A lot has been said about the dangers of a freemium plan for startups and new products. Most of these plans basically drain resources at the start of a new business (at a moment when they’re most needed). It also takes a lot of time for staff to handle support requests with customers using the freemium plan because it’s the first time users are experimenting with the product and it’s natural that they need help.
But in our case, we have a different approach. In our product, LicenseSpot, the first available plan is a free. The larger plans vary by the number of activations allowed. The product allows users to protect .net applications, in general, from being illegally copied (pirated) using a license scheme with public/private keys. LicenseSpot takes this one step further by providing online activation.
This first plan has 10 activations included for free and it’s providing lots of value to our customers. But the freemium is also converting customers because:
At some point the plan ends.
With only ten activations allowed, customers can only protect their own products with ten customers (or licenses). After that, they need to upgrade to a paid plan. With this, we take care of the issue about users staying forever in the free plan.
Testing time
With ten activations, users have enough resources to test LicenseSpot. This gives them a sense of how it works. Also allows them to integrate their products with ours.
Because we know testing and integration it’s important, if customers have exhausted the number of activations and need more, we provide an extra ten activations so they can continue with the testing.
Market testing
Also, when customers have reached the allowed ten activations in the free plan, it’s very probable they have paying customers proving their applications will sell. By the time they upgrade, they already have revenue coming in which makes it safe to invest in a better plan.
At this time, this configuration has worked for us pretty good. When we see customers upgrading from the free plan we’re sure they’re already selling the app and have found value using LicenseSpot.
Do you know of any other techniques to make freemium plans work?