Freemium is a "little black dress"

There are so many benefits of a Software-as-a-Service (SaaS) subscription model that I'm not surprised that it's become the darling of the start-up set. And now even Enterprise software is moving in this direction.

The most attractive business benefit of SaaS is the predictability of revenue -- and in today's business environment, that is nothing to sneeze at.

The secret to SaaS success.

Adding freemium to SaaS can be the secret ingredient that has a key business benefit: improved marketing investment ROI. And as a marketing leader, isn't this our holy grail?

Freemium is when you give away (free) some valuable part of your paid-for (premium) product. Free + Premium = Freemium.

Freemium as a category includes limited-time free trials. However, in my experience, it is when you offer a persistent free experience that the most significant marketing efficiencies are achieved. Why? Because with a persistent free product your existing customers become marketing agents for your product. And that allows you to amplify the investment you made to originally acquire that user.

Let's do the math: freemium ROI is real.

Let's say you invest $1,000 to acquire a new customer with a lifetime value of $2,500. That's already an ROI to be proud of. Now if that customer were able to bring you two other customers over his lifetime, your Cost Per Acquisition (CPA) is now $300 for each of those customers, for a total lifetime value of $7,500.  Wouldn't your CFO love to hear that?

Of course there isn't just one thing you need to do in order to successfully execute a freemium business strategy. In an earlier post I likened managing a freemium business to flying a plane because marketers must actively watch and calibrate many different 'dials' up and down the funnel, all at once. But one of the most important things you can to do is to build the product experience in a way that takes advantage of social behaviors.

Successful deployment takes advantage of social behaviors.

Your product must be built to take advantage of the social, viral behaviors inherent in the problem your product solves. Social behaviors aren't just what happens on Facebook or Pinterest, and viral doesn't just apply to grumpy cat videos. Social happens any time one person shares an experience with another person.

Take a business meeting, for instance. I would bet that your first thought about meetings isn't that they are "social" or "viral". But, think again. When I am organizing a business meeting with you, I am inviting you to interact with me around a relevant, common interest. During that interaction, content -- in the form of written notes or whiteboard photos -- are created and shared. Guess what? All that is social behavior. If you are thinking about freemium, you need to take a fresh look at the problem your product addresses and think about how the relevant social aspects can be enhanced.

To be clear, I am not advocating social "lip service". It is not simply adding like or share buttons into the product experience. The product experience needs to remain true to the need it is addressing and the experience should facilitate the social behaviors already occurring around that need.

Take that dress out of the closet.

Freemium and SaaS may be the current "flavor of the month" but success with this model still comes down to an understanding of the customer need and creating an end-to-end experience -- from marketing through product -- that meets that need and delights the customer. For me, Freemium is like the "little black dress" -- a classic, just being rediscovered.

Good Leaders Get Out of Their Own Heads

A recent Harvard Business Review blog about team members who derail meetings, reminded me of Whitman's famous quote, "Be curious, not judgmental." Over the past few months I have shared this quote quite a bit. 

My current role has me working closely with a team in Copenhagen. Since I live near San Francisco, that's not very "close". In fact, it's over 5,000 miles, an 11 hour plane ride and a nine hour time difference. So in a typical workweek there are only about 10 hours of overlap "working" time - and that's only because I start my days with meetings at 6:30 or 7 am.

Yes, we use video conferencing and of course we use social business collaboration tools for managing team workflows and communications. Technology is how we can make it work. But it's absolutely not easy.

This experience has brought home for me just how easy it is for people to be influenced by 'group think' and subtle biases. In psychology it's called ultimate attribution error and it can be summed up as "when members of our group make a mistake, its an accident or an anomaly, but when members of another group do so, it's typical of them." 

Ultimate attribution error is apparent among people who interact every day, and it gets exponentially amplified when distance limits personal interactions and communications are primarily written and asynchronous.

In my situation, the two groups in question could not be more different. One group is the acquired start-up: a less than 20-person team, mostly co-located in one office in Copenhagen. And the other group is the acquiring multi-billion dollar company with thousands of team members in a division spanning multiple locations in California and around the world.

Even for seasoned leaders like myself who have gone through required hours of "diversity training" and have earned some self-awareness through the school-of-hard-knocks -- in the moment, I can and do get frustrated. It is difficult to always assume positive intent and to be authentically curious about the other team member's actions and point of view all day long, every day.

So multiple times each week I remind myself - and my team members in both locations - to stay mindful of this reality. I find it is especially important to take a moment in those emotionally charged times when you perceive the other person as "derailing a meeting” or “going too slow” or “doing something stupid”.   The HBR blog post says it best: you must “suspend your assumption that you understand the situation and others don’t.”

It takes strong leaders in both “groups” to be mindful of the potentially dysfunctional tendencies and biases that exist between geographically dispersed teams. Leaders must actively self-regulate their own attitudes and behaviors while also proactively address developing these important ‘soft’ skills in all team members.

I think I will post that Walt Whitman quote on my monitor to help me keep out of my own head.  What will you do?