Freemium Strategies

This post is inspired in part by an article in the May 2014 issue of Harvard Business Review entitled Making Freemium Work.

Many support organizations support trials, and of course the goal of trials is to entice users to move from free to paid. Here are a few points for those of us in Customer Success organizations that are concerned about customer lifecycle.

Beware of a very low conversion rate (the percentage of free users who upgrade to paid). It means most users are happy with free so you are either giving away too much, or doing a poor job of explaining the benefits of the paid features.
Beware of a very high conversion rate. Perhaps the free version is just not very compelling so users just have to move up. It may look good to have a high conversion rate but it also mean that users may not be drawn to the free product in the long run.
Your mileage will vary. In a startup, conversion rates are typically higher because early adopters are more willing than others to adopt and pay for the service. Once the early adopters are taken care of, the conversion rate will drop. That spells trouble if the effort required to take care of unpaid users is high. Perhaps a time-limited trial is a better fit for you.
Free users can be profitable if they serve as references. Sure, they may not contribute directly to revenue but their referrals might. Are you tracking the source of referrals?

Are you supporting a freemium product? Please share your experiences.