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When Marketing a Freemium App, Measure These 5 Things

February 17, 2020

When marketing any product or service, it’s easy to get data fatigue and even harder to ensure you have the tracking in place to collect data.

For freemium apps, there are five crucial elements to track that will cut through the noise and allow you to make smart decisions around where to allocate your budget and resources for growth.

A brief overview of freemium marketing

Freemium is a subscription-based pricing model where certain features of an app are free and others are paid. Among the ranks of companies using this pricing strategy are Spotify, Trello, HubSpot, Asana, and more. Users have the option to use the app for free and upgrade to a paid plan for additional features like more users, special tools, certain integrations, and so on.

The term “Freemium” was coined in 2006 by Jarid Lukin of Alacra, but has skyrocketed in popularity in the last decade of software development.

trello pricing freemium to enterprise

Source

1. Acquisition channels or platforms

The first touch someone has with your app is key in determining where to put your marketing budget. Did they find you through your integration platforms and marketplaces? Are they finding you via google search? Have they come across your app in an app store?

Knowing where your users first interact with your brand will dictate not only your go-to-market strategy, but can inform things for the product as well. You don’t get do-overs for first impressions, so setting accurate expectations through your messaging and design is crucial for a successful first interaction. Ideally, you’re creating different journey’s based on where they’ve first touched by your marketing efforts.

If someone first interacts with your brand via an ad in the iOS app store, they’d have a very different onboarding and journey than if they were to first interact with your Slack app.

So, the first thing to do when measuring freemium marketing is to break down all of the platforms where a user can find and install your app. Once you have those three, five, or more in a list, breakdown the channels that go into each of those platforms. For more advanced reporting, if you have the data infrastructure in place, break down each platform further.

For “web” as an acquisition platform, you can break it down by more specific channels like organic, referral, CPC, display, and so on. However, although this information is great to have, it can be a lot of data to have in one place. If you’re just starting out, don’t get too bogged down by the data black hole. Rather, start by breaking each platform into paid (ads, paid sponsorships) and earned (organic, direct, referral).

acquisition breakdown per channel


Web:
Platform where users are acquired.

Earned and paid: Channels that drive users to that platform.

Visitors: Amount of total unique users that visited the platform via that channel

Having all of this readily available (and self-calculating) will help you to identify which levers you can pull to grow.

2. Marketing qualified leads (MQLs, free users)

A marketing qualified lead (MQL) in simplest terms is when someone who does something that indicates they are prime to use your product. For most non-freemium marketing strategies, the criteria needed for a lead to become marketing qualified might be any of these interactions:

Those leads then get passed on to a sales team to nurture, or become a part of a nurture campaign. For freemium, the most important action marketing can drive is getting people to signup for a trial or use the product for free.

freemium subscription to blog


While you'll have their email after they submit a form, there’s been no qualifying interaction with marketing materials that shows us they are interested the app. 

Conversely, when a user gets to this page:

signup method for app


In choosing an authentication method signs up for the free app, you get the user's information and can assume the intent of using the product.

3. Product qualified leads (PQLs, or highly engaged free users)

Product qualified leads (PQLs) are free users that you’ve identified meet enough of the criteria you’ve defined that they would be likely to become paid customers. To determine what a PQL is for your app, take a look at the top  three behaviors of your paying customers. What three things (that you can track) do the majority of them do within your app before they convert?

There are three things that make a user more likely to be engaged and thus convert to a paid customer:

  • Syncing an app to their calendar
  • Inviting another user to the app
  • Setting up a meeting 

Once a user triggers all three of these interactions, this makes them “product qualified.” They’ve accomplished the meaningful engagements we’ve defined in our app that will truly add value to them and make them more likely to convert to a pro account.

4. Cost per acquisition channel (CAC)

If you acquire a customer via the Slack app store vs. via the Google Play store, how much does each channel cost you? Cost per acquisition channel is the amount of money it takes to acquire a customer via that channel.

Fully loaded CAC vs. unloaded CAC

When calculating your CAC, you can go about it in two ways: Loaded CAC loaded (the salaries and other overhead that go into efforts for that channel, aka resources) and unloaded CAC (the dollar spend for ads, excluding salary and overhead data).

Fully loaded CAC = Salaries + Tools + Spend

Unloaded CAC = Spend

Fully loaded CAC can be a scary thing to put into your marketing plans, but it’s necessary to focus your marketing efforts. You might spend 80% of your team’s time and resources on SEO, and 20% on paid media. Looking at unloaded CAC for organic search vs. paid search would be astronomical, but you spend little time there aside from the budget itself. When you input salary data and resources into your CAC you get an accurate display of how and where both budget and resources are spent.

5. Churn rate

If you can get to a point where you’re tracking churn per channel, trust that you’re in a good spot. Knowing which platforms and channels have higher and lower churn rates married with CAC will show which areas to focus budget and resources on.

Suppose it’s only 50 dollars to acquire a customer via the iOS app store. It’s the lowest CAC of all your marketing channels and without knowledge of churn rate you might think to pump money and resources into that channel. 

But if 50% of those customers churn, and there’s another channel, say organic search, that has a slightly higher CAC (75 dollars) but much lower churn rate (10%), then using that data you’d choose to put more effort into organic search despite the higher cost to acquire.

To calculate your churn rate: take your total number of customers who churned and divide that by total number of customers. Say you acquired 100 customers via Android and 15 of them churned. Your churn rate for that acquisition platform is 15%.

Conclusion

There are hundreds of other metrics that you can track when marketing a freemium app. The cadillac of freemium metrics would include many other metrics like LTV, ARPU, etc, but when it comes to the ones that will give you the most insight into your marketing strategy, these five are a good place to start.

It’s rarely easy getting data organized and tracking properly, so be prepared for this to take time and potentially a lot of frustration. Rest assured, this will help with resourcing your team, the direction of your marketing strategy and forecasting your marketing efforts. 

Now that you have tips on marketing a freemium app in hand, learn how to market any app – 47 different ways!

Read more: 47 Ways to Market an App  →

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