The following is from the October 2010 Drilling Down Newsletter. Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection? Just ask your question. Also, feel free to leave a comment and I’ll reply.
Q: I was wondering if you’ve done any work with, or given thought to, companies who have a cloud based Freemium business model?
Should they be tracking usage (or anything) at the free level? Should they be tracking usage at the paid level? I’m sure defection rates are a big problem, but I’m wondering how many focus on engagement thru mass marketing versus trying to keep what they’ve got, or influence the free users to make the leap to paid. Any thoughts on this? Maybe you could do a blog post on it. It seems like a good fit with your brand of analysis but I’m just starting to think it through…
A: I just finished an analysis that’s a good example of this problem. Behavior during the Freemium period can predict who is highly likely to become a paying customer, who will need marketing efforts like additional sampling / package discounts, and who will not become a customer no matter what you do.