image credit: Antonio Zugaldia
When SaaS was new about a decade ago, a lot of companies added a free plan. At the time, having a free plan was a nearly free marketing strategy, because it attracted product signups. These days, however, free SaaS plans are no longer unique. And in fact, for many SMB-focused SaaS companies, a free plan may not even make economical sense.
So, with the combination of free plans becoming harder to market and the rise in SaaS companies addressing the SMB market, I was curious if freemium was still popular amongst SaaS companies?
Obviously, it would be impossible to analyze every single SaaS company. So to get a snapshot of the SaaS landscape, I decided to take a look at companies in the SaaS marketplace GetApp. I took a look at a handful of categories: Business Intelligence Software, Customer Management Software, Marketing Software, and Sales Software. Specifically, I looked at the first page of featured companies in these categories.
I found 3 interesting insights:
1) Most SaaS companies (in this dataset) are not freemium!
Given all the talk about free plans in SaaS, I was surprised that most of the SaaS companies I looked at did *not* have a free plan. However, as recently as last month, the Harvard Business Review called freemium the “dominant business model“. But, this just isn’t as true as people think.
The Business Intelligence category had the lowest percentage of SaaS companies that had free plans – a mere 12% of companies in this category offered a free plan. The Sales and Marketing categories were just slightly higher at 16% and 20% freemium respectively.
2) The Customer Management category is the exception.
However, the customer management category has a lot more SaaS companies with free plans. A whopping 32% of companies in this category were freemium. You could speculate why this might be. Salesforce is the behemoth in this category. The other categories don’t have a dominant player with the same level of legacy and revenue that Salesforce has. It’s possible that other companies in this category may be trying to use free to gain some ground on Goliath.
3) “Near free” may be the new freemium.
The Customer Management category also has a couple of companies that have a “near free” package. Namely, you pay just $1 per agent per month. $1?? That’s super cheap — that’s just about free. Yet, it requires you to input your credit card in order to use this package, making it easier for these companies to upsell you later.
Disclaimer: It’s unclear how GetApp chose to feature companies for each category. Interestingly, a lot of well known companies or rising startups were notably missing from all of these categories. In addition, many of the categories had companies that provided a couple of different offerings. Zoho, for example, has a number of products, and all of their products are free. So, including multiple products from the same company skews the results as well.
Shortcomings of the data aside, this is a good snapshot of how a number of SaaS companies may be thinking about freemium. Marketers may be finding freemium to no longer be a good business strategy. Does this surprise you?