The Art of the Freemium Sale

Standard

Considering going freemium? There are two questions you should ask yourself:

1)   Is your product really, really great?
2)   How difficult is it to setup? If your answers are “yes” and “a breeze,” then go right ahead!

If your answer to the first question is “maybe” then freemium is NOT the right model for you.
If your answer to the first question is “yes” but your answer to the second question is something along the lines of “well, it depends…” then, you’ve got a few items to take into consideration.

Freemium image

I would put products like Salesforce, Marketo, and Google Analytics in this category. The first two companies require annual contracts up front, with no trial period. They are quite difficult to setup, requiring system integrators, consultants, and full-day training sessions.  Google Analytics, on the other hand, takes the freemium approach – though it must be admitted that Analytics is not Google’s main source of cash flow. I would also argue that Google Analytics is certainly not really, really great; it is mediocre at best.

The difficulty with going freemium on a product that requires technical resources is that the implementation or setup must occur before the sale. This means that you’ll need sales engineers on hand to assist non-paying clients, and that your sales people will require a higher technical comfort level.

A traditional sales cycle goes something like this:

1)   A lead comes in and is qualified by an SDR
2)   The SDR hands off the lead to a Sales Rep
3)   The Sales Rep shows the lead a demo, perhaps with the assistance of a sales engineer
4)   The Sales Rep negotiates the deal, paid in-full, up-front, with an annual commit and no trial period
5)   The deal closes and the client is on their own to get up and running.

The Sales Rep is no longer involved with the deal, so has very little vested interest in the quality of the implementation. The Sales Rep, in other words, really just plays referee and negotiator. His job is to look for buying signals, hunt for needs and pitch benefits, name-drop competitors, and navigate the decision-making and budget discussions. He does not really need to understand the product in depth.

referee

With a technical freemium product, the process is much different.

1)   A lead comes in and is qualified by an SDR
2)   The SDR hands off the lead to a Sales Rep
3)   The Sales Rep shows the lead a demo, perhaps with the assistance of a sales engineer. The main goal of the demo, beyond further qualification, is to get the lead to integrate the product.
4)   The Sales Rep oversees the integration process, with the assistance of a sales engineer. A poor implementation leads to a lost deal, so the Sales Rep is
motivated to make sure the implementation is executed well.
5)   The Sales Rep works to help the lead see the value in their implementation, which requires familiarity with the product. The focus is less on the negotiation, because presumably the client is happy with the product – when they go over their free limit, they will simply pay or lose access.

The Sales Rep, in this role, is playing more than referee and negotiator; the Sales Rep is playing consultant. Google Analytics gets around this by not selling their free version – it’s completely up to users to figure it out. Their paid version comes with an “Expert Consultant” and runs $150k per year.  Adobe Sitecatalyst charges $15,000 for implementation work. Marketo charges a setup fee, and Salesforce pushes contractors at their clients.

Here at Mixpanel, we’ve taken a different approach – we’ve hired very smart, technical Sales Reps who can serve as experts and consultants throughout the implementation process. We don’t charge fees for these services. Finding these people has not been easy, however; we’ve interviewed hundreds of salespeople over the last couple of years, and only hired a handful. So, consider this: how hard is it to get up and running on your product?  If it’s a great product, and easy to get started (Dropbox, Docusign, Yammer) – then by all means, go for it! If it’s a bit trickier to implement, do you think you can find the salespeople you’ll need to be successful?

Leave a Reply

Your email address will not be published. Required fields are marked *