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New “Freemium” Models Turn Up Heat In Marketing Automation Space

While free trials of marketing automation software are a relatively common practice to give prospective clients a feel for the features and benefits of a solution, several vendors are now exploring a new “freemium” pricing model to compel prospective customers with a “limited access” complementary version.

The “Freemium” concept has caused a stir in the marketing automation space as Loopfuse launched its FreeView offering in June, and last week Genius unveiled a no-cost version of its Demand Generation product.

LOOP-GENIUSLoopFuse’s FreeView offers lead scoring, visitor analytics and multi-flight, email campaigns. In launching the version, Loopfuse said FreeView is designed to provide clients with the flexibility of growing with the solution, giving users the option of progressing to higher levels of usage as needed, for a fee.

“The marketing automation space has grown confusing for marketers and many solutions are priced beyond what many SMBs can afford due to tight budgets,” said Sean Dwyer, CEO, LoopFuse. “Clearly ‘free’ attracts a lot of attention.  In reality, though, the main proposition is about a shift in pricing to value.”

Earlier this month, Genius.com launched a free, fully functional version of the Genius Demand Generation product for up to five users who wish to send up to 2,500 emails to up to 3,000 contacts per month.

“With marketing automation adoption rates between 5-15% there’s plenty of room for growth,” said Scott Mersy, VP Marketing, Genius.com. “Freemium models eliminate the barriers to use and should accelerate adoption, which will benefit the entire category. It also encourages companies to be “customer success” focused to ensure that usage grows to the point where revenue can be attained.

So far this quarter, which began August 1 for Genius, Mersy said the Free Account offer has driven the highest number of inquiries and qualified leads for Genius. He added that as of last Friday, the company already closed its first paid deal from a free account sign-up. “We couldn’t ask for a better scenario than this: the lead came in from AppExchange on Tuesday, and the deal closed on Friday after the customer used the free version for a couple of days,” Mersy said.

The Value of Free?

Understandably, the ‘freemium’ offer has kicked off a healthy debate among marketing automation vendors. While proponents argue the models will remove barriers to entry, others have argued the no-cost pricing model could commoditize the category and cause further confusion among users.

Industry insiders point out ‘freemiums’ are just the latest in what is quickly becoming a very competitive space. “Relatively speaking, all of the marketing automation vendors are small, venture-funded companies, and I think there’s constant pressure to grow and show progress — both financial — but also with respect to market share,” said Malcom Friedberg, Principal, LeftBrain Marketing. “From my perspective, this is another tactic they are trying in order to achieve that goal.”

Other industry vendors caution that, while the ‘freemium’ model might be immediately appealing for SMBs seeking a cost-effective solution, it’s important to consider the complexity of marketing automation adoption as a whole. “Marketing automation products can be easy to use…But the frank truth is that marketing automation as a business process is not easy,” said Phil Fernandez, CEO of Marketo.  “Achieving true success with marketing automation requires a long-term commitment to designing and maintaining effective lead nurturing and lead scoring programs.  It requires continuous creation of high-quality content to ‘feed the machine.’  It requires an ability to test alternative strategies and drive incremental improvement.  It requires organizational commitment and buy-in from both marketing and sales leadership.  If companies try to jump on the marketing automation bandwagon on a whim by choosing a ‘freemium’ product, they are almost certainly setting themselves up for disappointment.”

Others share the same sentiment. “Demand generation is complicated to do,” said Adam Needles, Director of Field Marketing & B2B Marketing Evangelist at Silverpop. “Effective, buyer driven nurturing is not easy to do. Marketing automation platforms are pretty sophisticated tools that are there to enable and support demand gen programs through lead management processes and content marketing processes. I firmly believe that the processes have to happen before or in tandem with the technologies.”

“The reality is that you can’t make customers successful faster with a ‘freemium’ model,” said Jon Miller, VP Marketing, Marketo. “Marketing automation isn’t like CRM where you can do a free trial or get a free product and know what to do with it…Marketing automation is so new that the only people who understand it are super sophisticated marketers who are not going to be drawn to a low end product…You need to have some element of making it work and knowing what to do.”

“While I think there is some limited potential in experimenting with a freemium version, I don’t think it’s the way the market will go,” Friedberg said. “I know for a fact that the existing free trials many vendors offer have only been marginally successful, and some vendors no longer provide that option. The challenge is not using the tool, it’s understanding how a marketer should use the tool. That knowledge cannot be acquired through reading a white paper or attending a webinar.”

Friedberg pointed that gaining some familiarity with automation has value, but it will not replace the need for demand generation skills and processes that still exists in many companies. “It is important for prospective clients to have realistic expectations; while a free trial might be a viable way to put your toe in the water, a free marketing automation platform is not going to adequately address the challenges of most marketers.”

Eloqua CTO Steve Woods said providing a compelling offer helps "take the risk out" of the decision for buyers, so Eloqua's "SmartStart" is designed to get the business process changes off the ground while still jumping into technology. Eloqua also offers a money back guarantee to clients who don't see the success and results. "This has given us a great balance between delivering success, rather than just technology, to clients, and at the same time taking the risk out of the decision for them (in the same way that a freemium tries to do)," he said. "We found that leaving clients on their own to dig into a technology platform, regardless of which vendor, and try and find success on their own was not a great model for customers."