What we cover on Episode 41
We love talking business models on the GrowthTLDR.
We get into:
- The different types of leads you should implement for your freemium business.
- How can you segment your freemium user base to provide better onboarding
- The 3 levers you can use to improve your free to paid upgrade rate
Time Stamped Notes:
[5:30] The MadKudu founding team built an algorithm to decide on their brand name. It randomized words from Wikipedia, checked Google for any competing brand names using that word and then stack ranked them. The result was MadKudu.
[7:50] Your go-to-market should be tailored for your ideal customers. You need to consider how does your ideal customer want to buy your products or services.
MadKudu requires you to add data before you extract any value from it, so the time to value is long, meaning freemium isn't a great fit for them.
However, they do have two freemium offerings. They partnered with Zapier to offer a lead scoring module for SMBs and they have an offering for the Intercom Appstore that allows companies to score 100 leads or users free for a month.
[13:20] Segment used MadKudu's lead scoring to only show chat to their ideal customers. It worked so well that the sales team asked for the scoring to be removed so they could get all of the chat. After one hour of chat with no scoring, the reps all shut down their live chat because the quality of chat was being diluted by the noise.
[16:00] The most basic form of lead scoring is to define your ideal customer with a set of basic rules and prioritize their upgrade paths. The next phase is moving to predictive scoring.
[18:00] The hardest thing about building your own lead scoring technology vs. buying is being able to ingest that score across the different tools you're using.
[20:55] Three types of qualified leads for freemium models:
MQL: High-quality signup from your target market. May have not shown any behavioral intent, but still someone you want to talk to.
PQL: Based on usage of the product, these users are a potential fit for your paid tiers
MQA: High-level of interest in the account, so there may be no single PQL,
but there is a lot of engagement within the account itself.
Your different types of qualification are based on fit and behavior.
[25:00] You also need to think about the importance of role when deciding on your types of freemium leads. How a CEO PQLs on your product might be different from how an analyst or salesperson PQLs.
[30:25] In a freemium model, your sales team have a big role to play in the evolution of your product. They'll be able to find out what features users will actually pay for, what limits will cause them to pay you money for the product, and how well your user onboarding is working.
[34:30] There are three levers freemium companies have to improve the upgrade rates from free to paid.
- Differentiation of Paid Product: The first is making sure the premium version of your product has a strongly differentiated and incremental value feature add that makes people want to upgrade. Francis gives a great example from Trello.
- In-App Trial: Allow free users to signup for a free trial of your entire product in-app.
- Consultative Sale: Have your sales team act more like coaches for your free users than salespeople.
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