he really going to be an effective marketer? How many accounts have you set for free services you just wanted to "test out". For me I'd say about 20, and I've never been back since. I'd imagine they still have my accounts though.
No client incentive -
In my specific case my clients (businesses) will use the software to create a website. If the service is free, they essentially have no incentive, no motivation, and no time limit to proactively use the system. Consider the case where everyone had to pay the monthly fee up front, but came with a money back guarantee. "Did we not prove our product was useful? No problem, here's your money back". If a customer pays for your services, he definitely is going to spend time given it an authentic test run - his money is on the line!
Paying customers cover free versions?!
Again, depending on the product, and payment structure, your much more likely to generate more revenue from EXISTING customers, than you will be acquiring new ones. This is a very fundamental business/marketing principle.
Low efficiency -
If your business requires any type of customer support, the price for free jumps dramatically. Resources would be better spent servicing pre-qualified leads.
Paying customers are customers that value you. Doesn't that just sound like its a nice thing? I know we ought to work hard for our customers, but if you ENCOURAGE people to place no value in your service, you are asking for trouble no?
--------------------------
So seeing as how my business is not launched yet, these are all just theories in need of testing. They also, as I said, may or may not apply to certain industries and products. But overall I think its worth mentioning.