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Freemium

  1. Learn Freemium with the Practica AI Coach

    The Practica AI Coach helps you improve in Freemium by using your current work challenges as opportunities to improve. The AI Coach will ask you questions, instruct you on concepts and tactics, and give you feedback as you make progress.

  2. Intro to Freemium

    Freemium is a business model that offers a basic version of a product or service for free, with the option to upgrade to a premium version for a fee. It has become increasingly popular in the tech industry, but has also been adopted by other industries.

  3. When to Use Freemium

    Freemium is best used when the product or service has a large potential customer base, when the cost of producing the basic version is low, and when the premium version offers significant value to customers. It can also be effective for generating buzz and attracting new customers.
    • Point Nine Capital logo
      The Three Rules of Freemium

      Christoph Janz, Partner, Point Nine Capital

      Christoph explains the pros and cons of the freemium model, and then provides three questions to drive whether to use it: 1) Does your paid plan have a gross margin of 80–90%? 2) Does your free plan attract the right audience? 3) Is your product inherently viral?
    • Craft Ventures logo
      Freemium vs Free Trial: Which is Better for SaaS Startups?

      David Sacks, Co-Founder, Craft Ventures

      David Sacks discusses the pros and cons of two popular models used by Saa S startups: Freemium and Free Trial. While Freemium offers a free basic tier with premium functionality behind a paywall, Free Trials provide full functionality for a limited time, after which users must pay or stop using the product. • Sacks, who has experience with Yammer, a successful viral Freemium model, generally recommends the Free Trial approach due to its ease of implementation and coordination with sales and marketing efforts. Free Trials create built-in urgency and help in measuring ROI and lead value. • Freemium is better suited for viral or networked products that aim to encourage user-generated content, network effects, or bottom-up adoption. Sacks shares the success story of Yammer, which experienced rapid growth through its Freemium model. However, he highlights some drawbacks of Freemium, such as low urgency to buy and the complexity of maintaining a functionality-based paywall. • Sacks advises choosing the model that aligns with factors like User Adoption, contribution to network effects, willingness to pay, and the sales process.

  4. When Not to Use Freemium

    • Workable logo
      Here’s why we dropped our free plan

      Nikos Moraitakis, CEO, Workable

      Workable dropped their free plan in favor of a low-cost $19/month plan. They found that free users placed unsustainable limits on product development by prohibiting features with high per-user costs. Maintaining separate free and paid versions also led to poor user experiences and support issues. The company determined that only customers willing to pay for real value would be satisfied long-term. While free users generate more marketing through numbers, Workable decided it was better to please fewer paying customers with a high-quality product representing their brand well. In the end, the affordable plan allows them to build the best product for users while remaining financially sustainable.
    • Equals logo
      The fallacy of freemium in SaaS

      Bobby Pinero, CEO & Co-founder, Equals

      The CEO of Equals, Bobby Pinero, initially gated access to the spreadsheet product to manually onboard customers. This strategy was successful, allowing Equals to raise a $16M Series A funding round. However, Pinero then decided to introduce a free tier to emulate competitors like Notion and Figma. While initial signups increased, Equals struggled to retain free users or convert them to paid plans over the next 6 months. Pinero realized the free model was not working for Equals and switched to a free trial model requiring a credit card. Remarkably, this reintroduction of friction led to a resurgence in growth and more engaged users. Not all friction is bad, and Equals' experience shows requiring investment from users can build a stronger business.

  5. How to Implement Freemium

    Implementing Freemium requires careful consideration of pricing, features, and marketing. It is important to offer enough value in the basic version to attract customers, while still leaving room for premium features. Freemium can also be used as a way to upsell customers to other products or services. It is important to track metrics and adjust the model as needed.