Assistly’s Pricing Gamble: A Case Study in Freemium

7/26/11Follow @wroush

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it’s now “drop dead simple for a user to understand what they are getting and how much it costs to scale.” If Assistly customers had actually been consuming more of something—storage, bandwidth, CPU power—at the higher prices, then the tiered scheme would have made more sense, Black says. But “the Assistly product delivers full functionality out of the box,” which means that “it should cost the same for the first agent—or the second one in Assistly’s case, because the first one is free—as for the 101st agent.”

Alongside the flattened, freemium pricing scheme, Assistly is introducing some unusual features that give paying customers a way to earn free hours. For every new user added to a company’s account, for example, the company gets a free hour of flex usage; setting up a Twitter account inside Assistly earns three free hours. The company is calling the system “Wow Rewards,” and it’s designed to incentivize customers to add a la carte upgrades while also making the whole system more fun to use.

“Fun” is a word you don’t hear too much in business-to-business software circles, but Bard says the company is already collecting feedback from customers who are enjoying the new setup. “We got this awesome e-mail on Monday that I sent around to the company, where this person was configuring Assistly, and she said the new experience was like a game—it didn’t feel like a chore. This person had earned 30 free hours.”

There’s no doubt that by cutting the base price for the companies that were previously paying $99 or $69 per seat per month, Assistly is sacrificing revenues, at least in the short term. (Customers who paid $39 per seat, by the way, are permanently grandfathered into that price—they aren’t being forced to pay $49.) Indeed, quite a few companies were formerly paying Assistly $58 per month: that is, $39 for the first full seat, plus the $19 up-front fee for flex hours. All of those companies got e-mails from the startup over the weekend informing them that their service is now free, not counting their flex hours.

But Bard is convinced that the new pricing plan will come back to benefit Assistly in the form of faster customer acquisition. “The risk is that we are giving away a lot of future revenue that we would otherwise have had because people would have paid for one seat and then bought a lot of flex hours,” says Bard. “We took that into consideration and we felt that the benefits of doing this—the value to customers, the marketing and word of mouth that we would get out of it, the evangelism—would be more than enough to offset the revenue impact.”

Time, as they say, will tell, but one thing’s for sure: lots of other SaaS startups will be watching to see how Assistly’s freemium strategy works out.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://www.pricingwire.com Chris Hopf

    Excellent post Wade and thanks for the insight into what went into Assistly’s thinking when making this significant shift.

    Indeed time will tell. I am a big advocate of getting paid and studies have proven that if you value what you offer the market enough to charge for it, doing so communcates value to your prospects and eventual paying customers. Too often companies default to playing with their pricing instead of fine-tuning and improving their messaging, offerings and value communication.

    Free trials is one thing, but perpetually free is quite another . . they have set themselves up to be on the hook for supporting these free users for…ever? Really?

    More I could say, but indeed they are bold and I commend them for trying something different (I hope it works out even better than they hope).

    Respectfully,

    Chris Hopf
    PricingWire

  • http://alexkinsella.tumblr.com Alex Kinsella

    This model is light years ahead of the competition. Excited to see how assist.ly takes advantage of the lead they’ve built for themselves.

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