Tips for Product Management for your Freemium model
October 25, 2018
October 25, 2018
How to do Product management for your freemium model and balance the demands of the paying customer against the freemium users is a common discussion thread within product management. Any business needs to focus on driving revenue and therefore the knee jerk reaction is to focus on the demands of the paying customer and set aside the freemium segment to continue to increase your bottomline. At a high level, I have found this to be a mistake and can cause much larger issues down the road. At the end of the day, a customer is a customer when it comes to product management and your position is there to solve their needs by providing a solution within your product. Yes, product management is responsible to drive growth using the product but by ignoring freemium users you end up hurting growth.
Let’s explore how you ended up with a freemium for product management.
Let’s take a step back to talk about the freemium model for product management. First, a freemium is often introduced because you believe the market is a low cost market that needs a very low barrier to adopt your product and over time upgrade to a paying model. Additionally, it is a great way to acquire contacts and emails that can be used later to cross sell or other services you may be offering. There are other benefits as well as you should naturally see an increase in your user base which means more word of mouth marketing and ideally reviews to help with additional marketing to drive more users to your product. You can show user adoption of your product as a great sign of market validation for your product using this approach as well. With that said, a freemium model and freemium user should be treated as any other customer segment that you are working to solve their needs within your product.
Typically you would place restrictions on their feature set to drive the upgrade to a pay subscription so you need to make sure that the features you offer at sufficient to gain value but not so generous that you never get a paying customer. As a product manager, it is critical to review the features and offering for the freemium because the balance of offering enough to see value but not too much where they are a lifetime freemium user is a really delicate balance. I always view Dropbox and Trello as examples of freemium offerings that are so generous with their offerings I would never need to upgrade to a higher level or a pay subscription for personal use but would obviously hit a wall at some point for commercial or business use with a larger company. You need to really layout the pain points of each of your persona’s that could use your product if you want to offer a freemium to ensure you give each enough to adopt your product but as they grow would need to upgrade and this line in the sand is something a product manager needs to monitor and potentially change as they watch the data.
How do you compare paying users and freemium users product management requests?
In these days where online reviews is a major part of a customer buying habit, you need to be sure you are 100% ready to support freemium users equally as paying users. If not, while they may not be paying you, they are in fact your customer and can blast your support, your team and product on every forum and review site possible. If you treat the freemium users with less than the paying, be prepared for the downside of that which is a potentially negative experience for those users and making them less likely to stay with your product and eventually upgrade when they are ready. So when it comes to your product roadmap, you should be adding features and listening to feedback equally across your base to drive trials, drive freemium adoption, drive conversion of freemium to paying and curb churn. You would want to treat the metric as another KPI that you are tracking about your business and as product manager one that you look to improve on all fronts.
If you plan to offer a lower level of service to freemium users as a product team, you are better off not offering the tier at all. As a product, your business exists to solve a pain point of an industry and you created, launched and grew a product to do that. Now it is time to support users that you are marketing to and adopt your product to help them solve their problem. It is as simple as that. If you are marketing to freemium users to adopt your tool, then support them and help them be successful within your tool. If you plan to treat freemium separate, then why market to them as they seem outside of your scope of the market segment your product set out to solve.