Choosing the right pricing model for a product or service in the B2B space can be a real challenge for many companies. For starters, the product or service needs to be something that makes sense and matches the expectations of the ideal customer. It’s important to offer something that solves a clear need. Another important consideration is the pricing strategy. Companies need to make sure they’re not underselling the value of their product or service, so competitive pricing is key.
Despite the price, one of the biggest challenges is getting people to purchase and actually start using the product. This is where the “freemium” business model comes in. This pricing strategy has been successfully adopted by many companies, including popular sites like Spotify, LinkedIn, and online newspapers. The word “freemium” is a combination of “free” and “premium. With this model, users can sign up for a free account and later upgrade to a paid (or “premium”) plan to unlock more features and functionalities. It’s not just B2C companies that use this pricing model. Many B2B businesses also offer free plans to generate new leads. Let’s take a closer look at how this works.
The Advantages of Offering Freemium Products
Firstly, it can lower customer acquisition costs (CAC). By offering a free version of the product, it eliminates any barriers to entry, making it easier for people to try it out. If they decide to purchase it, they only need to provide their payment details since the business already has their name and email address.
Additionally, providing a free version of the product can give businesses access to valuable data on their users’ behavior. This data can be used to identify which features of the product are working well and which ones are not. Furthermore, businesses can segment their user base by market segments or buyer personas to see who benefits the most from the product.
Another advantage of offering a freemium model is that it can build trust with potential customers. For larger software-as-a-service (SaaS) or technology platforms, prospects may want to try the product before investing in it.
However, providing a freemium model also comes with risks. Users may expect to receive more features and benefits from the paid version, so it’s essential to clearly communicate the value of upgrading. Additionally, freemium products, especially in the B2B space, require upfront investment, and converting trial users into paying customers can be challenging.
To make the freemium model work, businesses must focus on their “freemium-to-premium-customer” conversion rate. They should nurture trial users through the sales cycle using in-app notifications, highlighting the benefits of the paid plan, and converting them into paying customers. By doing so, businesses can reap the benefits of the freemium model while minimizing the risks.
To generate B2B leads using a freemium business model, you need to take some important steps.
While a freemium business model can help generate leads at a lower cost, it does require initial investment. Make sure your product is one of the best in its category, so users will want to use it long-term and eventually convert to paid users. Minimize distribution costs, as you are giving away a version of your product for free. With cloud-based platforms and Software-as-a-Service, the distribution cost should be negligible.
Your product should be easy to use and simple enough for customers to educate themselves. Customers shouldn’t have to ask for help with the free version or even the paid version of your product. You also need to be operating in a market space with lots of activity to get better market potential, as only a small percentage of your free users will convert into paying customers.
Your product needs to deliver value constantly, like Spotify, Canva, Dropbox, and other successful products that keep bringing in new customers with new features. You can increase the value of your product with discounts, new features, and support. It’s also important to have clear upgrade paths for potential customers, making it easy for them to know what they’ll be getting when they upgrade.
When it comes to developing a freemium strategy that generates B2B leads, there are a few key steps you need to take.
It’s worth noting that the early adopters of your product or service are likely to be less price-sensitive than others. They’ll be attracted to your product based on the market opportunity or value it offers, so you’ll likely have a good number of B2B freemium leads at launch. With some smart marketing and PR, you can build on this momentum.
However, as your user base expands and you start to reach the early and late majority, conversion rates will likely decrease. These groups tend to be more price-sensitive and may not immediately see the value in your product. You may also find it challenging to convert laggards who arrive late to the party.
To address these challenges, you’ll need to devise strategies for these different market segments and communicate the value of your offer to them. This is where your website, social media channels, email marketing, and PR can all come in handy. You can also leverage your existing users by turning them into evangelists for your product and encouraging them to bring in new B2B freemium leads.
To increase the number of referrals you receive, consider providing incentives and communicating regularly with your user base. You may also want to experiment with different conversion methods, such as calls-to-action or in-app notifications, to see what works best for your audience.
Ultimately, the key is to ensure that you’re constantly reminding long-term users that there’s a paid option available with more advanced features. You don’t want to have loads of free users who aren’t contributing to your bottom line, as this will put a strain on your hosting and customer service resources. By following these tips and staying focused on your goals, you can develop a successful freemium strategy that generates B2B leads and drives growth for your business.
Examples of B2B businesses using freemium for lead generation
Here are a few examples of companies which offer a freemium plan. (It’s important to note that some of these companies target both B2B and B2C customers, or require individuals to sign up before upgrading to a paid plan for their entire business.)
