Business-focused topics from Jason and Kim. We’ll talk about the freemium membership model—should every membership site use it? We’ll also talk about our plans to run some A/B tests and whether funneling people through free membership to paid is better than directly funneling people to our paid plans.
Transcript: Season 2, Episode 13
Welcome back to that talking thing. I’m Kim I’m Jason. This is episode 13, season two, and we have some business topics later on in the episode, we’re going to be talking about AB testing, if that’s your jam. But first up, we’re going to talk about freemium business models. And if should every membership site have a freemium model?
Yeah. What is a freemium model? Jason? Okay. Ah, freemium is when you have a paid product, but you give away. Something for free first. It could be as simple as a free trial. I seen people talking about free trials as being freemium, but more often there’s a free version of something that is limited in some way.
Um, but you kind of capture people and then they have to upgrade. There’s all kinds of like MailChimp has a free plan, but when you use it a lot, then you have to upgrade. Um, specifically, specifically, it was kind of a shower thought for me that, you know, our membership product is freemium and. I also had this thought that like, it was as simple as like we should write a blog post or have a video about the freemium business model and how it applies to membership sites.
And I started thinking, I was like, should every single membership site have a freemium version? And sometimes it’s obvious like, yes, like a podcast, there’s a free podcast and a premium podcast. And that’s your. Membership. Uh, but sometimes it’s a little more settled. Like it, your blog posts are free, but the stuff you actually pay for is your premium.
Like, so even if you don’t have like a free product, almost every business is putting like free content out into the world. So I was trying to wrap my head around this and figure out how we could explain it to our customers. Patrick shared a tweet recently from Nathan Berry founder of convert kit. It was, you know, an audience is like a business hack.
Like one of the best things to have in your pocket when you’re starting a new business, like just a runway to being more successful because you’ve created an audience and that’s what people use freemium for a way to create an audience that’s willing just enough to give you some personal information, willing to commit just enough to liking your stuff for some small downloadable PDF, for some access to something.
And you can later market that. So kind of the goal for us, we do open-source everything, but for freemium on our site, you need to create an account to access documentation. Yeah. That’s really the only thing free people get as documentation, or you can get the plugin for free. We serve a version of the plugin for start download the generic membership site.
Writing this blog post, is it like the title could be like, you have to have a free, what did we, we had like stats on this. How many of our members had freedom when Patrick did the research? It was an overwhelming majority. Had a free membership level and were priced at a monthly payment under $30. Yeah, it was the most.
So maybe this is not news to folks like, Hey, you have to, but, oh, but, oh, the other motivation for this, remember when we’re in person at booths at conferences, there’s this order of conversation where they say, what do you do? It’s a membership plugin for WordPress. And what does, what does that mean? Like you can charge for access to content.
And then as a. What does it cost, but it’s free. And like, how do you make money? Or they say like, can you use it even if you’re not charging for access? Yes. I remember some plugins got paid memberships pro, so it’s kind of, we have to say, Hey, it’s okay if it’s free, you know, figure out like a nice way to include that message.
I think some of the app updates we’re doing in the workflow is like, is this a free level? But I thought like, we should just recommend if they don’t have a free level, like, Hey, you don’t have free level that great one. But I think people don’t realize that they could use a membership site with a free level only as a lead gen for other services, for other products, for workshops delivered in person or virtually for events coordinated, uh, for coaching, for things that, you know, they might see the membership site and say like, oh, that’s like a paid thing.
People I don’t want to get paid that way. My product has to be direct sold. My product has to be. Price configured based on, you know, the audience I’m serving with my coaching skills, but what could you segment off as a freemium version to get people interested and get them like a minor version experience version of your product.
As we were brainstorming videos on this morning, me and Mandy, and I said, how cool would it be if we collected a bunch of people’s. Videos saying like, what’s your hobby and we’ll design a membership for it. We’ll design. We could design a freemium membership. We could design a multi-level membership product so we could get videos of people saying, you know, I make handmade wood crafts for my family.
Every Christmas I make a new ornament for the tree, and then we could brainstorm three business models they could make. That’s fine. Yeah.
I wonder, I was thinking like this really like Mr. B style, give someone a business instead of like, give him a car, give him a business. That’s a little scary though. Cause we used to do that for people who sought us out and paid us and they still were like, wouldn’t do anything. And you’re like, you wanted a business and you’re like, yeah, but I have to work.
Um, that’s interesting. Do you think freemium works best when you start with. From the get-go like we, I think people over architect, their membership site design too much design for some end price level. They want some end like access level they want. And you think freemium makes the most sense at the like getting started stage or how do you tack on freedom?
Yeah, because it’s like, just get something out there and get email addresses, which is, I think Nathan Barry’s point too is, oh, I’m writing a book. It’s going to take a year. And you’re like, well, in the meantime, right, like the first chapter and put it out there and get an email address, an exchange or something like.
I didn’t read that specific tweet, but I’m imagining it was, that was all, it was, it was just, it’s like a business hack. You have an audience already. Sure. Yeah. So finding ways to build audience and there’s like a social media version of it getting follows, but email is still just king. Um, Hmm. So I’m just like take it, but some people it’s interesting.
Some people maybe they’re turned off by freemium, but if you explain it, Hey, like it’s not what you think it is. It’s not. Given away something for free. It’s like giving them content, giving them, you know, service, having hourly, you know, um, streams and videos where they can reach you. But if you want more, so you could really add free level to an existing monetized membership.
It wouldn’t deplete the value of your monetized membership. Hopefully your members, you could hide it from them. You would present it in a way that it’s, you know, the light version or just the steps, get your foot in the door, kind of thing. Yeah. And it’s like trying to cast a wider net to find people. I don’t know.
Maybe we’ve got to keep saying, we know for our own product, people who sign up for free versus people who sign up at the paid level automatically, this is a segue people sign up for free versus sign up for pay. They automatically what, well then who enters at the free level and the paid level. So, uh, if you have a freemium level, Mistake.
The fact that you’ll lose out on paid sales, that some number of people are only willing to start at free. And some, even when we present a free level on our own product site, some number of people, I think it’s 55% of people last week assessed many years ago was, would start right at a paid level. So they skip over free.
People will skip over that stat. So of all paid signups, half of them didn’t have a free level first. Um, and something like 4% of free users will upgrade within three months and maybe up to 10, like over the course of some people will stay for free forever. Yeah. Which is because we don’t want that. Okay.
Yeah. I think most membership sites, the free version would be more limited. The access would be more limited. If you were a course site, you couldn’t find the course any other way than being a paid member of it, but there’s a free version of the course. That’s the first X lessons, the excerpts, you know, the first five minutes of the videos for page one of the workbook.
Yeah. That would be the challenge is to reverse it as like what business model would like having a free version hurt. Cause it almost seems like you’re only going to get people’s attention and potentially get customers. Like it seems like there’s limited downside. You probably just have to think of. I know it’s like dating sites.
Do like women are free. Men are paid kinds of things. Technically freemium, is it? Oh, I don’t know. Yeah. That’s um, what like pricing based on the audience demand pricing. Yeah, we met, we actually, we started a segue, but we missed it. Our next topic was about AB testing. So this free verse pay comes up in our AB testing we’re doing, or, um, but, uh, I feel like we talked about this on podcasts before.
I’m bringing it up again, I’m having deja VU, but that is also an AB test. As you, for example, have a headline, let’s try a different headline and see if it’s better or not. And how do you know if it’s better? You want to track some kind of conversion rate. And so do we want to track the paid conversion rate or the free conversion rate?
Um, because we’re kind of seeing that in some of the stats from our pricing plan changes is it’s, uh, it’s still a little early it’s, there’s all kinds of factors, but it’s like, oh, Paid sales have gone down, but free sales have gone up, but we’re trying to figure out, well, how much do we make? You know, if you know, so many percentage of free people eventually pay, maybe that makes up the gap, you know, when the, the more free, eventually upgrade or something like that.
So I think going into the AB test, we have to pick one and that actually that’s, maybe that’s like we have to just pick that in general. Like as our business model, Hey, we have free stuff, but our website kind of funnels into the free or the paid plan or is it Hey, funnel into the free plan and that’s on us to get them to upgrade better, which I don’t think we’ve been historically great at converting the free people to pay it.
I think they are stuck at the free level.
Yeah, I would rather AB test. The entry at paid level, because I think that our competitors that don’t have a free version. They have a benefit because I firmly believe that once a person has committed to buying something, they’re also more emotionally committed to being successful with it. And we’ve talked about that before you and I have just talked about that fish.
There’s like ego, you’ve made a decision. You’ve. Show him that you believe so much to give your credit card to it. When you buy something for free, you aren’t motivated to necessarily activate it. You might’ve misspoke. So do you think we should focus on paid customers cause they’re better and focus on AB tests that optimize for entering at the paid level?
Not entering at the free level? Yes. Whereas a business decision, we could say, Hey, we’re going for market share. Like that’s what’s. And like the fact that our. Product is better than everyone else’s paid product is kind of like our secret sauce. It’s our marketing angle that, you know, is like, we’re the judo that we’re doing.
We’re not hitting them direct on we’re hitting, you know, if you compare our paid plans, they seem kind of similar or, but our free plan is so much, they don’t even have one. And our free plan is as good or better than their paid plan. So it’s like leaning into that and maybe they take a hit on revenue. If we have to always put, like, go for market share and longterm.
Let’s maybe just a business decision. Maybe we have to make the business decision. And then the AB testing is clear. Like what actually, what we, we used to do this with customers where they, um, you know, their homepage they’d have the slider and it’s like, call us or email us or download this or do this.
And I was like, which one do you want them to do? They’re like, I realized like, realistically, I want them to call me. It’s like, all right, but the call me front and center. And that’s what you focus on, you know? And then you can have catch, you know, if they didn’t take that call out, you know, if they didn’t cover.
You know, at the bottom of the page or something, it’s like, Hey, maybe you’re not the type of person who call us. You can also contact us these ways. Yeah. So, but it’s like, mark chair question is why I asked you, and this is something we don’t know. What percentage of people come to our site, make a decision to join at paid or free, but have already installed our plugin on their WordPress site.
And we don’t know that if we knew that, then I would, I would say market share is unrelated to how people buy on our site. Or it’s not directly related. People signing up for free on our site. If I knew that 10% of them already had it installed, my gut is telling me 99% of them already have it installed, but I might be wrong.
Um, I don’t know that people are, I think people are overwhelmingly discovering us through their admin of their WordPress site or installing they come to our site and they skip right the paid because they’ve been using our free plan without logging in for. Yeah, I don’t. Yeah, we’ll have to estimate that we’ll get, when we do like some more, um, an app data we can track, like, I mean, long-term market shares related to the success of the businesses built on our platform because we could be the product that people use to try to start a business.
And if they keep trying and failing, then we’re always just getting these entrepreneurs who have like a 60. To burn out on their business idea, but the people that are willing to pay from the get-go potentially have more of a commitment to their, it’s a really good indicator that they’re more serious.
You know, they are at least funded to some extent whether it’s funded through an overdrawn account or not. And we got a couple minutes I want to back up. You said you wish you knew. So the 50, 50 stat doesn’t feel good enough. Cause you’re like some of those paid people. Warrant on our site yet, but they were probably using the product.
You’d rather have a more accurate number, but why, how does that help you make decisions? If, you know, for example, that it’s 75% of people who checkout for paid levels already have, are using the product or 25% are already using the product. How would you change? Because free on our site is an email address, right?
Yeah. And we do that to get their email address cause we can convert them later. And so they get documentation now. Okay. When people are already using the platform, I get why it’s different, but why does it matter? I would get, when I looked at the stats, I’m like, it’s probably about the same. We have as many free users as there are like site installs on wordpress.org.
So I’m guessing like some large majority of people who use our product eventually goes to their email address. And it’s 50 50, whether they give us for a free account first, or if I pay it, well, actually, I mean, we have way more free than paid, but of the paid of the people who end up paying eventually.
You know, they either jumped the Pater or cooperate. It was kind of trying to help us get our, figure out our messaging on the homepage. If you’re saying like you’re already using PM pro, but here’s the stuff you’re going to get then. But if you’re saying like PM, president’s new thing, I thought just where you’re going.
And then the messaging is going to be different. Like they’re not even using it. They don’t know already. If they don’t even know yet, it’s like, are you stuck? That’s like a big thing. Like people are reaching out to us cause they have a problem. I think if they’re already using it, then we should be convincing them to pay.
To get the ad-ons they already are kind of bought in, but I think the people who haven’t even had it yet, it’s hard to sell them on paid. Right. Yeah. And I don’t think there’s that, is there a plan? Like we sh we should find a way to like, let people use it for free first, before they pay. And we should just do a better job of upgrading if it feels like the right business plan.
But we also, like a lot of times. Well, w this is we’re getting into this, uh, time’s up though, so we’ll have to continue this conversation some other time. Good things to work on. Tough. Thanks. Thanks for listening.