8 Lessons from launching Freemium

Thinking of launching a freemium app? Here’s what I learned.

After 5 years of building an enterprise app, we launched our freemium version at the start of 2018 🎉 And so, here are the 8 lessons I learned from launching SoapBox as a freemium app — and we’re still just getting started.

After all, freemium isn’t easy: giving away your product for free, and then trying to entice users to upgrade to value-added features means a lot of planning, hard work and risk. But here we are! 😅

1. It will take a long time (a REALLY long time) 📆

I thought it would take three months to build our beta, three for our paid plan, and maybe another three to six months to get it out to the masses. I was so, so wrong.

It takes a long time to launch even a good version of the free part of your app, let alone a good version of your on-boarding, let alone all your paid features, and completely ignoring the time it takes to build payment.

The first lesson was accepting that it was going to take a long time. That’s ok. It’s hard. There really were no shortcuts.

At SoapBox, we launched our alpha experience (a SlackBot for one-on-one meetings) in March 2017 and iterated based on customer conversations for three months. Then we added team meetings functionality, which took another three months to build and iterate on. We closed out 2017 working on Discussions (which eventually became a pro feature). So, within a year, we were still knee-deep in refining our free app.

Every feature we added to get us closer to our vision, took us backwards in the simplicity of on-boarding. In total, we spent a year focused solely on 14-day user retention… and there’s still so much to do to improve it. It wasn’t until 2018 that we started getting our paid features ready. We released Next Steps, mobile and in-app payment. We’re basically talking about two years right there.

I’ve seen so many products just keep plowing forward with adding features and never spending the time to go back and refine the very few good ideas that can unlock all the power of your product.

So, yes, get your app done and out to users in three months. But then redo that work three more times. Give yourself time for being wrong. Budget for it.

So that’s the lesson: Budget for your free version to be wrong two or three times. That gives you the freedom to be wrong, to learn, to get better. (And when you’re feeling really shitty about timelines, just remember that Slack was in beta for two years.)

2. The first 5 minutes is the most important ⏲

I’ve talked about this before: focus on the first five minutes. Before you look at 14-day retention, before you look at 45-day retention. Look at your first five minutes.

Yes, build an MVP, but build the first part of it first. That means ignoring that really cool report you can spit out with the data you’re collecting and instead, building an on-boarding that most people don’t even notice (that’s the point).

Then, stay laser focused on building value for free. Don’t even think about paid features until you’ve gotten your free version into a place where it’s invaluable to users.

Why? Because until you’ve nailed it on step one, no one’s ever going to get to step two. There was no point in making a killer paid plan for SoapBox if our free users are dropping off after the first day.

On top of that, we’re a small team; We couldn’t do everything at once. If we did nothing would ever get finished and/or it would be finished poorly.

But, if you take that small-but-mighty group of talented individuals and zoom them in on one small thing, then move on from there, you’re going to slowly build up something awesome.

So that’s the lesson here: Figure out the critical path your users must follow to have success with your product, then iterate each step of that path in that order.

3. Who do you want as your customer? Only get their feedback. 🤔

This is one thing in launching freemium that I look back on and think, “Yeah, we did a good job with this.”

Before we even designed the product, we found people in our target market. We reached out and said “Hey, we want your advice and your feedback. We’re doing this thing…”

That paid off in dividends. Not only did we get raw honest feedback, but we got it continuously through our launch.

Our SlackBot is the direct result of some of that initial feedback: One of the first people we reached out to for advice told us he wouldn’t use a tool like ours because he didn’t want another place to go. So, we thought “okay, let’s not give him another place, let’s make something that works with the tools he’s already using.” So we built a SlackBot, and our main value prop grew out of that experience.

The feedback we got from our early days helped us refine the product and our messaging. And now, those same people are some of the biggest advocates for our brand.

There’s a saying, “Ask for money, get advice. Ask for advice, get money.”

So that’s the learning here: Before you have a mockup ask for advice from the people you want as your customer. You’d be surprised how helpful they will be as time goes on as beta users, and early advocates when you launch…

4. Scale being close to the customer 🕵️‍♂️

Closest to the customer wins. So scale that.

Being close to the customer is easy when you have five users and a few people on the team, but when you have thousands of users and a handful of team members, it’s way harder to manage. We had to learn how to keep that connection to the customer alive as we scaled the team.

People always say: build, measure, and learn. But we found it we rarely prioritized the measuring and learning. Now we do, and the difference is profound.

We’ve done so many things to scale this as we’ve grown. In fact, it’s something I’ve become weirdly obsessed about. We must do this to win.

A few things we’ve done to scale this knowledge gather and share:

• Film reviews — Once a week, we gather to watch a customer go through our customer’s journey — from our website to sign-up to on-boarding. Each week a different department (product, marketing, engineering, etc.) is responsible for presenting the film review. That team reaches out to a customer (existing or potential), films the interview, takes notes and then walks us all through the learnings. While we’re doing these, we have all our buyer journey, ideal customer profile and value prop statements in front of us ready to edit, refine, debate and decide.
• Our podcast — Our product manager Jill and I host a podcast called People Leading People where we dive deep into the minds of expert managers (that’s our customer). We stay clear of selling our product and really use it as a way to get access to the smartest minds in our space — ask them all of our questions and spread the knowledge. (P.S. So far, for season two, we’ve recorded Slack Engineering’s rands, Intercom’s Eoghan McCabe, Buffer’s Katie Womersley…lots of exciting episodes to come!)
• Expensive product tools that I didn’t want to pay for — Segment, Mixpanel, Intercom, Fullstory, Google Optimize. You can’t learn unless you measure.

But the key thing is that as more people join the team, you’re scaling these processes so everyone can empathize with the pains your customers (free or not) are going through.

So that’s the lesson: Find ways to add learning and empathy from your customers to the regular routine of your sprint. Scale it as you grow.

5. Function over flash

We didn’t put a designer on SoapBox until we hit our 14-day user retention milestones.

Our prototype was for raw functionality and usefulness. We intentionally held back the “pretty designs” to stay focused.

Instead, we chose to focus on the workflow and critical paths, then looked at retention as an indicator of the value we’re providing. Ultimately, we ended up with a stronger, more sticky product.

Once we hit our retention numbers, we brought in bright designs, emoji and confetti. And guess what? Retention doubled. 🥂

It’s no secret people love well-designed products. When you pair something that adds value to something that looks and feels nice, retention will happen.

However, if you pair something that looks nice with something that doesn’t add value, then you might see strong five-minute retention, but ultimately you’ll lose those users to things that provide value.

That’s the lesson for this: It’s easy to fool yourself with first five-minute retention, but if you can get people to sign up and give something ugly a shot, then you know you have something.

6. Prioritize learning over 💸

The only way to grow and to grow fast is to make sure you’re learning from wins and losses really really fast. Forget everything else. Prioritize learning.

So, how do you optimize your entire business/team around learning and executing on those learnings versus making money?

It’s actually simple: change the question you’re asking in all your strategy and planning time from, “Which path will make money and hit our revenue goals?” to “Which path will teach us what we need to know the fastest?”

A big reason we chose to target scaling tech companies when building our product is that we could learn faster from them. They’re chock-full of innovators and early adopters who are willing to try things. Generally speaking, they can use an app with their team without permission or a security audit. And they’re tech people, so we don’t have to build for ie7.

There’s no point in learning from late adopters or laggers. Every second of wait time reduces the flow of feedback, and the faster you can get feedback the faster you can build and grow the right thing.

Our learning here was simple: Build for early adopters first, they’ll teach you the most and you’ll grow the fastest. Target companies that do not have a process in place to remove freemium apps in the company. Once you learn all you can from those who are teaching you the faster you can focus on the others.

7. Payment is a massive project in itself

It’s easy to forget, but actually implementing in-app payment will eat up a ton of your time. It’s invisible, so it doesn’t feel like it exists and it sucks to take time away from feature building to do this — but it has to be done. And it has to be a great experience. Important learnings from our massive payment project:

1. Opt-in trials versus opt-out trials — We started with opt-in trials and always knew it would be temporary. It was a band-aid solution for us while we built in-app payment. Once we properly integrated Stripe, we switched to everyone getting a 30-day trial. This brought on a whole new slew of issues we didn’t necessarily think of, like people not understanding what’s paid and what’s not. The potential to screw yourself a bit here is massive. Regardless of your trial period, opt-in or opt-out, pay close attention to how it affects about the user experience.
2. Focusing on the free experience when you push out a paid feature — Don’t forget that every new paid feature you add, which will be helpful for people who want to upgrade, will be confusing to new users.
3. The possibility that the person adopting your tool isn’t necessarily the person paying for your tool. Consider that the person who uses your free app, won’t necessarily be the person who pays for the app. Those two people will have different needs and different problems. Your user acquisition messaging might be different from your conversion messaging. It’s something to think about specifically with your acquisition and product marketing strategy.

It’s 2019 now and freemium payment strategies are complex. Sometimes the difference is very subtle (i.e. with Slack, you’re not paying to keep using it…you’re paying to not lose information) and might be a pain that the free product highlights.

My learning here is that: Unless you want to have a free-trial… then you’ll need to think of how your free product, paid product, and payment flow intertwine. That’s a complex engineering project… but it’s also a complext product, marketing, and cs project all rolled into one.

8. Forget “build it and they will come”

Assuming you get to the point where things are okay (meaning you have lots of things to fix but at least you know what they are) the next problem you have solve for is distribution. The entire idea of free is that your free users are your sales pipeline. And like all sales, it’s a numbers game.

Do the math: Take the absolute best-in-class conversion rates for your industry, and work backwards to figure out how many visitors you need on your website to make $1MM. You need a ton of people going to your website, app store listing, etc.

Distribution is what separates the products that “make it” from those that don’t.

Unfortunately, it’s true: Sometimes crappy products win because everyone knows about them. And sometimes great products die because no one knows they exist.

Believe it or not, one of the hardest challenges is actually how to distribute your free thing to enough people that the whole freemium strategy has legs. An astronomical amount of people need to be aware of your product for it to work.

At SoapBox, we learned:

• If you blog about it, it’s not enough to break through the noise 😐
• If you write ads, it’s not enough to break through the noise (or ad blockers) 😑
• If you put it in an app store, it’s not enough to break through the noise 😖

So what works then? An intense laser focus to move the needle across the company.

Believe it or not, there are people behind these app stores — and part of that means building really great integrations. We’ve taken advantage of all the latest features with our integrations and stay in constant contact with our partners across platforms. That has lead us to be featured on the front page of many of these stores.

Other things that have worked are launches and lists, like ProductHunt, and publishing content on sites that we know have our core market’s attention. We’re going to where they’re already talking, and adding in our two cents.

So that’s the final lesson: Spend as much time promoting your free product as you do building and designing your free product. You’ll figure out the right tactics to use… but at a minimum treat your marketing efforts with the same intensity as you treat your product efforts.

Phew. I feel like I just re-lived the past two years. I can’t imagine a freemium journey will ever be smooth, but we feel like the lessons we learned along our own adventure could help others to make it just a tad less bumpy.

Thanks for reading!
Brennan

p.s. If your startup has hired a few employees (or you’re a manager), you should really check out our product SoapBox now.

Brennan is the CEO & Co-founder of SoapBox — the manager’s sidekick app, bot, and platform. Have better one-on-ones, team meetings, AMAs, town-halls and more, with your team.

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