The Freemium Devil

I recently read a great article on the Freemium model that resonated with me. It kept me thinking for several days afterward about how some startups with freemium models “made it” and how others failed.  The difference between success and failure has become a very fine line indeed.

I completely get it, it’s all about how many users your product or service has. The rationale has always been that more users == more revenue and many startups created wonderful free products (i.e. Dropbox) around that idea. Free isn’t so bad if you’re trying to build a startup yourself. I know many entrepreneurs who build startups on open source or free products. Open source and free is the backbone for a vibrant startup community but there are so many companies hawking their “free/open source” stuff that I wonder how they make any money at all.

It’s a pay-as-you-go type of model and I really like it.

You need to make money, especially if you’re a startup. If you don’t, you’ll need cash and lots of it.  Whether it’s attracting talent or paying your receptionist, you’ll need cash for just about everything you do.

The only problem? Getting that cash is harder to get now more than ever.

The Dot Com Years

I remember vividly the Dot Com years when Venture Capital threw billions of dollars against good startups (Amazon) and half-baked startups (Pets.com). When the VCs got burned, they started demanding more robust business plans and a path a profitable path to exit. Startups took notice and started to think about how to convert users to customers more either right away or at some point in their experience with the product.

If you have users and figured out a way to convert a portion of your users to paying customers then you’ll likely get some funding. If you haven’t figured that out then you’ll probably end up making a Deal with the Freemium Devil

A Deal with the Devil

Freemium is like making a deal with the Devil. You want to get more users and minimize your acquisition costs so you put out a free version of your product or service. If all goes well, you’ll start seeing an increase in your user base. So then the problem becomes how to convert those users to paying customers.

It’s so confusing what approach to take…

Most of the time you gave away all your product’s functionality for free and now you want to charge for it. Your users panic and drop off because you suffering from the “why pay for milk if you can get the cow for free” syndrome.

Maybe you reserved some functionality as an upgrade for users to pay at a later date. That’s smarter thinking but what if that upgrade is really lacking? The users can get by using your free product without ever having to upgrade!

It’s so confusing what approach to take, which way is right?

The Right Freemium Model

Kyle, in his Linkedin article, shines a light on 4 Freemium models that look to survive the test of time.

  1. The Free Trial
  2. Tailored, hyper-specific free products of lead gen
  3. Product qualified lead (PQL) engines
  4. Anti-lean startup approach

The free trial is just what it sounds like, a free trial that’s limited to a time period. The danger of this is that your sales reps keep extending the trial period for some apparently “big fish” users. In the end, they never convert! Free trials are very successful if it’s a great product, at a great price, that’s easy to use and demonstrates significant value for the user on day 1.

The tailored, hyper-specific free products of the lead gen method is a relatively new one that I’m seeing being adopted with some success. The ones I run across give you access to a REST API but limit it to maybe 1,000 calls a day. If you want 10,000 calls a day then you pay some $. If you want 1,000,000 calls a day, then you pay more $$$$. It’s a pay-as-you-go type of model and I really like it.

The PQL model is something I’m very familiar with and I’m seeing its success first hand.  This is a robust land and expands model that typically provides all the functionality of your product but measures product use.  The goal of this is to identify a subset of users that exhibit a strong propensity to buy from casual users. While every PQL model is different it comes down to identifying the right leads for your sales team to go after instead of every lead that comes through the door.

The Anti-lean startup is an interesting model and I’ve seen some startups do this approach. It’s definitely a great way to generate a buzz for your product. Hopefully, customers will line up at your door with money in hand BUT it’s got to be a great product.  This one puts a lot of pressure on the Startup to get it right on the first get-go.  The biggest risk is that this product remains in Alpha mode and never truly gets released!

TL;dr

Before you put a free or open-source version of your product out there, think about how to convert your users. Be smart about this. It’ll save you a lot of headaches in the future when you want to get VC money.

Custom Reports in Google Analytics

Recently I imported some custom reports in Google Analytics that I found online. They have been eye opening indeed!  My most favorite ones are the Profit Index and Time of Day custom reports.

Profit Index

Google Analytics assigns a page value to each and every page you have, provided you use Goals. Without using Goals, this won’t work! In my previous post, I wrote about how I started using Goals to see how readers interacted with my site. I arbitrarily assigned a value of $1 each time the reader clicked on a tag or stayed on a post for more than 5 minutes.

I began searching through Google to see if could find a way to lower my bounce rates because I switched back to WordPress (that’s for another post altogether).  As soon as I switched back, I noticed an increase in bounce rates and that bothered me.

I found out that bounce rates are really just people going to one page (usually my home page) and then dropping off. The majority of the visitors have no desire or incentive to continue through the site. The ones that do usually end up on my Tutorial or Archive page.

In my sleuthing I found something called the Profit Index. This is a fantastic report you can build for you Google Analytics as a custom report. The Profit Index can show you what posts have a high value but have the highest bounce rates! You can also see which pages have the highest Adsense revenue vs bounce rates. Once you know where the problem is, you can work to fix it.

pagevaluevsbouncerate

For the most part all my posts are incredibly sticky and OK page value vs bounce rate, but I never dreamed that the Stock Trend Following post has such a high drop off rate.

Time of Day

This custom report is a fun one for me. It let’s me look at what time of day readers come to my site, what day the come to my site, and most importantly what time AND day they come to my site. Originally written by Dan Barker, it’s very enlightening for me!

timeofdayweek

Over the course of the last 30 days, my most popular visit days have been Thursdays at 11AM, 1PM, and 5PM. The numbers change when I look at them from across the year but Thursday at 11AM appears to be the winner. Is it any wonder why I scheduled this post for today and at this time?

Note: Day 0 is Sunday.

Get Custom Reports in Google Analytics

Getting custom reports in Google Analytics is pretty easy if the creator has shared them. With the exception of the Profit Index, the Time of Day report is shareable and easy to install in your Google Analytics dashboard. You can easily rebuild the Profit Index report by following the instructions on the their website, it’s pretty easy but eye opening!

If you want more reports, just visit this page here. They have some great free ones!

 

Rebuilding a Blog – Part 2

This is my second post in rebuiling a blog series. This time I check out where my readers are coming from. It’s not suprising that my readers come from all over the world. The map below are where they came from in the first half of 2016. The majority of them came from the USA, followed by Europe, and then Asia. This does not come as a surprise and makes complete sense because the users were searching for RapidMiner Tutorials.

Neural Market Trends Reader LocationsNeural Market Trends Reader Locations

As a continuation to my previous post, I’m still sleuthing through my Google Analytics data trying to understand what is happening and why. Mostly I want to figure out a strategy so I can succeed in my roll of film quest” but if yesterday’s post was an indicator, my quest is off to a rough start!

Mobile Traffic

I got curious as I dug through my Google Analytics data. How are my readers interacting with my site? Is it mobile or is it desktop. Once again, the results aren’t surprising. 11.88% visit my site from mobile devices but the overwhelming majority (88.12%) is a desktop or tablet.

Neural Market Trends Mobile User MapNeural Market Trends Mobile User Map

Neural Market Trends Mobile SessionsNeural Market Trends Mobile Sessions

Smartphones are becoming ubiquitous and if my kids and nephews are an indicator, the desktop will go away one day. With technologies like AirDrop and Chromecast, do we really need a desktop to consume content? In the future, probably not. I think that mobile friendly blogging is a must in the near future here so this as part of my blog rebuilding, I will focus on making this site more pro-mobile.”

New vs Returning Readers

The following chart is truly interesting. The rate of returning mobile users is the same as the rate of returning desktop/tablet users.

Neural Market Trends New vs Returning Users with Mobile Pie ChartNeural Market Trends New vs Returning Users with Mobile Pie Chart

What does Value mean?

Last week I shared a few thoughts around what it takes to be a Sales Engineer in a high tech startup. My last thought, around understanding value, begs for a full post on that subject.

I hear the word value” thrown around so often that I wonder if it has a real meaning anymore. Everyone says their new product or service provides value, but what does that mean?

When I think about what true value means, I approach it from two distinct angles: time and money. No matter who you’re selling to, value will come down to a function of their time and/or money. That’s it.

We pay lip service to providing value for our customer’s time and money but we don’t grasp it completely. If we did, then our success rate for closing deals would be a lot greater than it is. Plus, we’d have happier customers.

Dissecting Time and Money

Let’s dissect both of these two components:

  1. Time – your customer might be under some time constraint. He/she might have to deliver a model, product, or some service to their customers or end users.
  1. Money – your customer is under pressure to increase revenues or cut costs. They have to do more with less.”

I come across these two problems every single time. No one buys a piece of software or service if they didn’t have one of these problems. The hard part for you is to prove to the customer that what you have is the right fit.

How do you do that? Instead of talking generalities in a demo, prove it to them by helping them build a business case.

Let’s take a typical sales pitch I hear all the time.

Our tool you can cut your ETL time in half!”

Ok, everyone says that. What’s so different about that? Does the next vendor cut ETL time by 55%? 55.6%? It’s a fluff statement, devoid of all context and meaning.

The New Sales Pitch

Now let’s look the same sales pitch but framing it into a context for understanding value.

An entry level Data Scientist makes around $120,000/year. That translates to $57.69/hr in direct labor costs in your department. If they spend 80% of their time on ETL work (1,664 hrs/yr) and we can cut that in half, you’d save $47,998 in labor costs. Our product/service costs only X% of those savings. With the time you save, your Data Scientist can work on new projects.”

Let’s read between the lines and see what was said. I told the customer that my product has value. I used back of the napkin” calculations to quantify it. Next, I pointed out that it only costs X% of the money they’d save from its use. Plus they could redeploy 832 hours of a data scientist’s time to some other project. You can do more with less.

Understanding Value

That’s true value right there. Quantifiable, in context, and meaningful to the customer.

The Medium is the Message

The one thing that is as important as your product is your messaging about it. In some ways, messaging is more powerful because if no one knows how great your product is, you’re toast. To illustrate my point, let’s investigate the phrase the medium is the message.” Originally coined by Marshall McLuhan, Marshall tells us the the medium (product) and message are one of the same. Your message becomes your product and your product becomes your message. Your success depends on your product (medium) and message saying the same thing at all times.

My coworker Tom made a powerful inaugural post about this very subject. One of the most hard hitting tidbits I gleaned from his advice was this:

But messaging is hard. You’ve got to get buy-in from everyone. You’ve got to validate it with customers and analysts. You have to enable + certify your entire field organization on it. You’ve got to test it via your website, paid search, email, etc. Don’t underestimate how difficult and time consuming that’s going to be. But when done right, a compelling message cuts through the noise and amplifies everything else you’ll want to do.

Messaging is hard

I have to agree with him that this is hard to get right. It’s near impossible to get right if your marketing and sales teams are not aligned. I speak from experience because I’ve seen misaligned marketing and sales teams. In some cases, marketing and sales are downright adversarial to each other. They blame each other for missed revenue targets or lead generation.

If this happens in a startup, it dies. If this happens in an established organization, it stagnates.

So how do you align sales and marketing? Generally speaking, I don’t think it’s as hard to do as defining your message, but it can be. When I see misaligned teams I often think a few things, but I usually look to the top leadership first.

What kind of leader does the organization have? Is he/she a team builder or a team divider? Everyone says they’re a team builder but many are team dividers. They divide teams in the spirit of free market competition. They hope that when every team competes, it will drive more revenue. They can’t be more deluded.

Marketing and Sales are Complimentary

Marketing and sales are complimentary teams. You can’t match them against one another and expect the money to roll in. You must foster a continuous feedback loop between them.

Sales is in the trenches, they hear what the customers are saying. If they sell, then great. If they fail, that’s great too. Why? No one likes to fail but failures are a great way to help marketing adjust their messaging. Sales sends feedback to marketing, marketing adjusts messaging, and sales executes with more wins.

Likewise, marketing is also in the trenches. They spend their days analyzing the market, crafting the message, and producing collateral. They’re findings help the sales team craft their opening salvos and engage with prospects. They provide the leave behinds” that sales gives to interested prospects. They provide direction for sales where to focus their time, money, and energy at.

Aligning Sales and Marketing

Going back to my original question, so how do you align sales and marketing?

  1. You must have leadership that builds teams instead of paying lip service to it
  2. Everyone on the team must know that they are part of something that CAN’T work if they’re not working together
  3. A feedback loop must be put in place and used
  4. Remove obstacles preventing you from aligning. This could include removing some people
  5. Never stop massaging the medium or the message for that matter
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