Brands Are Using Freemiums To Engage Consumers And Boost Customer Acquisition

August 7, 2020 Sarah Cavill

Freemium promotions, which can include offering consumers a free trial or something for free with a subscription, are an effective way to create consumer interest and scale customer acquisitions. A strong customer acquisition strategy allows brands to build lists, gather data, increase brand awareness and develop customer loyalty while elevating sales volume. From Panera to Spotify, digital marketing strategies that include freemium offers continue to successfully scale memberships, customer bases and revenue across a variety of industries.

Panera’s Free Coffee For Members Has Been A Game Changer For The Quick Service Restaurant

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Panera launched their unlimited coffee subscription for MyPanera Rewards members in late February. The MyPanera+ Coffee subscription was a unique idea that offered subscribers unlimited coffee, tea or iced coffee for $8.99 a month, with the hope, of course, that while enjoying their coffee customers would order breakfast or lunch too. However, the timing of the MyPanera+ Coffee subscription launch was unfortunate, with everything grinding to a halt in March because of coronavirus, including commuters and everyone else that might stop in for coffee. Fortunately, Panera was able to recruit 100,000 coffee subscribers in February, and, as restaurants and retail have started opening up again, another 700,000 in July. The MyPanera+ Coffee subscription was a massive customer acquisition success, especially considering the roadblocks.

“We try to look at this [the MyPanera+ Coffee subscription program] from a consumer perspective. It has been a tough stretch for everybody and making it very easy for them to get free coffee is just our way to infuse some positivity,” said Eduardo Luz, Chief Brand & Concept Officer at Panera. “We offered this with no catch. When people understood how simple it was, droves of people registered.” Panera was in a good position to launch their MyPanera+ Coffee subscription. The brand was able to use the first-party data and strength of their very popular and trusted MyPanera rewards program, which boasts 40 million members, and gather steam for their coffee subscription model. The MyPanera+ Coffee subscription program has been so successful for Panera, particularly as coffee drinking habits shift to later in the morning and closer to lunchtime, that the brand is considering other, similar freemium promotions.

Streaming Brands Leverage Show Popularity + Free Trials To Scale Customer Acquisition

There’s a reason so many people have so many streaming services. A specific show gets a lot of buzz, the streaming service strategically leverages that buzz across advertising channels, while also offering a free trial period, and the deal is done. Whether it’s the Handmaid’s Tale on Hulu or Mandalorian on Disney+, leveraging the popularity of a buzzy show to promote streaming subscriptions, usually coupled with free trials, has been an effective model over and over again for customer acquisition efforts of streaming brands. In the case of Hulu, that perfect alchemy allowed the lesser known streaming network to come up from the minor leagues, gaining 40% more subscribers from 2016 to 2018. “[Handmaid’s Tale] was the most-viewed launch of a show in our history. We’ve just seen this up-and-to-the-right trend of new subscribers getting in, and existing subscribers keeping up,” said Craig Erwich, SVP of Scripted Originals for Hulu. 

And, while there are always going to be some “binge and bolt” customers who cancel when the free trial is over, Americans are committed streamers, subscribing to three streaming services or more on average. Reducing churn, however, requires ongoing digital marketing nurturing strategies and new products/services that keep consumers engaged.

SaaS Platforms Offer Tiered Services And Effectively Leverage Perks And Functionality To Gain Paid Subscriptions 

SaaS platforms like Dropbox, Evernote and Hubspot all offer free versions of their services. The free versions are scaled down, offering enough functionality to be habit forming and create loyal users who ideally will opt for the paid versions that offer more functionality. By targeting consumers with high engagement rates, directing them to simple sign-ups for upgrades of their most used services, and personalizing messaging that speaks to why an upgrade will benefit those customers, many SaaS users will convert from free versions to paid subscriptions. 

The SaaS industry has deployed the freemium model for more than a decade, with Evernote co-founder Phil Libin famously saying in 2010 that “the easiest way to get 1 million people paying is to get 1 billion people using.” And the freemium model has also been effective for other types of technology platforms, including Spotify, which has gained 112 million paying subscribers worldwide in the five years since adding a premium subscription. 

When brands can effectively entice consumers to try something new by offering a free version or a fun perk, satisfied customers often opt to upgrade to paying models or subscription renewals. For marketers, freemium promotions can be the carrot that gets someone in the door, building loyalty and the potential for more and different purchases. 

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About the Author

Sarah Cavill

With more than 20 years of writing, editing and reporting experience, Sarah Cavill brings to Digital Media Solutions (DMS) a fine-tuned and diverse set of skills. Her work has been featured in notable publications including The Daily Muse, CBS Local, Techlicious and Glamour magazine. Sarah has a passion for current events and the deep-dive research that goes into the content development and brand identity of DMS Insights. In her role as Senior Marketing Communications Writer, Sarah contributes to the pitching, researching and writing of multiple stories published each week surrounding digital and performance marketing innovations in pop culture, news, social media, branding and advertising.

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