Reaching Impenetrable Markets with Freemium
Here is what I think you’ll be crazy of knocking out your software for free and of course this is given that you’ve followed the other conditions that we’ve just mentioned. But first, lower friction means faster attraction, right? So if you can bring down the wall to deliver or acquire your customer or for your customer to acquire you, then you can hook them really, really, really early and really easily.
The great thing with the service like Box.net or Zogby or and some of these other technologies is that when you’re using this service, you’re actually contributing a lot of the data to the service, which means that you are now have a better relationship with that product and it’s much stickier. So if you think about from a cabalistic standpoint, why wouldn’t Box make that as easy as possible to do in the first part of the process? And one of those barriers is a credit card and one of those barriers is thinking about what is the value I’m going to get. I’d rather prove to you the value that I’m going to be able to deliver to you as a customer rather than you having convinced by some sort of marketing language. So hook them super early and get their data and then they’ll be much more convince to continue using it.
You’ll also get higher marketing leverage. So your users become your marketers. Instantly, you have millions of evangelist of your product and that’s super powerful. So you no longer have to spend lots of money on fancy advertising or billboards. You can actually put your product together and have them share the service yourself. We do have a billboard by the way if you don’t get that joke, but that’s fine.
So the idea is again, make your users your marketers and make sure that they’re able to deliver your product for you and you get it, and it’s extremely high amount of leverage. So, the majority of all our enterprise customers that comes into Box start out as end users of the service. So it’s really working and it means that people can spread your product for you. It also forces you to make a much, much better product.
So if you think about things from a product philosophy, this is a really important aspect of the ‘freemium’ model. You can no longer go and sell into an organization with really fancy marketing or really fancy sales because you’re giving them, you’re much more transparent. You’re giving them the product right upfront and you’re saying this is what we do. If you like us, then you can pay for more of it. But no one is not going to pay you for more of a product that they don’t like so you’re really saying that we trust our product and we trusted our users are going to want to pay for it.
So it forces you to make a better product. You can no longer sell, like the old days of Oracle and go to an organization that have vapor product for the first year or whatever it has to be able to deliver value right away. And sales will love you for it. So your sales organization will absolutely love the fact that they have users calling you. So instead of taking a 100 prospects in calling and then converting two or three of them at a while, the inefficient rate, you know have customers calling you. So this is much more effective now that you built this inside sales organization that is only talking to qualified users of your product and that’s really like powerful and it means that you can grow really efficiently and you can understand the matrix around your business a lot of faster, and it means that people are super excited to actually talk to sales which is really important.
It also means you can reach traditionally impenetrable markets, right? So a lot of times, we think about small business as being hard to reach because they’re sort of disconnected, they’re just reorganized geographically. They don’t have traditional conventions and ways that they acquire technology, so they’re really hard to have access too. But the great thing with premium is that they actually come to us and the product actually spreads within their own ecosystem. So we’re able to reach them much faster, the same thing for enterprise software, right? We wouldn’t be able to build out the right kind of sales organization to reach enterprises that scale a lot, but instead what happens is you have the users spreading the product for you which enable us to get into new markets and new industries that we wouldn’t have time to have.
So again, it’s all about listening to your customers and making sure you’re paying attention to when you’ve actually appeared in the new industry which is really important as you develop the product and what you want to be doing. And if they don’t want to pay, they don’t have to leave. And this is actually the most exciting part about the premium model to me. So instead of having a customer sign up for a free trial of your product and you’re getting 20% conversion right on that free trial and they have to leave if they don’t pay you, you actually get to keep all of your customers which is really awesome. There will always be segments of customers that can’t afford your product. It’s not the right time for them to buy. They might want to pay later, but they might not have budget for now.
So why not keep them in your ecosystem while they don’t have the right kind of value or aren’t seeing the right kind of ROI on your technology and that’s really important to premium is to be able to acquire these customers and you’re able to keep them on your network and on your service and not going over to another service if they’re not willing to pay. And hopefully, you’ll be able to convert them later but if not, then they become a marketer for you so that’s really, really important.
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