Recently, I wrote about freemium. It’s something I’m very interested in exploring both because it creates alignment between us and our customers, and because it could be a big marketing win. But it has its downsides.
In this article, I want to talk about one of those downsides: How it impacts customer service. I’ve read that most businesses with a freemium plan end up having somewhere between 20 and 100 free users for every one paying customer. This means the model only works for products that can be offered at virtually zero marginal cost to the business. Software normally fits the bill, but customer service is something that is expensive to do well.
The most obvious solution
There are obviously tons of freemium businesses out there already, so maybe we can look to them for help. What do companies like Slack, Loom, Hubspot, and Notion do?
The answer is simple: They don’t offer good support to their free users. I mean, some of them don’t offer good support at all, but if they do, that’s something you have to pay for.
Freemium companies often use the term “community support” for the free version of support. That means that if you need help, you can read the help articles or post on a public forum to see if someone will answer your question, but you don’t have direct access to the support reps at the company.
This makes complete sense. Good customer service is expensive to provide, so if you want it, you should have to pay. There might be a few minor things to figure out (e.g. if someone calls your support line, you have to verify they’re a paying customer before helping them I guess) but mostly, it should be pretty easy to segment your users into paying vs. not paying, and adjust the support accordingly.
The above solution seems obvious, but I’m not sure it would work for us at Less Annoying CRM. That’s because customer service isn’t just something our paying customers want, it’s a core part of how we get people to pay us in the first place. There are a ton of CRMs out there, and one of the ways we stand out is by giving people a ton of personalized help when they’re first getting started. If we only offered that help to paying customers, a bunch of potential customers would never get to see how good our support is.
This is a bit of an over-generalization, but what I’m basically saying is: If customer service is just something you have to do, but it’s not core to your competitive advantage, the above approach is probably fine. But if customer service is core to your offering, I think you’ll need to find a different approach.
I’ll admit, I’m still in the process of thinking through how we might approach this at LACRM, but here are some possibilities (some of which we’ve already ruled out, but I’m sharing here in case you might want to use them):
Don’t do freemium
The path of least resistance here would be to conclude that if customer service is a core part of what you offer, freemium isn’t for you. While that makes sense, and it’s probably the decision we’ll end up making, it’s not a very satisfying answer. Additionally, I think the world of software is increasingly moving toward freemium, so I don't want to sleep on this. Let’s keep exploring other ideas…
Offer top-tier customer service to everyone
This isn’t actually a viable approach, but I figured I should address it. In theory, you could offer the same level of amazing support to all users regardless of whether they’re paying. The reason this isn’t viable is that good support is expensive, and it would crush a business’s margins to spend those resources on the order of magnitude more free users.
Move away from support being a reason people buy
Fundamentally, I think freemium is a “product led growth” strategy. What that means is that customer acquisition is driven by the strength of the product, not something else like sales or customer service. So arguably, it just doesn’t make sense to consider customer service a huge part of why people buy if you’re also doing freemium. Pick one, and focus on that.
This doesn’t mean that freemium companies can’t offer great support, it just means that the support might not be the primary reason someone pays. After someone is already paying (presumably because the product is amazing), you can further impress them with an amazing support experience. but support wouldn't be the main attraction.
This approach has some appeal, but (a) I think it’s easier said that done, and (b) it would mean a significant cultural change. Doing customer service well requires tremendous buy-in from the entire company, and turning away from that culture isn’t something I’d recommend doing thoughtlessly.
Offer free trials in addition to freemium
Normally, freemium plans have no expiration date. A person can use the software for free indefinitely, as long as they don’t need any of the premium features. The problem with that approach is that you can’t tell the difference between the people who are likely to pay and the ones who are likely to stay free forever. This means you can’t do high-touch things (sales, customer service) for the real leads without also doing it for everyone else.
One way around this is to let freemium users start a “free trial”. This would let them access the premium features, including support, for as long as the trial continues. At the end of that, they can either go back to the free tier, or they can pay.
I think this is a fairly promising approach, but my concern is messaging that to customers. The difference between the free trial vs. freemium options would be hard to explain, and it might seem like customer service is an upsell (which isn’t really true, it’s just that free users aren’t actually customers) which could leave a bad taste in the customer’s mouth.
Make a non-core part of the product free
In my post about another potential problem with freemium, I talk about an approach we’re considering at LACRM where our core product (CRM) would stay paid-only (with a free trial), but we could add additional functionality that would have a free version. For example, if we built appointment scheduling (like Calendly) into our product, we could offer just that for free.
I think that would make it easy to segment users from a support perspective without reducing the high-touch help we offer to people trialing the CRM. If you’re only using the free version of the appointment scheduler, you’d get the basic community support. If you’re trialing the full CRM, or you’re already a paying customer, you’d get the full support experience.
This main downside of this approach is that the main thing you’re offering to customers (CRM in our case) isn’t what the freemium plan is demonstrating, so you’re arguably generating the wrong type of leads (people who want appointment scheduling, not people who want CRM). At the same time, it seems to avoid most of the freemium support pitfalls, so it is appealing.
What do you think? Are there other approaches that might work? I’ll keep thinking about how Less Annoying CRM might approach this, and I’d love to hear your thoughts!