How we made the freemium model work

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?

Why SaaS applications should provide pricing information

Everyday new online services are launched and must of us don’t even notice but a few of them. I’ve found that the majority of these few start with a freemium model or a beta test mode to attract users and subscribers. I don’t find anything wrong with this, but personally, the first thing I do when exploring a new service is to find the pricing page to check if I can afford it.

For me, there’s no personal benefit to subscribe and start using an application day on and day off, configuring the service, entering my data, so when the owners think they have a large customer base, publish the pricing information and I end up without being able to use the application. It has happened to me before. Now, when I can’t find the pricing information, I just don’t sign up and let it pass it by.

Why everyone should you have a pricing model:


Even if you need a year for beta testing your product, at least publish how you think the business will make money. It shows potential customers that the company has a plan and also, when the time comes, you’ll know how much you’ll need to pay. Also the company has (or at least has think of) a business model. Most start ups just die because they can’t find the right model to generate cash flow. This gives some kind of assurance to customers.

The right customers

Every potential prospect subscribed has even more probability of becoming a customer when the application exits the beta testing phase. You can increase conversion even more by giving a discount to beta tester for their efforts.

One of the first thing we did with LicenseSpot, our license and software protection service, was to define a pricing and a business model and then built the website and all collateral information. Even though we’re live, any new prospect can check how much the service is worth and if it fits they’re pocket.

Do you provide pricing information on you web applications?