Deciding whether a free trial, freemium, or hybrid model will work best for your business is challenging — especially as choosing the wrong one could potentially dent your business’ performance.
In this course, you’ll learn:
Wes:
As I walk through each of these strategies, I want you to pull a pen and paper out or start writing down notes and write down what market strategy you're currently using as a business and which one you'd like to deploy in the future. The first one on the far hand upper left quadrant is the differentiated strategy. If you're deploying a differentiated strategy, you're able to get the job done better than the majority of your market, and you're also charging more, or at least maybe if you aren't, you should be charging more because you are solving this problem so uniquely and you're providing an insane amount of value to your customers.
Wes:
Now, when we're thinking of differentiated strategy, each of these has pros and cons. One of the big pros is, well, you can charge more. If you're going up markets, this is a great strategy to have because you can get very customized and really differentiated around how you help people. And so that's why differentiated companies are never going away. There's always going to be room for them in the market. However, the con is your product can get pretty yanky, and when I say yanky, I'm meaning complex, confusing for a lot of people. In that instance, maybe product-led might not be the best fit for you if you are just deploying the differentiated strategy. Now, there's many flavors of differentiated. That does not mean, "Hey, Wes, I picked differentiated. That means I can't be product-led." No. It just means how you go about it, and it's something to think about because there's many ways you can build a business.
Wes:
All right. Next piece is dominant strategy. This is where you have to get the job done better than the entire market, and you also have to charge less. This is a very difficult place to hold as a business because, well, one, you've got to have an incredible product. That's hard enough. Two, you've got to figure out how to be capital-efficient and own your customer acquisition costs, keep them low, and service that market in a very efficient way. That is really hard to pull off. But what I've noticed is in the dominant strategy, most companies, at least in 2020 as I'm recording this right now, are deploying that free trial or free model because they want to stay lean. They want to be able to create a moat around building a dominant growth engine and really starting off the customer journey with that free trial or freemium model or some hybrid of that mix so that they keep the handholding to a minimum and their costs low.
Wes:
And so on the bottom right, this is the last one I'll go through for the market strategy, this is the disruptive strategy. This is when we're thinking of helping over-served customers. And so I won't name names of companies yet because I'm going to get you to guess in a couple of seconds which companies are which, and which strategies they fall under. But disruptive companies, they go into a market that usually has at least one or two companies that are completely over-serving their customers, and they provide a simpler, easier-to-use solution, and they charge a lot less. And because these are customers they're going after that are already over-served and they're usually already paying, what they usually deploy is some sort of freemium model to make the draw to join their solution that much more convincing. It's not always freemium. It's just what is often the case.
Wes:
And so if you will look at each of these strategies, you can see that by picking one, there's different choices we have to make. And as we go through the next three slides, I want you to try and guess what companies are deploying what strategies. The first two I'll go through is Netflix and Spotify. When you think of Netflix, even versus Blockbuster, Blockbuster had a ton of content. Netflix did as well. So there were a lot of them were competing for the same digital content. But one of the things that was interesting about Netflix was they deployed that free trial model very early on, and they were able to acquire customers for a fraction of the cost, and they were a lot more capital-efficient when compared to Blockbuster.
Wes:
And so I want you to take a guess. What market strategy do you think these companies are deploying? Both Netflix and Spotify. What strategy do you think they're deploying? Now, since this is pre-recorded, if you want to keep thinking about it, you can always press pause. But I'm going to say, both of these companies follow more along the lines of a dominant strategy because what they're doing here is trying to create one of the best products possible and get you an incredible value for your buck whenever you purchase these solutions. And so that's what I'd argue both of these companies are doing.
Wes:
Now, whenever we think of, let's say, a real estate CRM, there's hundreds, absolutely hundreds of CRMs. And when we think about that, that's fine. It's a competitive space. But a real estate CRM? What do you think they're doing? Are they creating a product that is disruptive or differentiated? Now since there's just two choices, I'll give you this one. This one is really following a differentiated strategy, and so they're creating a better product for this market specifically, and because of that, they can charge more. And differentiated strategies are really amazing in a lot of ways because if, let's say, your category is already very saturated, but it's a massive market, you can go after specific verticals like this and see some good success.
Wes:
Now, the other market strategy, and the last one I will go through is really just disruptive. When we think of Canva, who was their big company they were going after that was over-serving their customers? Now, if you aren't familiar with this particular space, there was Adobe Photoshop. There still is Adobe Photoshop. But Adobe Photoshop does a ton of stuff, and you can do so many things. It's got all the bells and whistles, but it's confusing to use.
Wes:
And so Canva came along, and they made it really easy to do social media graphics and a bunch of other little things initially, and what they were able to gain traction on is, well, there was a big difference in terms of how easy it was to use, and it didn't quite do as much, but that was fine for the average user. The average person who is, let's say, a social media marketer, they didn't care for all those bells and whistles because they were being over-served with Adobe Photoshop, and Canva was free to try out, so they had every reason to check it out, see if it would work, and then eventually transition to using Canva.
Wes:
Who do we think of Google Docs? What was Google Docs going up against? It was Microsoft Word. And Microsoft Word still to this day has so many bells and whistles. I haven't even explored all the tabs, and I don't need to because 98% of the times, I'm using Google Docs. Microsoft Word, I just use the basics, and Google Docs did the basic stuff that I needed it to. And they even added some other fun things like collaboration that made it way better for a lot of use cases. And so in this case, they followed disruptive strategy, deployed a freemium model.
Wes:
What I want you to ask yourself is, what strategy do you want to deploy in the future? If it's differentiated, hey, maybe a sales-led approach still might work, or you've got to figure out some other way to own that market but still be product-led. That's very possible. If it's dominant, disruptive, if you really want to hold that position, you most likely will have to go down this product-led path. And so I really want you to start thinking about how does your market strategy impact whether you should become product-led now or later because differentiated strategy doesn't mean it might not be the right time for your business, but it means you definitely have to think a lot more intentionally about how you are going after that market.
Wes:
If you're customizing everything and you're basically a dev shop for customers, it's going to be really hard for you to make this strategy work, to be completely transparent. But if it's dominant, disruptive, it means you likely need this more efficient go-to-market model to make it work. And so defining your market strategy, it really sets the stage for how you want to play the game for your business. But to be effective, you need to look at your market for clues on if it's the right strategy for right now.
