The rise of the Freemium business model combines the necessity for technology to radically improve the customer experience with naturally attracting more customers.
A Freemium product must provide significant efficiency increases for both free users and converted premium customers.
- In order to initially attract free users, a product must provide a service which increases customer efficiency by such a margin that even added frictions of the free service can entice customers.
- In order to effectively convert free members to premium ones, a product must have one or several key features which can convince users to flip to premium.
Product and Marketing must not only collaborate to attract new users, but also to convert free ones.
- To convert existing users, the Product team should create features strong enough to entice users already benefiting from the free product’s efficiency increases.
- However, as this conversion is crucial for profitability, Marketing will spend most of its time trying to increase conversion rates.
- Due to the focus on existing free users, virality of a product is crucial to reduce the burden of getting users in the door of the free product.