Email marketing and the challenges of the Freemium model

Freemium is a business model that works by offering a product, such as software, at no cost while charging a rate for advanced features and services. Though ideas about the value of free offerings have been the source of much debate, it’s important to brush past the trivia and look deeper and more critically at why some internet companies are successful at employing the Freemium model while others are not.

There are different types of free strategies, but a key factor in making Freemium work is the structure of the offering. Since Freemium is an entry-level module that could either strengthen the foundations of your company or result in failure, careful research and planning is needed to ensure that any steps toward it are not taken blindly.

An initial consideration that businesses should make is whether Freemium makes sense to them if they are already operating on a healthy paid-only revenue model. The odds are that it is a worthy enough concept to experiment with because, in the software world, you can almost always find a completely free product somewhere that will be competing with yours and siphoning off a steady rate of customers – even if it’s not quite as good.

Also, in addition to protecting businesses from sneak-attacks by competitors with free offerings, a well-constructed Freemium model will stimulate sales and act as a gateway for paying consumers who then no longer have to window-shop for software and feel that the product is insulated from use and proper testing before purchase.

Email is not dead

Although new channels to reach consumers have become popular, such as social media or in-app advertising, brands are still turning to email for their direct marketing needs. Email actually drives a lot of the social web activity, through alerts and notifications. Whichever way you look at it, email is a great complement to social in that it allows marketers to extend the reach of their messages. So for an Email Marketing Service Provider expanding into the Freemium environment is still a highly feasible move — which is a way a number of email service providers have accessorised with Freemium packages even in the current economic decline.

One of the main enablers for free email marketing accounts is that it allows small businesses, start-up enterprises and those who want to become acquainted with email marketing to get accustomed to email newsletter marketing at no expense – therefore removing channel-entry barriers. Typically, these allow clients to upload a limited number of email addresses to their mailing lists and send a limited amount of free email newsletters per month, with limited access to a customer support.

Most internet products or services usually need a period of use before the customer can confidently determine the value they can derive from it. A free product can be a huge catalyst for adoption, but on the other hand you might also struggle to get some customers to pay after having used the product for free. Pricing plays a huge part in competing for customers and customers are reluctant to buy when someone asks them to prepay for a product or sign a long-term contract. This is why it is vital to choose your premium features wisely as these will need to be attractive enough to spur conversions.

As always, permission is everything; so existing trial-phase users need to be given a choice to sign up to a newly implemented free account package instead of being forced. Even if on unpaid accounts, man-handled customers are not repeat customers and won’t accrue value as brand ambassadors.

The Freemium model transition requires strong leadership and a core belief at top management-level to ensure that internal organizational naysayers and antibodies won’t kill the free account before it has had the opportunity to grow and reach its potential as a successful part of your new business model. One of the great side-effects of having a free product is that it really forces companies to do some soul-searching with regards to their user experience, but if your product doesn’t have momentum you should probably wait before introducing a free account option.

It’s important to view the Freemium plan as a long term journey, instead of a project with a very definite start and finish line.

Email is a global industry, but whatever your SaaS, always remember that you need a big market to have enough people who will become buyers. Ultimately, the easiest way to get 10 000 people paying is to get 100 000 people using.