Don’t Fear the Freemium

Neil McCarthy

Director of Product, Yammer

Consumerization of the Enterprise

• “The emergence of consumer markets as the primary driver of information technology innovation is seen as a major IT industry shift, as large business and government organizations dominated the early decades of computer usage and development.” Wikipedia

• “But while this trend may be true when it comes to the technology itself, the differences in business models and go-to-market strategies seems more distinct than ever.” Ben Thompson, 2013

Bring Your Own Apps (BYOA)

• First, users became more comfortable using their personal devices for work email.

• Mobile app, web app, and desktop app adoption exploded.

• Users have become comfortable using these apps for work.

• Enterprise freemium is a business model built for BYOA.

Contrasting business models

• Boxed software sales (traditional)

• Time-limited trials

• Consumer freemium => enterprise

– Gmail/Google Docs => Google Apps

– Dropbox => Dropbox for Business

– Evernote => Evernote for Business

Who does enterprise freemium benefit?

• Users - they can adopt the product and start using it right away without any obstacles.

• Customers - they know a product is getting adoption so they know it’s a worthwhile investment.

• Vendor - it can use modern methodologies to prove out ideas and grow.

COFFEE CUPS FOR THE ENTERPRISE

Coffee cups for the enterprise

Coffee Cup RFP

The winning cup

The rest of the process

• Implementation

• Validation

• Migration

• Internal launch event

• Training

• Don’t forget to deliver on those sales commitments!

Most Importantly: Pray for Adoption

Coffee Cup Takeaways

• Current process rewards complex checkbox products.

• Complex products are usually unusable for end users => users don’t like them.

• Users rebel and use consumer alternatives => hurts adoption for selected product.

The freemium acquisition process

• Users and teams adopt the products that they want to use without involving IT or other stakeholders.

• When a product gains adoption, the users or company upgrades it as necessary.

• Bonus: Users feel empowered because autonomy kind of has that effect.

IT’s Reaction

At first

Eventually

The goal

The role of IT

• Product Selection

– Enterprise freemium reduces their role in this.

• Security

– Here be dragons.

• Supportability

– Worst case scenario: more products to support, but they are easier to support than complex alternatives.

BUILDING ENTERPRISE FREEMIUM

Advantages for the product

• Get into organizations where there is an entrenched competitor.

• Get into organizations where enterprise buyers are skeptical about the product.

Unfair advantagesB

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Users care

High

Low

HighLow

Checkbox features

Analyst attention

User adoption

Press

Existing relationships

Cost

Security

Tactics for enterprise freemium

• Sign up flow

• New user onboarding

• Virality and social proof

• Reengagement tactics

Build the right signup flow

• Ask users to sign up with their work account.

• Don’t blindly minimize friction – require some investment by the user.

• Introduce concepts from your product.

• Borrow heavily from consumer product patterns.

• Useful: http://www.useronboard.com/

New user onboarding

• Training wizard

• Contextual tips

• Getting started checklist

Virality and Social Proof

• Invites

• Solving the cold start problem with social proof

Reengagement tactics

• Email notifications

• Email digests

• Reengaging lapsed users

Freemium revenue

Economics of Freemium, Peter Fishman, 2014

Data Informed Methodology

• Choose a metric to try to improve – success will result in more revenue.

• Opens the door for data-informed product management:

– Clear feature goals

– Defer non-impactful features

– A/B testing to measure success

SELLING ENTERPRISE FREEMIUM

How engagement becomes revenue

• Sell to small teams – credit card upgrades

• Sell to the whole company – traditional sales cycle

– Takes longer, but deals will be bigger.

– “56% of respondents indicated that either the CIO/top IT executive or the IT department were the primary leader in driving change through the consumerization of IT at their organizations.” Reference

Using your unfair advantage

• Your signed up users have voluntarily shared their contact information with you, transforming them into free leads – find executives to reach out to.

• Some users have already adopted the product with no help from IT – find champions by looking at usage activity.

Objection handling

• “Your product is not secure.”

– 90% of enterprises say that the use of consumer services used for work is pervasive today.

– 41% of these sites are used without IT approval.

• “We already have a product that does <x>.”

• “We don’t have the resources to support your product.”

source of metrics

Common sales requests

• “Can we do a Proof of Concept? It’s part of our acquisition policy. Also, we need to block all users from using your product until the POC users have finished evaluating it.”

• “Can we turn off <feature x> for our users? They already have that feature in a different product that we’ve invested significantly in.”

• “Now that we’ve purchased the product, can we turn off invites? IT can handle onboarding all the users.”

Customer Success

• Roll outs and launch events

• Training

• Roadmap and release schedules

Should you offer freemium?

• Adoptability

– Easy to use with no formal training?

– Doesn’t require IT to set it up?

• Network effects

– Helps make it more likely that the product will gain adoption.

Thanks for coming!

• Neil McCarthy, @hardkornelius

• Christina Fan, @cfanimal

• Related resources

– The Economics of Freemium, by Peter Fishman

– New Sales Models, by David Sacks

– Testing Yammer’s Signup Flow, by Neil McCarthy