Robbie Kellman Baxter asks and answers what features should be free and what should be paid in a freemium subscription?
I get asked all the time what features should be freemium (aka free forever) and what features should go behind the paywall.
The answer is, of course, it depends.
But here are some useful frameworks.
Does your business model depend on VIRAL MARKETING?
If your “free” subscribers are a marketing channel for attracting paid subscribers, you might want to invest in making your offering attractive for free subscribers.
Does your business model depend on a NETWORK EFFECT?
If your free subscribers create value for your paying subscribers, simply by participating in your network, and are part of the product, you might think of your investment in features for free subscribers as part of your product development investment. This could be through their content, through their data, or even through their eyeballs.
Does a significant percentage of your freemium subscribers predictably CONVERT to paid?
If your free subscribers are your best acquisition channel, that’s a good reason for continued investment from your lead gen budget.
There are some other things to consider as well.
Have you ALREADY offered the feature for FREE?
Many businesses launch with generous free offerings, planning to “monetize later”. This can be an effective way to build community or to beat competitors in a land grab situation. However, when you build a trusted ongoing relationship by giving stuff away for free, you might be building an expectation, an implied commitment, to giving it away for free forever. It can be very hard to put something previously available for free behind a paywall.
Key points include:
- Later monetization
- Lost leaders
- The top guiding principle
Read the full post, What Features Should be Free and What Should be Paid in a Freemium Subscription?, on LinkedIn.
Robbie Kellman Baxter shares her latest article with expert insights on the subscription-based business model. This week, she discusses the disruption to the manufacturing industry and three mindset shifts leaders will need to make during the coming year.
Whether you’re a B2B manufacturer or a supplier to the industry, it’s time to rethink your entire relationship with your customers.
Companies like Dollar Shave Club and Birch Box let consumers enjoy cost savings, convenience and the fun discovery. And Peloton offers video subscriptions so purchasers of their indoor cycling bikes can get more out of their fitness regimen.
Now, B2B manufacturing and the companies who supply the manufacturers are starting to get on the act. The implications are huge. Think of the potential if manufacturers were ‘members’ who could subscribe to a factory line instead of owning it outright. I’m talking about the makers of heavy equipment like jet engines, cranes, combines and, of course, automobiles, but also entrepreneurs designing new electronics products.
Of course, subscription isn’t a totally new concept for the heavy equipment world. Many businesses already prefer to “subscribe” to cranes or trucks rather than bearing the burdens and responsibilities of a major capital expense. But what if you’re a supplier to a manufacturer, or a manufacturer whose primary “customer” is the distributor, not the end-user? If you want to see what the future holds, just look at the “Software as Service” (SaaS) revolution.
Key points include:
- Starting with the service, not the machine
- Customer focused strategies
- How to build a Forever Transaction
Read the full article, The Subscription Model is Set to Disrupt Manufacturing. Here are 3 Mindset Shifts Leaders Will Need to Make, on LinkedIn.
Robbie Kellman Baxter shares key points on developing tiered pricing options that elicit a positive reaction from subscription-based customers.
Netflix, one of the largest and most successful subscription companies in the world, has among the simplest of business models. There’s a one-time, short, free trial and then the only option is to subscribe.* They only offer a few subscription options, are very limited in the partnerships they utilize and generally stay away from bundling their products with those of other organizations. You don’t get a free toaster with your Netflix subscription and you don’t get a free Netflix subscription with your toaster. The clean model makes it easy to track subscriber behavior and understand how people value their offering. After all, if you only subscribed to get the toaster, you’re going to behave differently than if you intended to make Netflix content part of your new normal. In contrast, news organizations have a huge range of offers. They bundle with other content providers–music, video and other news organizations. They have dynamic paywalls, offering more free articles to some people than others. And they have dynamic pricing, trying to optimize for revenue on every transaction and every relationship.
Tactics around dynamic pricing, while effective in the short term, don’t always make sense from a Membership Economy’s long-term perspective, and focus on lifetime customer value (LCV). For example, it’s accepted wisdom that long-time subscribers are less likely to cancel or complain about pricing. So there’s a temptation to give new customers better pricing than loyal ones. To me, that logic seems like “our best customers are dumb enough to trust us, so we can charge them more than we charge new customers.” In a world of increasing transparency, where it’s easier than ever before to quickly assess what any product is worth and the best available price, this is dangerous.
Points covered in this article include:
- Dynamic pricing
- Gaining the trust of the subscriber
- Managing internal systems
Read the full article, How to optimize tiered pricing options for a subscription, on LinkedIn.
Umbrex is pleased to welcome Rezzan A Kose. Rezzan is an operations, organizational design, and strategy leader and the founder of Ares, a boutique advisory and consulting firm. Before starting her own practice, Rezzan was the business product owner of an AI-based technology platform at Citadel, a global hedge fund.
Prior to that, Rezzan was an Engagement Manager at McKinsey & Co. focusing primarily on business transformation, process redesign and operations across different sectors including financial services, insurance and pharmaceuticals. Along with client services, she was also the deputy COO for McKinsey’s internal advanced analytics center, overseeing day-to-day operations and execution. Earlier in her career, Rezzan worked as a research fellow at Goldman Sachs covering energy sector and commodities.
She lives in New York City and plays polo competitively.