Both the free trial and the freemium model lower the barrier of entry for prospective new customers. But what is the difference, and when is it appropriate to use one versus the other?

The free trial offers users a way to try a full-featured product for a limited period (generally time-based) before requiring them to pay to continue to use the product. The premise is that users need to have proof of the value of the service through usage, and will convert after the experience. At the end of the trial period, all users become either paid users or non-users.

The freemium model allows users to engage with limited functionality for an indefinite period of time. Paid premium features are available, but it is expected that the majority of users will NOT convert to the paid features. They will find sufficient value in the free offering, and will use it without giving the company revenue. Users may become paid users, free users, or non-users at any point.

Why would a company want to offer the freemium model and support freeloading users? The answer that that these users provide something apart from monetary support; they provide data. The freemium model is very data-driven and having a large user-base can help product designers make data-driven decisions based on user segments and user behavior.

If it were obvious what features your target customer found valuable and were willing to pay for, there would be no reason to offer a freemium version. You could charge everyone (perhaps offering a free trial initially to lower the barrier to trial) and earn revenue from everyone. But it’s not obvious, and offering a freemium version gives you the opportunity to learn from your users and create offers that speak to what they value and are willing to pay for. At that point you can earn more incremental revenue from specific segments than you could in offering a standard paid offering to everyone. The best freemium product is adaptable and highly customizable, so that you have the best chance of earning revenue from a portion of your users. A good rule of thumb is conversion of 5% of your users to paid.

A freemium model is not a stopgap on a path to convert all users to paid users. It is particularly important to have a broad pool of users when the product takes advantage of network effects; you do not want to limit your usage only to those who pay. Rather, it is a platform that allows you to gather insights about user behavior and segments so you can match users with features they value and what they are willing to exchange for them.

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I havent written much in the past two years, as I was working on my MBA. I suppose a lot of my thoughts and effort went into that. But now that my head is out of that water, I know I need to do it the justice of thinking and writing about it.

Over the two years we covered a lot of material. For the first 1.6 years we all took some core courses together as a cohort and then separated for electives.

Executive Leadership
Entrepreneurship
New Product Development
IT and Business Strategy
Marketing Management
Marketing Strategy
Business Plan Preparation
Quantitative Methods (Statistics)
Market Intelligence
Decision Modeling and Applications
Managerial Economics
Financial Accounting
Corporate Finance
Socially Responsible Enterprise
Negotiations and Conflict Management
Strategy

It wasn’t a huge surprise but the courses in Finance and Accounting intimidated me. I was much more comfortable with Entrepreneurship and Marketing courses. But I think the most important courses weren’t in the “hard” subjects.

One of the first things we did in the program was take the Myers-Briggs and other personality tests. I came back strongly task- rather than relationship-focused. That’s definitely me. I want to feel productive and I’m not great at the people stuff. So I really enjoyed the courses that focused on that: Executive Leadership and Negotiations. They both helped me more fully appreciate the importance of working with people, and then how to do so. I won’t say that I’m a totally changed person but it helped me recognize that my approach to getting things done wasn’t really sustainable, nor the most efficient.

Yes, it turns out that the most important learning from my MBA program was to be a better person. I dig that. You ran read a reference book on balance sheets, but for me at least changing behavior is a lot tougher than wrapping your head around a new subject.

The two really meaningful courses, Executive Leadership and Negotiations, were two in which we could reflect on and analyze our behavior. We identified areas we wanted to work on and then documented how things went. Obviously you can’t do TOO much in a 6 week course but I relished the opportunity to directly apply things.

Many people have asked me what I plan to do now that I have an MBA. The fact is, the jobs I have held since June 2012 (a month after I started the program) are precisely what I would like to be doing and I feel my MBA will only help me in them. I don’t care to be doing anything different. I just see the MBA as helping me do them better, giving me the opportunity to apply what we have learned.

Interestingly enough, one of the first messages they gave us at Orientation over 700 days ago was that the network would be one of the most important take-aways from the program. While I can recognize that, my tendency towards task- vs relationship-focus lead me not to forge as close of relationships as I could have over the program. I do regret that but it’s just part of the way I’m hard-wired. At least over the program I was able to recognize that I could do things differently. And every day is the opportunity to apply what I learned and continue to improve.

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On Sunday, I attended a few sessions that reminded me of some of my MBA studies, and organizational change and relationships. “Don’t be Ned Stark” and “The Hard Thing About Hard Things” were both about being successful and effective within an organization.

I love establishing new programs and taking on new challenges, and one key approach I’ve been looking at is how best to develop, introduce and promote a program to the best chance of success. Ultimately a huge piece is the interpersonal piece. Both sessions focused on relationships – work with people you’d want to spend time with, be sure you have internal support. Be honest and respectful. There wasn’t a lot of talk of how to formally establish or enforce processes. Rather, it was about recognizing when there would be challenges along the way and not quitting.

On the flight home I sat next to a woman who had been in the Ned Stark session with me and she said her biggest takeaway from the entire event was that everyone struggles with ‘imposter syndrome’. I hadn’t thought of it as being quite so pervasive, but as she mentioned it I could see it rang true. I like SXSW as I feel that the majority of attendees are pretty humble, regardless of their credentials. But perhaps these are two sides of the same coin. Yes, the first fellow I met at the hotel was an author, but he thanked ME for showing “a noob” the ropes. We all have things to improve on, which honestly is probably why we come to Austin every March. To learn.

Yet even as I write that, I’m reminded of one of the recommendations that came out of the Ned Stark session: how important it is to unlearn. As Harper Reed stated: “There is a beautiful experience of accidentally succeeding because you dont know what you cant do”. Innovation by definition entails a break from the status quo. However, you obviously need to be cognizant of what’s important to the organization, what changes have a likelihood of being adopted versus not.

And maybe this comes back to so many of the sessions on experimentation, prototyping and testing. If we assume too much, we risk missing things. Technology in particular is changing rapidly and we can’t ignore that people are getting increasingly sophisticated in their needs, expectations and capabilities. If we focus too firmly on what we learned in the past, we risk focusing on where the puck is (or worse, was) rather than where it is supposed to be.

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SXSW2014: Combinatorial Creativity: The Future of Innovation

March 8, 2014

This session, which was quickly renamed “Awesome combos” by the panelists, was described as follows: Some of the most transformative new ideas and products are being created in both the skunkwork labs of tech giants and by digital artists, hackers, and other collectives; and in some instances the two sides are joining forces. The thread […]

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The Maker Movement, Creativity and Artifacts

March 8, 2014

I was just perusing the SXSW Bookstore, and lots of the content was of interest. Yet there were only a few I considered purchasing the hard-copy of. One was Show Your Work by Austin Kleon. The book is a square shape, and it doesn’t read like a “normal” book. The pages seem scrawled, like the […]

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SXSW 2014 Themes: Day 1

March 8, 2014

Today I attended four sessions, although one was a dud. Of the other three, however, I started to see some themes emerge. Wheres in years past I’ve felt like many sessions focused on the “ooooh shiny” factor of technology, I’m really starting to see a maturity and focus on process. What Do We Build Next […]

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sxsw 2014: How Adobe Decides What to Do Next

March 7, 2014

The first session I attended at SXSW2014 was “What do we build next” by Adobe. It really spoke to their innovation process. To some extent I wonder how much I am just set on going to sessions whose kool-aid I already drink. Adobe has a team called “pipeline” that seems to be their innovation/prototyping department. […]

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Mary Poppins was a Product Strategist

January 8, 2014

“In ev’ry job that must be done There is an element of fun You find the fun and snap! The job’s a game And ev’ry task you undertake Becomes a piece of cake A lark! A spree! It’s very clear to see that A Spoonful of sugar helps the medicine go down The medicine go […]

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Lean Methodologies for Product Development

December 26, 2013

As a product strategist here at ReadyTalk, I help to identify customer needs and market opportunities within our industry. Our organization is still relatively small (180 employees), and lately we’ve been discussing how lean methodologies may or may not be able to be applied to our business. As I recently finished courses in Entrepreneurship and […]

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Catching Up, Moving Forward

December 26, 2013

It’s been far too long since I updated this blog, and each time I’ve tried, I’ve become overwhelmed with where to start. But in keeping with some of my latest learnings, I’m going to just start for the sake of starting. One of my last posts mentioned that I was likely going to focus on […]

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