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Killing FREE: How to make every SaaS customer pay

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“Freemium” done right can feed your funnel with qualified prospects.

Done wrong and it can cost you a fortune and become a monster. “Customers” that never pay are a massive drain on your business. They use server time, database space, and pound your customer success team - which means your paying customers are suffering at their hand.

This presentation will help you:

Determine which non-paying customers are likely to pay, and how to get them to take out their wallets so you can increase your total revenue
Determine which customers are most likely to pay MORE so you can expand your margins
Plan for converting FREE customers to paying customers, so you can decrease your costs (and expand your margins)

Veröffentlicht in: Marketing
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Killing FREE: How to make every SaaS customer pay

  1. 1. Killing Free How to make every SaaS Customer Pay RYAN KOONCE
  2. 2. @Kissmetrics #Kisswebinar @thuelmadsen
  3. 3. Thue is the Kissmetrics Webinar Wizard and Marketing Ops Manager. Before joining forces with Kissmetrics, he was a Lyft driver in SF, which is also how he ended up as a Kissmetrics marketer. Whenever Thue is not trying to automate everything around him, you can find him hiking in the Sierras. THUE MADSEN Marketing Operations Manager, Kissmetrics @ThueLMadsen As CEO of Mammoth Growth, Ryan works with his team to help clients leverage data to drive growth. He is also Executive Chairman of Attributionapp.com, a SaaS platform providing multi-touch attribution, and Managing Director of Roaring Bull Studios, a social game studio. RYAN KOONCE CEO, Mammoth Growth @ryankoonce
  4. 4. @mammothgrowth #Kisswebinar @ryankoonce
  5. 5. 1 Section One - Introduction Defining Free Understanding Freemium Taking Advantage of Your Pricing Power Balancing Free and Trial Time Based Vs. Metered-Based Trials Switching From Free 2 Section Two - Killing Free 3 Questions? TABLE OF CONTENTS #Kisswebinar
  7. 7. What does it mean to make a customer pay?
  8. 8. Free is giving something away and getting nothing in return. - or - FREE = Net Profit per Customer <= Zero DEFINING FREE #Kisswebinar
  9. 9. There are different types of payment IF YOUR PRODUCT HAS VALUE, YOU SHOULD GET PAID #Kisswebinar Money Indirect Promotion Direct Promotion
  10. 10. RESPONSE WHEN ASKING REID FOR A FREE PREMIUM LINKEDIN MEMBERSHIP Reid Hoffman Linkedin If it’s going to be useful for you then you should just pay for it.“ *note, this was paraphrased.
  11. 11. Give away 100% of your core service to everyone. Unlock features for people that upgrade.
 Maybe great for social games. Almost never optimal for SaaS. No, Mailchimp didn’t really win with Free. WHAT IS FREEMIUM? #Kisswebinar
  12. 12. FREEMIUM IS GREAT, UNTIL IT IS NOT #Kisswebinar Cut loose your deadbeat customers.
  13. 13. When does it make sense to keep or kill free?
  14. 14. You must be free when you have no pricing power • No real product differentiation (or crappy product) • Customers can live without you • Switching cost low • Competitors pricing you out of business with VC war- chest (e.g. war of attrition) • Crappy sales team Reality check: If this sounds like you, you have a existential issues (e.g. no business model) WHEN YOUR PRODUCT HAS TO BE FREE #Kisswebinar
  15. 15. You can charge when you have pricing power! • Unique (great) product • Customers struggle without you • Switching costs high • If above true, hard for competitors to spend you to death • Great sales team (trumps all of the above) If this sounds like you, it’s time to go win bigger! WHEN YOUR PRODUCT DOES NOT HAVE TO BE FREE #Kisswebinar
  16. 16. We will assume you have some pricing power. AND THAT IT DOESN’T COME FROM YOUR SALES TEAM…
  17. 17. Free trials are great! But you have to balance the Trial and the Free. FREE TRIALS ARE NOT FREEMIUM #Kisswebinar
  18. 18. Two things are really important: 1) Get Customers to the Ah-Ha Moment FAST 2) Don’t lose money on Trial users. BALANCING FREE AND TRIAL #Kisswebinar
  19. 19. Your trial should show the value of your product to your customer, without providing full value. BALANCING FREE AND TRIAL #Kisswebinar
  20. 20. The ah-ha moment is different for every business. FIGURE OUT YOURS!
  21. 21. Two types of SaaS Businesses 1) Easy / No Commitment (simple implementation) 2) Difficult / High Commitment (harder implementation) BALANCING FREE AND TRIAL #Kisswebinar
  22. 22. Clearbit provides data augmentation for every step of your sales and marketing funnel. 1) Simple Setup - Fast AH HA 2) First 100 api requests are free. Then metered pricing. SIMPLE IMPLEMENTATION EXAMPLE #Kisswebinar
  23. 23. Find out what web sites are built with. 1) No Signup Required to Use - Fast AH HA. 2) Report returns first 10 rows of a 10k row competitive report for free. Start sub to unlock. SIMPLE IMPLEMENTATION EXAMPLE #Kisswebinar
  24. 24. Attribution provides multi-touch attribution modeling. 1) Implementation required (varying degree of difficulty) 2) Cohort based reporting requires time to bake. 3) Scrapped 14 day trial for MTU and Campaign-based usage. 4) Upgrade request triggered at AH-HA moment HARD IMPLEMENTATION EXAMPLE #Kisswebinar www.attributionapp.com
  25. 25. It is almost always more optimal to implement a metered free trial than a time-based free trial.
  26. 26. Don’t lose money on trial users.
  27. 27. You must understand your Cost to Service (CTS). Your CTS is your hard cost of serving each incremental free customer. • AWS (storage, server etc.) • Messages Sent (email, SMS, etc) • Other SaaS MTU Costs (analytics, etc) • Onboarding cost (CS headcount) These add up at scale DON’T LOSE MONEY ON FREE #Kisswebinar
  28. 28. CAC > LTV is not enough (CAC + CTS) > LTV is the winning formula DON’T LOSE MONEY ON FREE #Kisswebinar
  29. 29. Identify high value customers early for optimal resource allocation
  30. 30. Madkudu stuff MADKUDU SLIDE #Kisswebinar
  31. 31. Now that you’re convinced to kill free…
  32. 32. So how do you make the switch to revenue yield, without blowing up what you have? MAKING THE SWITCH #Kisswebinar
  33. 33. • Pricing page testing • Rate limit testing • You probably know where value is in your business. • Start throttling back from 100% gradually. • Upgrades should be immediately preceding full value exchange. #Kisswebinar MAKING THE SWITCH
  34. 34. It unlikely that you are perfectly priced, which means you can get more from every customer. Give it a try and let us know if you would like some help. #Kisswebinar SUMMARY
  35. 35. LEARN MORE NOW Discover how Kissmetrics can help you optimize your marketing
  36. 36. THUE MADSEN Marketing Operations Manager, Kissmetrics @ThueLMadsen tmadsen@kissmetrics.com Questions? RYAN KOONCE CEO, Mammoth Growth @ryankoonce