Dan Martell - May 23, 2016


How To Build a Great Freemium SaaS Company


Episode Stats


Length

4 minutes

Words per minute

201.16014

Word count

971

Sentence count

38


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

3 things that freemium companies do right: 3 things you should be focusing on if you re a startup trying to scale to a billion dollar company. 1. Free to market and educate to win Mindshare. 2. Use data to improve your product. 3. Use customer data to increase your sales process.

Transcript

Transcript generated with Whisper (turbo).
00:00:00.000 Three things that freemium companies do right, you know.
00:00:13.520 Today, I don't know if you've ever thought of building a
00:00:15.720 freemium company, if you want to know what the best do to win
00:00:19.560 or how you should prioritize your resources,
00:00:22.320 that's what I'm going to share in today's video.
00:00:23.720 You know, I had the privilege of being asked to formally advise
00:00:28.320 one of the largest freemium companies out there, HootSuite.
00:00:31.060 You know, they're a billion dollar plus company
00:00:32.920 and I've been working with them for the last seven years.
00:00:34.820 So I've seen them go from, you know, thousands
00:00:37.420 or hundred thousands of users to millions
00:00:39.160 to tens of millions and how they've really leveraged
00:00:41.860 their freemium business model to extract the most value.
00:00:45.080 You know, I'm also blessed to be friends
00:00:47.040 with a guy named Mike McDermott
00:00:48.200 who built an incredible company called FreshBooks.
00:00:50.840 And, you know, over the years watch him
00:00:52.880 how he's evolved his product
00:00:54.540 to really leverage that business model.
00:00:56.140 When I was building Flowtown, you know,
00:00:57.980 My company, it was a social email marketing tool.
00:01:00.620 We integrated with MailChimp and we worked with Ben,
00:01:03.060 the founder and CEO and I understood and we watched
00:01:07.160 that transition from when they were only paid to freemium
00:01:11.300 and it was incredible to watch and how he explained it
00:01:13.820 on his blog and the data that they used to make that decision.
00:01:16.740 I just think that as I've seen all these companies operate
00:01:20.400 in scale, there's really three things that they do right
00:01:23.840 and that's what I want to share with you in this video.
00:01:25.440 The first one is they're free to market
00:01:27.580 and really educate to win Mindshare.
00:01:30.220 You know, at the end of the day,
00:01:31.580 Dropbox and other great freemium companies,
00:01:34.080 they do everything they can to educate the market,
00:01:36.380 to get press, to talk about integrations,
00:01:38.660 to talk about how their product works with other companies
00:01:41.460 so that people recommend them when there's a need.
00:01:44.060 You know, recently my dad reached out and he's like,
00:01:46.060 hey Dan, I'm thinking of starting a newsletter or an email.
00:01:49.200 What tool should I use?
00:01:50.040 Well, obviously MailChimp.
00:01:51.400 I mean, you know, you get 2,000 contacts for free.
00:01:54.060 so if you ever grow past that,
00:01:55.920 then he's gonna be willing to throw down a few dollars
00:01:58.160 to pay for it, and that's the paid part.
00:02:01.060 So I just think that the best freemium companies out there,
00:02:04.240 they really educate the market, they talk about it,
00:02:06.900 they get mentioned in press, you know,
00:02:08.600 think about Evernote, all these incredible companies.
00:02:11.180 They're talked about all the time
00:02:12.820 because it reduces the barrier when you're free
00:02:15.980 to having other people adopt it, right?
00:02:17.820 And it needs to be a very simple, focused solution.
00:02:20.360 The second thing they do is they use data
00:02:22.880 to improve their product, right?
00:02:25.280 So think about segments, cohorts, A-B tests.
00:02:28.660 Because they have so much volume,
00:02:30.560 because the product doesn't cost anything to use,
00:02:32.520 they have so many users coming into the funnel,
00:02:34.860 they're able to run experiments way faster
00:02:37.620 than any other company and get statistical significance
00:02:40.800 on those tests and because of that,
00:02:42.960 their product is evolving and testing and growing
00:02:45.940 and improving at a rate that you wouldn't otherwise
00:02:48.240 be able to do if you didn't have a freedom
00:02:50.300 in business model, so that is, when you think about resources
00:02:52.740 and where you should allocate them,
00:02:53.980 you want to make sure you take advantage of that.
00:02:56.140 And then the third thing they do is they use customer data
00:02:59.420 to improve their sales process, you know?
00:03:01.820 If you've got a bunch of different accounts
00:03:04.620 within a company, if you look and you got, you know,
00:03:07.220 27 users from a big enterprise corporation
00:03:11.120 and there's like four different departments,
00:03:13.660 it makes a lot of sense for your sales guy
00:03:15.400 to reach out to that company and say,
00:03:16.900 hey, you've got four different departments
00:03:18.760 using this product, all separate accounts
00:03:20.760 And wouldn't you want to consolidate billing,
00:03:23.000 save some money, provide you with some extra features
00:03:25.900 like security management or enhanced support
00:03:28.860 or service level agreements?
00:03:30.260 All these things, because you have the data on the users
00:03:33.140 and how they're using it, feeds into the sales process.
00:03:35.640 It helps qualify.
00:03:36.980 It helps create the lead list.
00:03:38.580 It helps ensure that they have the data
00:03:40.220 to talk about the benefits and the features
00:03:42.440 that are gonna be most attractive to those customers.
00:03:44.380 And I've seen companies totally dominate.
00:03:46.680 I mean, Yammer was one that did this at scale.
00:03:49.220 they talked about it, how they looked for the domains
00:03:51.680 of those different company emails,
00:03:53.460 and then reached out to those businesses
00:03:55.860 that were high priority, that were very probable to buy.
00:03:59.160 And that is the third one.
00:04:00.100 So real quick, free to market, educate and win mindshare.
00:04:04.200 That's number one.
00:04:05.040 Second is use data to improve the product
00:04:08.040 through segments, cohorts, and A-B tests.
00:04:10.740 And third, use the customer data
00:04:13.320 to improve your sales process.
00:04:14.980 Because if you think about it, free gives you traffic.
00:04:17.840 Then you want to make sure your product rocks,
00:04:19.880 so you want to use that data to run your experiments.
00:04:21.840 And then third, once you got them,
00:04:23.280 you got to convert them from the free part
00:04:25.180 to the emium or the premium part of, you know,
00:04:27.680 you want four or five percent of your users
00:04:30.260 to end up upgrading to a pro account,
00:04:32.660 so you want to use that data to ensure your salespeople
00:04:35.120 have qualified leads all day long.
00:04:37.260 That's what I want to share with you.
00:04:38.420 If you want access exclusive content or private invites,
00:04:41.960 subscribe to my newsletter right there.
00:04:44.460 And as per usual, I want to challenge you
00:04:46.240 to live a bigger life and a bigger business,
00:04:48.120 and I'll see you next Monday.