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How to convert freemium users into paying customers

As businesses increasingly look to do more with less amidst tougher economic conditions, many have relied more heavily on product-led growth (PLG).

The PLG approach puts the product at the centre of business growth, as opposed to more traditional top-down sales strategies and is moving from the start-up/scale-up world into all businesses who are looking to drive customer satisfaction and growth.

A product-led approach has allowed many businesses to grow, but this doesn’t mean companies should put all their eggs in one basket. Businesses can best maximise growth by combining PLG with other traditional, sales-led approaches, here’s how.

Sales strategies and channels have changed

In the software sales environment of the past, where physical disks were being handed from seller to customer, sales teams were the core way companies drove growth. They were responsible for customer acquisition, conversion, and retention of customers. Digital products have changed the way in which businesses and their customers buy products.

Post-pandemic, between 70 and 80% of B2B decision-makers preferred remote or digital self-service when dealing with sales reps, according to a McKinsey study. This has put the power in the end-user’s hands. Now, their initial experience with the product is the biggest determining factor when it comes to whether they will buy it or look for another. This means the product is now key to a business’s ability to acquire and retain customers.

Blend product and sales 

It is understandable, then, why we have seen a shift to a more product-focused strategy. However, businesses must treat this strategy as a complement to sales-led growth rather than a replacement. Companies that can combine the two approaches into their overall growth strategy will be the most successful.

Sales teams should view a PLG approach as an asset. Instead of spending time cold calling, sales teams can take more time to focus on closing deals and providing account management support. This is particularly valuable with enterprise relationships that need time and ongoing attention to flourish. 

Case in point, buyers who engage with humans during a sale are more than 2x more likely to feel validated by their purchase, according to a recent Gartner study on value affirmation. And this experience leads to a 30% increase in the likelihood that they will complete a premium purchase.

Putting it into practice

For any product-led strategy to work, businesses need a product that people love, first and foremost.

Business leaders should therefore consider; how do you know what features your users keep coming back to? This is where product insights and analytics become essential. By understanding where pain points are and which features users use repeatedly, product teams can streamline the product experience.

The next step is to identify how to convert active users into paying customers. Many businesses offer a free trial or ‘freemium’ version of their product for people to try out. This allows businesses to steadily build awareness of the product and build a consistent pipeline of potential customers. Spotify used this strategy to disrupt the music industry in the early 2000s, providing a freemium streaming service as a totally new way for customers to listen to music, along the way disrupting how the music industry was able to release value from their artists and tracks.

User conversion is next and requires businesses to have visibility into the user journey to understand when users are ready to graduate to the next level of product usage. For example, if there are features that are limited to a certain amount per month, is a customer reaching this limit regularly? Or are there certain job roles that are signing up in large numbers that could be targeted with specific features relevant to their industry? By looking at the right data, teams can measure where their efforts should be placed in order to maximise results and efficiency.

A business’ product is its best asset, so it is crucial that companies take a look at how they can better leverage their product to drive business growth. But those who will be most successful will be the ones who understand where — and when — to combine PLG with their existing sales motions. By empowering product and sales teams to work together, businesses can put themselves in the best possible position to drive both short- and long-term growth.

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Mark Drasutis

Mark Drasutis

Mark Drasutis is the Head of Value at APJ

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