This post is in continuation of the last post. For more context on MailChamp story and the ideas discussed in the last post, please check here.
Continuing more ideas from this absorbing case.
4. Pricing shouldn't be a barrier to adoption
Mailchimp’s customers pay nothing for the first 2,000 subscribers or 12,000 emails sent, and then $10 a month after that. [From Forbes article]
Product monetization is not an easy beast to tame. In the past, many companies have struggled to hit that sweet spot with the users. Not so long ago, I recall that Evernote overhauled it's strategy as it was seeing weak conversion from free users to the paid ones.
What MailChimp followed is Freemium model for it's monetization. The key purpose of the freemium model is to attract new users. The freemium model enables a company to build a user base, which in turn provides a constant source of feedback. This helps organizations innovate faster, which is critical to the success of a freemium offering.
Per the Harvard Business Review, in order for freemium to be successful, the feature balance between free and premium versions is crucial. Free features should be compelling enough for the users to install the app, and the premium features should be just as compelling, enabling users to convert to a paid subscription.
Earlier this year, I was reading this thoughtful book- "Monetizing Innovation'. The below excerpt from this book hits the nail right on the head on the subject:
'New products fail for many reasons. But the root of all innovation evil - what billionaire entrepreneur Elon Musk would call the set of "first principles" is the failure to put the customer's willingness to pay for a new product at the very core of product design. Most companies postpone marketing and pricing decisions to the very end, when they've already developed their new products. They embark on the long and costly journey of product development hoping they'll make money on their innovations, but not at all knowing if they will.'
Summarizing the discussion in 2 points:
1. It takes a fine value balance between the free and paid features for the Freemium model to work. Getting the users to pay is always going to be challenging so the offering should create the necessary pull.
2. Monetization shouldn't be an afterthought in product design process but should be a critical part of it's discovery.
5. Your offering need not be High Tech to succeed
"Mailchimp’s success is built on the backs of America’s small business owners. Its most popular service—email marketing—might seem a low-tech, unsexy medium in 2018. But small business owners usually can’t afford marketing teams or social media pros." (From Forbes article)
With the companies built on high profile technologies dominating the conversations and getting majority of venture capital, the case of MailChimp stands out. It leveraged a marketing medium (email), considered by many as nearing extinction and built a multi-million dollar business on top of it.
I am reminded of an acquisition that Twitter did a few years ago to penetrate in India market. The company was called ZipDial. It tapped into a specific behavior of remote Indian consumers which made them call a number and hang up the call before the other party picks up the call. This sequence was called as 'missed call'. Consumers did it avoid high call charges and the other party having call balance would call back (receiving call was usually free). As an example,
For Disney, ZipDial created a contest on its TV channel where those giving a ‘missed call’ were logged into a contest and winners get prizes.
The case in point being that there are large number of problems waiting to be solved, especially in the emerging markets that could be solved with basic tech intervention.
Low tech isn't dead just yet.
Image Sources/References:
https://www.techwell.com/techwell-insights/2014/05/why-microsoft-launched-office-ipad-freemium-offering (my own article)
http://monetizing.wpengine.com/wp-content/uploads/2016/03/book-cover.png
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