Transitions its entire business model by analyzing customer usage patterns.
INDUSTRY: Social Media Management
LOCATION: Vancouver, British Columbia
HootSuite was initially a free service, and attracted hundreds of thousands of customers through viral word-of-mouth. In 2010 it decided to transition to a “freemium” model: it charged for advanced features but left the basic version of its application free. Transitions like these can be company-making or company-breaking events. Initial attempts weren’t successful.
HootSuite initially planned to introduce a free option and four premium tiers. Daniel Mathews, Data Analytics Manager at HootSuite recalls that when HootSuite tried this initial freemium model, “We experienced a significant dropoff in both free and paid signups. We could see right away that we didn’t package it properly.” HootSuite knew it needed thorough analysis of its users’ behavior to drive pricing and packaging. This was a real pain point for them, recalls Matthews. “Before RJMetrics, we didn’t do a lot of data analysis. When we did, our developers had to spend a long time doing ad hoc data pulls. We really wanted to allow our developers to get back to building HootSuite instead of pulling data for business intelligence.”
Within a week of contacting RJMetrics, HootSuite had their initial reports in place to measure their customer activity. Through this process, they decided to shift their strategy. They embarked on a new plan to separate their customers into two main pools—5% into a paid pool designed for business customers and 95% into a free pool for casual users.
They tested different usage profiles via an RJMetrics bucket analysis to determine how many users fell into each of the proposed tiers. Mathews recalls that “with the RJMetrics dashboards in place, we easily segmented customers by key metrics – X% of customers used certain social networks, Y% sent messages, or Z% added team members.”
Using RJMetrics, HootSuite found a set of features that best differentiated between casual and business users of their product. Ultimately, the ability to add unlimited social networks, RSS feeds, team members, advanced statistics were used as the criteria for differentiating their customers. Using this information, HootSuite relaunched their freemium offering.
This time, HootSuite not only saw their free sign-up rates go back to their historical rates but also saw paid signups increase as well. Today HootSuite continues to use the plans and feature segmentation identified in RJMetrics, and its freemium model is at the core of its success story.
Having undergone a successful transition from ad-supported to freemium, Mathews continues to use RJMetrics every day. “I setup an overview dashboard, which gives me up-to-date insight into micro and macro trends on recently created accounts. We also have other broad overview dashboards that are available to everyone in the company.” He adds, “The marketing team gets a daily RJMetrics summary email on user sign-ups, and the sales team uses RJMetrics’ data export functionality to follow up on new leads. RJMetrics can be used by every department in your company, which you can’t say about many tools.”