Who Do You Engage in a Freemium Business Model? Everyone?

The Freemium business model has been on the rise lately (but it’s not new), largely due to the ease with which scalable cloud based solutions can support it. CRM and related platforms/services are no exception. Whether it’s a 30 trial, or a no cost perpetual set of reduced functionality, it’s being tried over and over again as a means to lure subscribers that could convert. It’s a risky business if you don’t know what you’re doing. Some reverse-engineered analysis of the product BaseCamp (and other 37signals offerings) suggest that (at best) the paid subscriptions account for 1% of the user base. That may not sound like much, but it can still be very profitable because the mouth of the funnel can be huge.

For those exploring the possibilities of this model, there is fairly simply math available that can help you understand where you break even, etc.. For instance, you can calculate the Contribution Margin (revenue per unit/period less variable costs per unit/period) which is the basis …