Recently, we hosted our quarterly Scaling Dinner Series in San Francisco.  The topic? Reconciling Freemium and Sales.

Given the overwhelming response to the dinner event, freemium is clearly a hot topic. However, many companies are still struggling with how to effectively capitalize on the model.  The idea that having vast numbers of free users will magically result in an enterprise software business emerging whole, like Venus from the sea, has pretty much faded.  But, what is also clear is that the right freemium offering can pave the way for enterprise adoption.

Two of our portfolio companies, Box and DocuSign, kicked off the dinner with their own perspectives on driving success with freemium.  Executives from 25 companies engaged in a lively discussion on the trade-offs to make the model work, the topic of free trial vs. truly freemium, and, of course, how much do you give for free? Too much for free and the company becomes non-viable. Too little for free and the adoption just doesn’t happen.

We gleaned the following 8 tips on how to make freemium work.

  1. Choose your path: Decide if you are freemium or free trial. Don’t be afraid to experiment and try new things.  One company determined that freemium worked best for mobile, but free trial for the web.  You need to constantly tweak to find the best returns.
  2. Find your advocate: If you focus on freemium, make sure you identify the advocate within your target customer.  The key is to find someone within the organization who is obsessed with your product and, in turn, will promote your business.
  3. Don’t ignore the user experience: New user experience is vital to a freemium business model, but is often overlooked.
  1. Streamline your product development:  One company found that keeping the features the same for both the freemium and the paid product allowed them to reduce their development costs significantly.
  2. Don’t waste sales: Lead nurturing services such as Marketo, Eloqua or Pardot are absolutely critical to score the freemium leads and figure out which ones are the highest priority for a salesperson to call.
  3. Conduct A/B testing to determine the lead capture process:  One company said they changed the lead form to collect only email addresses and they saw an increase in lead flow of 45%. However, capturing only an email address may not work for your salespeople.  Striking a balance between information required and the number of high quality leads is important.   In addition, consider utilizing services such as Demandbase to gather more data about the freemium leads.
  4. Manage your churn: Collect the credit card up front.   The general consensus was that this created a more committed user.  But if they don’t use the product during the trial period, don’t charge the credit card!  The customers are likely to churn quickly anyway and this will affect overall churn metrics.  Also, the customer support costs can easily swamp the money made on the first month sale.
  5. Consider the Cause:  A new wave in freemium is causium marketing. Rather than freemium, consider asking users to give $10 and then donate the money to a charity.

Thanks to those who participated in the event and stay tuned for the next one!