Freemium Offerings Accelerate Technology Adoption and Innovation

Editor’s Note: This blog is based on an article by the author in TechCrunch on February 3, 2021

In Millennials: Coming of Age, Goldman Sachs Global Investment Research writes, “Millennials are poised to reshape the economy; their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come.” This is true of personal and business buying behaviors. And I already see it in my industry, enterprise cloud software and services. 

The way companies evaluate and implement enterprise technologies has changed significantly over the past decade. That’s in large part because a new generation of IT leaders are making strategy and purchasing decisions. As a result, we’re seeing increased transparency in the evaluation and selection of enterprise technology, and the revival of “freemium models” from many technology vendors in industries ranging from communications to data management.

It’s time that tech companies sell the way that digital natives want to buy.

A New Technology Culture

Millennials will comprise roughly 44 percent of the workforce in 2021, and many of them are in senior executive, C-level, and founder roles. They’re shaping organizations from a vastly different set of experiences than the Baby Boomer and Generation X (Gen X) cohorts that came before them. These digital natives grew up on smartphones and the internet, playing Second Life and other MMO games, texting instead of emailing or calling, socializing in chat rooms and on WhatsApp, and sharing ideas over Snapchat and Instagram. The cloud services mindset is not second-nature to them; cloud is part of their DNA. Millennials (along with younger Gen Xers) pioneered the BYOD (Bring Your Own Device) to work movement; and that meant they also brought their own clouds. They even think of music as a software as a service (SaaS) offering. This is the Spotify generation, driving a world where 85 percent of music industry revenues in the first half of 2020 came from streaming. 

Transparent, Collaborative Evaluation

The process of product evaluation has also changed dramatically with digital native preferences. In the world of consumer tech, peer reviews gained traction in lock step with digital commerce; as digital commerce grew 20 percent per year as far back as 2016 and 2017, academic studies showed the importance of peer reviews, especially among younger buyers. We’ve seen that same evolution in B2B tech as well. Gartner’s Peer Insights is the perfect example of this.

Peer Insights veers from Gartner’s traditional approach of providing analyst advice in reports, and instead curates customer reviews based on direct, firsthand experience using a product or service. And yes, Peer Insights is a free product. One thing the last decade has shown us is that opinions are expected to be free. 

While I am always happy when Reltio is favorably assessed in an analyst report, the customers reviews of Reltio Connected Platform on Gartner Peer Insights thrill me; especially given our comparative ratings.

Freemium Models are Driving (and Being Driven by) Innovation 

Contemporary B2B freemium products are often feature rich, enabling customers to get to know a service. Like the mobile apps that excelled with freemium offerings before them, they provide value, with a step up to a paid product level. Think of it as a League of Legends model for business software. Just as players of the world’s most popular video game learn that paying for in-game options such as better weapons yields better results, freemium customers discover new use cases that can unlock more value.  Indeed, companies such as RingCentral, Zoom, Slack, and Microsoft have taken this approach. It’s also the approach that we are taking at Reltio in launching our own freemium product, Reltio Identity 360

Reltio Disrupts Master Data Management…Again

Traditionally, master data management (MDM) product evaluation and implementation would take more than a year, on average. Reltio first demolished that model with a cloud-native MDM SaaS platform that is ready on day one. Now we are breaking the barriers again and delivering business value not in months or weeks, but within hours of submitting a request. Customers can deploy Reltio Identity 360 immediately without configuration and get clean customer profiles in a secure production environment.

Dave Menninger, SVP & Research Director of Data and Analytics Research, Ventana Research wrote, “Master data management is a critical capability for organizations. Our research shows less than one quarter are very confident in the quality of their data. Our research also shows organizations are moving their data processes to the cloud. Reltio Identity 360 will enable organizations to experience the benefits of master data management for free. The new generation of IT executives, many of whom are digital natives, are accustomed to feature-rich freemium models that deliver lasting value. Identity 360 provides an easy path to cloud-native, multi-domain master data management for Customer 360 and Enterprise 360 as those use cases arise.”

On the vendor side, cloud-native SaaS companies with the infrastructure flexibility to quickly develop, deliver, and manage new products, have the agility to quickly meet the needs of this new technology culture. Because they can move fast, they can bring innovative new freemium offerings to market ahead of competitors who rely on traditional on-premises models. A cloud-based freemium model also ensures that upgrades to premium products go smoothly.  

 In offering a fully-functional free-tier product, technology vendors are doing four things:

  • Building Customer Relationships. Digital-native IT professionals at every level want to evaluate a technology without the significant financial risk that enterprise implementations of the past incurred. This builds familiarity without pressure and often creates learning cycles and getting quick wins ahead of a full implementation. People within an enterprise have more access to a product and begin using it early, driving popularity and easing the cultural transition inherent in technology adoption.
  • Building Trust. Gartner hit on the concept of trust with its Peer Insights, building on the understanding that people trust brands more if their peers do. Freemium products take the trust issue one step further. A great freemium experience builds trust in the most fundamental way: through first-hand use of a product. Freemium should not mean a watered down version. Offer the same level of performance, security, and stability as premium products and make use it delivers value.
  • Building Confidence. Demonstrate quick business value for an enterprise. By providing a risk-free opportunity to experience new software and tools, freemium products demonstrate their impact on the bottom line; this can often result in surprising results outside of original project scopes. When users build out these additional capabilities, they are much more likely to go with a brand they know and trust.
  • Building Community. The Goldman Sachs Global Investment Research study I referenced at the beginning of this article also points out that Millennials are social and connected. When asked, “After searching online, how do you communicate with others about a service, product, or a brand?” Text messaging dominated and was closely followed by social media and instant messaging.Just like their buying habits, the new generation of IT professionals carry over an openness to sharing opinions into their work. This is manifest in almost spontaneous community creation in which solicit and share product experiences, ideas, and tips and tricks. Authenticity reigns supreme. Open-minded tech companies should embrace and encourage community building around freemium offerings. The commercial benefits will come. Splunk is a textbook example of how to build community the right way. 

Freemium-Driven Organizations

Even in organizations where the CTO or CIO may not fit a Millennial demographic, the expectations and patterns established by digital natives are shaping innovation. The benefits of freemium products go beyond direct financial results; freemium products encourage innovation. Disruptive, emerging growth companies are most often early adopters of new technologies, using what they can afford and what fits into the habits and lifestyles of younger employees. Freemium products like Slack and G-suite have helped an entire generation of new companies innovate more quickly and focus funds and resources on building new products and services.  

Reltio introduced a free tier for this reason. By putting elements of Reltio’s industry-leading MDM platform in the hands of Chief Data Officers, Chief Information Officers, Enterprise Architects and other data professionals at companies of any size, we envision providing them with a better way to enable business initiatives. We’ve seen how MDM benefits our enterprise customers from Carmax to Shiseido; we can’t wait to see how a new generation leverages the insights from Identity 360.  

This is a new development for us, but initial data are encouraging. And Reltio is committed to expanding our portfolio of free tier, cloud services. Two more are already in the queue. I’ll let you know how that goes. 

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