Why did MailChimp make their marketing automation tools free?

Corey Harris
Jun 8, 2017 · 3 min read

Mailchimp (MC) is now offering it's marketing automation (MA) tools, a key paid conversion driver, for free. I asked myself: “If I was Mailchimp, why would I offer my key revenue driver for free?”

A. Increased competition

B. Shrinkage in market size

C. Shrinkage in market share

D. Their engagement (or new user leads) funnel are broken

E. All of the above

I researched and tried to find third party research to validate (or invalidate) each scenario.

A. Strong Yes

I went to Betalist to see if there were new email marketing automation (EMA) startups being founded. After using Betalist to gain roughly 100 signups for Bestowr, I knew it was a favorite site for tech entrepreneurs, product managers and tech enthusiasts to validate their market assumptions. I found 140 EMA startups and counted 10 startups founded between 2016–2017. I did not use Product Hunt(PH) as a resource because it relies on tech thought leaders to introduce new startups to their platform and thus would not be a good indicator of Email Marketing’s market growth.

Increased competition is a good sign. As it can mean the market is expanding however it could result in less loyal customers (monthly paid subscribers) for each EMA company (users have more options choose from).

B. Strong No

The market size has been increasing due to more incumbents entering the EMA space. The email marketing market has been increasing based on information from Betalist, and Google Trends.

People are using the long tail keyword “email marketing automation” more readily and EMA companies are consistently buying ads for this keyword.

4 Clicks ads in enclosed in the red box

C. Maybe

According to Datayze, Mailchimp owns 45% of the Email marketing market. I was not able to find another data source that allowed me to look back 5 years at Mailchimp’s market share. That would have given me a more definitive answer to whether their market share was decreasing.

When I googled the 9 other companies in the 10 listed; I found that 8 out if 10 (including MC) offered some level of email marketing automation on the free level. This showed me that MC may have been holding off on doing it as a last resort to keep consistent growth. These included: AWeber, Campaign Monitor, GetResponse, Mailer Lite, iContact and Klaviyo.

D. Strong Yes

I could not find a definitive data source for their lead and engagement funnels. (They are a private company). Traditionally, MC (like their competitors) have used their MA tools as anchors for converting free users to paid users. The email marketing industry has been expanding(yearly) and new incumbents are giving email marketing users more options. I suspect their new user growth rate has slowed down due to “comparison” shoppers choosing other providers who provide a better bang for their money and )or) current free users were leaving because they could get the MA tools for “free”. MC knows that if the top of their new lead and returning user funnels stay plentiful the rest of their funnels follow suit. Which should increase their revenue.

Infographic Source: http://zuzamam.com/define-your-lead-funnel/

Their decision seems to be driven by increased competition and the normality of offering marketing automation for free. I suspect MC did a split test offering a sample size of their new (or existing free clients) subscribers their automation tools for free and decided to offer it for free once they saw it had a positive impact on their lead funnels and revenue.

Corey Harris

Written by

Interested in New Opportunities / HackerNoon Blogger / Previously Yelp / UNC Economics ’10 / Side Project: Blackchain

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