Convert Your Startup's Freemium Users Into Paying Customers With This Marketing Strategy

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Problems. For as long as we’ll share our precious time on this beautiful planet, if there is one thing that's for certain—it’s that encountering problems in our lives will always be inevitable. Whether it’s something that most people would consider big problems; like not being able to find adequate housing or healthcare. 

Or something most people would deem as insignificant problems; like finding the perfect place or outfit for a first date—they are still problems nonetheless. 

The upside is that due to the infinite amount of problems in the world today, it has afforded you the opportunity to become a startup founder by solving a particular problem that a particular group of people are facing. 

But before a problem can actually be solved for an audience, it first must be addressed. Offerings like freemiums and free trials are one of the ways that your startup could solve a problem for its target audience.

What makes the freemium model such an effective marketing tool?

Aside from maybe IRS agents and parking enforcement officers, without question, one of the careers most synonymous with causing absolute dread amongst those who must encounter them—is car salesmen. Particularly used car salesmen.

The reason why car salesmen often get such a bad rap is because people associate their sales tactics with being deceitful and manipulative. 

Be that as it may, one thing that car salesmen do deserve immense credit for—is creating one of the most advantageous marketing concepts of all-time. That concept consists of offering free test drives at car dealerships for those shopping for a car. 

What makes offering test drives such an effective marketing concept, is the same thing that makes freemium modeling (which consists of a company offering a basic version of their product or service for free, with an option to upgrade for a price) so effective.

Both provide consumers the opportunity to experience firsthand how great life would be with the addition of your brand’s items, products, or services.  

What is required to turn freemium users into paying customers? 

Not to reopen any old wounds, but have you ever gone through a tough breakup of a romantic relationship that wasn’t initiated by you? If so, I’m sure you’d agree that one of the things that made the breakup process so difficult for you—wasn’t just the fact that the person just abruptly ended the relationship. 

It was the fact that you had grown accustomed to a certain way of life with that particular person. And depending on how much value or utility they contributed to your life—you may not have realized until it was too late, just how more difficult day-to-day life without that person would be until they removed themselves from your life. 

But what if there was a way that you could prevent that person from leaving the relationship or get them to instantly come back at the time? Would you have been interested in exploring that option? 

Akin to that state of emotions experienced when being broken up with, in order to convert your startup’s freemium users into paying customers—your products or services must first be perceived as adding enough value or utility to their day-to-day lives that if it were to be taken away from them—they’d be willing to take the steps necessary to regain it.

How to convert freemium users into paying customers

Behavioral economics studies show that for a vast amount of people, the pain ensued from a loss, typically feels more intensely than the pleasure of an equivalent gain. The proper term for this particular tendency is loss aversion. 

Loss aversion would explain why the heartbreak caused by being broken up with—feels so much more intense than the joy that you may have experienced when you were in a relationship with that particular person. As the classic song by Michael Jackson goes, it’s simply human nature. 

Nonetheless, the human nature aspect of loss aversion intensifies even greater when whatever that was lost—either helped remove or reduced a problem in your life. 

This brings us to the secret syrup you’ve been waiting for that’ll convert your company’s freemium users—into upgrading to become actual paying customers. Before going any further, it must be reiterated that the effectiveness of this marketing tactic is contingent upon the value or utility of your product or service through the lens of your target audience. 

At last, now that we’ve gotten that out of the way, here’s what to do:

• First, place a 3 month (which is an appropriate amount of time for consumers to become emotionally attached to your products or services) trial period on your freemium offerings. 

• Next, begin emailing users expiry reminders every 30 days after they've activated their freemium offer.

• Lastly, if by the end of their trial, the user still has not upgraded their freemium offering, wait 5 days, then extend the user a one-time 40% off discount for the product or service which must be redeemed within 2 weeks. 

What makes this strategy so effective is that it is designed to evoke three critical components that are proven to cause enough friction to coax consumers to make a purchase: 

1. Utility – Users are given the opportunity to experience the usefulness of your product or service firsthand.  

2. Loss Aversion – The ability to avoid any negative ramifications of losing something beneficial to their lives that they have grown emotionally attached to.

3. Value – By extending a 40% off discount on your offering to users to make an upgrade—with an expiration date within 2 weeks, users will feel compelled to promptly take action by purchasing or subscribing before the offer is taken off the table. 

Conclusion 

Marketing is all about creating concepts to connect with consumers. And when executed correctly, the freemium business model is a superb marketing tool that assists in doing just that by helping brands create and build relationships with consumers. 

If you would like our marketing firm, Decryption, to help devise, guide, or execute your startup’s freemium marketing strategy, contact our office today to schedule a call to become our next client and we’ll begin the process of creating a marketing strategy that will help your startup advance!