Reconciling Freemium Model and Adoption for B2B Technology Companies

July 24th, 2014 by Matthew Rosenhaft Leave a reply »

Interesting trend that we have seen lately – B2B SaaS software firms who are dealing with an adoption problem despite their freemium offerings. It seems that they have a huge drop-off from the sign-ups on the freemium version to their paid version. Not surprising that there is a drop-off, but many feel like the drop-off is bigger than expected given the value that they provide.

We have seen this before with a client that we worked with so I feel confident that I can guess at some of the root issues:

  • Sales Team – They are selling a somewhat complicated solution without a direct sales force substituting a free experience for sales management. For many less complex, consumerized applications this is an appropriate model as the cost of sales does not support the cost of the application.
  • Adoption – For the more complex applications, the challenge for the larger organizations is getting people to buy into the application – intellectually, emotionally, and operationally. Freemium does not mean it does not have a cost to the buyers.
  • Integration – A large part of today’s software requires integration with other systems. Hosted solution does not mitigate the challenges for non-technical departments. The belief that it is SaaS means that you don’t need IT usually does not hold true. Many of these depts. get into the freemium offering, but cannot integrate the data or processes without help so they never convert because they tried to bypass IT (maybe for good reason), but then they get stuck.
  • Defining the Problem – I cannot tell you how many B2B technology websites that I look at, especially SaaS sites that are visually well-designed, easy-to-read, but don’t tell me what problem they actually solve for me. If I have to talk to someone to “get it” and there is no one to talk with, I may sign up if it is free, but unless the lights come on during the free usage, I probably will drift away.
  • Configuration versus Focus – A lot of platforms are really good about building the configuration options into the platform. Much better than the old customizations that required implementation teams. However, many times there are too many choices. In complex organizations, I have a lot of other people that I work with that all have different requirements. There are design trade-offs in every platform, UI, software release. By building in the configurations, the platform will usually have more than the user needs. Give it a few releases and it will be a robust platform to support a wide-range of requirements from different business types, sizes, verticals, etc. It can be overwhelming even with the best support FAQs.
  • Simplification – The consumerization of marketing has had some serious repercussions for B2B companies. Notably that I think that they are trying to oversimplify their messaging. They try to reduce a complex solution sold to complex organizations to solve a complex problem based upon an unique innovation. Add to that many like to create differentiation with their own category label because it drives valuation. In short, sometimes in simplifying the message to hook them, give part of it away for free, and then let them absorb the complexity on their own is probably creating an adoption problem of its own.

My recommendation is simple. Separate the problem from the solution. If you want to simplify, explain the core business problem(s) that you solve simply. Don’t try to create an amazing sound bite on your amazingly complex innovation. Not going to get it right the first time or the first 100 times. It will take a while to explain it. It will take lots of customers with lots of cycles to nail it. Instead, embrace the focus on the buyer and their problem. Help them understand why the problem is difficult to fix, how complex it is in their environment, and how it can be solved. Don’t try to educate them on your uniqueness and cool technology. If I have to understand your solution to figure out what problem that you really solve. Wrong! It isn’t going to happen, even if you make a freemium offering that solves a very simple piece of the complexity.

If you have a simple offering then simplify the explanation. If you have a complex solution with a lot of moving pieces that you need buy-in from complex organizations, then embrace the complexity for the solution. I will take the time to learn if you clearly and simply explain why the pain that I am feeling is the problem that you solve.  Giving part of it away doesn’t change the fact that I still need to see value for my investment of time, focus, and energy.

Matthew Rosenhaft

Matthew is a Social Marketing Executive and is co-founder of Social Gastronomy, LLC and the Social Executive Council. Prior to founding Social Gastronomy, Matthew has over 18 years’ experience as an executive in marketing, product management, and sales. Matthew has an extensive background in the SaaS Software, Social Media, Mobile, IT Services, and Telecom industries. He has prior entrepreneurial experience as a founder and executive in several early-stage venture-backed technology companies, as well as, holds several US patents for a mobile marketing technology. Matthew is a prominent blogger and regular industry speaker on social marketing and strategy topics. Matthew’s blog can be found at For more information on Matthew, you can check out his LinkedIn profile at or contact him directly at