The Secrets To Doing Freemium and sales-driven sales at the same time with MixMax CEO Olof Mathe

Hi everyone, I'm Olaf Matej. I'm the CEO and co-founder of Mixmax. We're a sales automation platform, and I'm so excited to share the secrets of doing both freemium and a sales-driven model at the same time. And so y'all SaaS aficionados are probably thinking we're completely crazy to mix both freemium and sales. And I'm here to tell you in part why you're right. And so here are a couple of the things that we're gonna cover today. We're gonna talk about why having a hybrid model between freemium and sales is crazy and why you should be doing it anyway. I'll share the 3 key questions to answer when you're going hybrid, so you get your hybrid model exactly right. And then I'll share just a personal experience of going hybrid, all the challenges we faced, how we overcame them, some of the challenges we're still working on, and then the opportunities we found in going hybrid. So first of all, what are the two models? What do we mean when we talk about freemium and direct sales? Well, this is kind of the traditional way we think about sales in SaaS. It's the dichotomy between freemium and direct or enterprise sales. Enterprise sales is probably where, you know, SaaS started out. It's the CEO co-founder jumping on a plane to close a deal. It's the wine and dine. It's the opaque pricing, but hopefully the customer gets exactly what they need at the end. Freemium, on the other hand, I think is being— have really popularized by a SaaS product like Dropbox, where it was about having a really low friction product with massive reach. And then some subset of those people would upgrade. Of course, they never talked to a human. They had to figure everything out on their own. They never got any attention really, and if there was support, it wasn't bespoke at all. And so what's cool today is that we're seeing increasingly best-in-breed SaaS companies that are doing a hybrid between these two models. And why do they do that? Well, hybrid matters because SaaS today is so mature, and you're always up against an incumbent or a competitor that has more market share. And so it's just a great way to differentiate. I'm sure some of you are familiar with this picture of the MarTech 5000. Just to show— and I can't make out a single logo, which of course is purposeful— just to show how crowded marketing tech is. It's the same in sales tech, the space we're in, in finance tech, in development, deployment tech, whatever part of SaaS you're in, it's crowded and there's an incumbent you're up against. And so typically you have kind of two ways to differentiate yourself. Either you can focus on a better product experience or a better buying experience. And so if you're up against an incumbent that tends to lean more on direct sales, and have a more direct sales-heavy approach, you can differentiate yourself by having free or freemium as part of your mix. And again, the reason you do that is not to get crazy reach. It's mainly to reduce friction so much that you can get a trial, because the buyer is always going to be incented to go with the incumbent or the competitor that has more market share than you for the time being. Now, on the— On the other side, if you're, you know, up against, if you're in a category where freemium is more prevalent with kind of a broader use cases, you can differentiate by having a way better buying experience. And what that typically means is layering on some kind of sales experience or human attention on the buying experience. Because hey, not everyone wants to buy from, without talking to humans, and especially if you want to grow faster than your purely freemium-based competitors, that can be a great, great strategy. So going hybrid is a great way to differentiate yourself in SaaS since it's so mature today. So how do you pick a hybrid SaaS model that really works, and how do you find, you know, the right fit that works just for you? So here's what we'll go through: the 3 key questions to ask yourself when going hybrid and figuring out your sales model. So you'll notice, by the way, that these are kind of like a sales funnel, and that's exactly how I would think about them. So first of all, you need to ask yourself, how do you qualify your leads? What information are you asking from people that, you know, sign up for demos or sign up for your product? Then how do you show value? Is this entirely self-directed? The lead is on their own, or are you giving them some kind of bespoke concierge experience? And lastly, how do you sell? Is pricing on the website? Is it opaque? Does the lead have to pick up the phone to call your sales team, or can they just put down their credit card? And so as you think about these dimensions, you'll notice that, you know, typically in the old world, freemium was just like very permissive, and in the old world, direct sales was pretty restrictive. And now we're starting to see interesting hybrids. So I'll go through kind of the dimensions for each of these. So firstly, how do you qualify and what's the full plethora of options you have available to yourself? Well, for qualification, there's actually a lot from doing abs— asking your leads for absolutely nothing. They can try out the product without even giving you their email address. This, I feel, is one of the most underutilized ways in SaaS. It isn't that prevalent. I think Boomerang, the Chrome extension, had this on one of their products. Sites like Alexa kind of have this. You can do things like asking for an email address or OAuth, which is pretty slick. Of course, we have the forms and surveys, some of which are very lengthy. And of course, none of us enjoy saying, you know what, I'm primarily interested in, here's my role. And no one ever enjoyed chatting to a chatbot. And then of course, you have the full actually having to talk to a human before even potentially getting access to the product. And what's interesting here is Today we even see some freemium products that are adopting either very lengthy forms or surveys, even live calls before you get in. And then some companies that rely more on sales that try to open up the top of funnel so much that they have very, very light qual, or just invest heavily in automated sourcing to reduce friction for, for the, for the user. Now, of course, qualification isn't fun, um, and the best types of qualifications are probably the ones that actually show us value. And that goes to the other dimension. How do you show value to, you know, people that your leads that have signed up and are on board? Well, here again, you have kind of a full set of options from completely self-serve, self-directed, find your own flavor, figure it out on your own, to sales or success, doing some kind of intro meeting with you to show the value of the product, but typically it's one-off and you're on your own, to something that's much more concierge bespoke, you're mapping Salesforce fields together and they're really, really out to solve your problem. And again, here in the old world, freemium was almost always just self-directed, direct sales was much more on the concierge side. Now we have some freemium products that, you know, rely heavily on pretty deep onboarding and some sales products, well, well, sales comes in very late, and a lot of the initial discovery is actually self-directed, in part because perhaps the target audience doesn't actually want to be sold to. So a lot of options here for you to think through as you choose your hybrid model. And then, of course, when it comes to the sell, how are you going to do that? Well, here again, a lot of options from open, what I call more an open model, to a more closed one. Open being there's a free version of the product, or perhaps the product's free, it's typically self-serve, through to pricing's opaque, you have to pay for the product, you have to talk to the sales team, and with everything in between from, you know, putting in your credit card to get a trial, having a free trial, being bounced back to free, or perhaps even getting shut off once your trial's over. So a lot of different options for you to think through here. So those are the 3 questions to think through. What type of model do you want your various stakeholders going through at every point in the journey? And so here I'd like to share what the hard lessons are from the choices we made in choosing a hybrid model, because we went pretty much across all of these dimensions rather than choosing just the standard freemium or the standard sales model. And in a way, you could say we actually have a mix of both. The first thing I'd like to clarify is certain types of companies are more— better suited to hybrid models. And I would say the types of companies that work really well for hybrid models are companies whose product products have tiered value. And so what do I mean by that? Well, I think a company like Figma is a really good example of this. Figma is built for design, but not just designers. So Figma, as you know, is a design platform. Designers make mocks and interactive, you know, prototypes in Figma, but there are a whole set of other stakeholders that use and interact and get value from Figma. You know, engineers, product people, even some folks on the go-to-market team. Now, of course, designers are the ones that get most value, and all these roles are kind of ancillary, but they're still getting value. And the cool thing about this is since they have many different types of stakeholders, that opens up for really interesting expansion opportunities and growth opportunities within accounts, especially larger accounts. Looker is kind of similar. You know, it's, it's built for data science. But not just data science— scientists. A whole variety of different stakeholders rely on Looker charts and modify them and look at them and are getting value. And so what this means for companies that have different types of stakeholders, hybrid models are really useful because at different times in the lifecycle, you want to engage with your leads differently. And so this is where it comes to us, and I'm just sharing so you get a sense for the hybrid model we chose. Where a sales automation platform will build for sales, but not just salespeople. In fact, some of the core use cases salespeople have around scheduling and email tracking, almost everyone on a revenue team or anyone who talks outside of the company needs. And so our hybrid model, which we chose, and I'll go into some of the challenges of this, was having a free plan to get massive virality and reach, and then giving users the option to choose a free trial of our paid plan where If you don't want to pay, you bounce back on free. And so for qual and showing value and selling, we're actually across all of these dimensions. We try to reduce a lot of friction up front by just having OAuth and automated scoring. Yet if you're a really good lead, we'll actually try to call you to— for— so our sales team engages with you. In terms of showing value, we're mainly self-directed, but If you're a great lead, we'll really try to concierge it with you and map out Salesforce fields and create amazing automations with you. And then on the sales side, while we rely really on direct sales to slow— to sell big contracts, we love when you just pay out of pocket as well. So you can imagine that this creates some conflict internally and there are challenges with it, and that's the meat of this. So let's talk about qualification. What happens when you try to have really big top of funnel? So challenges for us have been the SDR role gets pretty rich and actually kind of complicated. You just can't have a canned discovery process because people have signed up to use the product. They didn't sign up to get qualified. And so your SDRs need to show a ton of product value and be your leads' best friends in helping them achieve what they want to achieve. And that means that you need a very special breed of sales leadership and a very special breed of SDR, which isn't given. Secondly, another challenge, of course, is just on the product side. Wide top of funnel, we get high ACV customers, low ACV customers, users, and then people actually sign the checks, which are buyers. So who do you optimize for? That can create a lot of internal conflict and confusion. And so what helped us there was making a very explicit exec decision on our focus, where we said 20-25% of product and engineering team attention is going to acquisition, and top of funnel and the rest on the core features and value add that we sell in direct sales. And of course with this, there's a lot of opportunity, right? Because we're in a space where we sell mainly against kind of folks that very much focus on direct sales. And so it introduces less friction to get more trials. And with this, with really smooth qual, you'll get lots of leads and lots of users for experimentation. So a lot of expansion opportunity there as well. Okay. What about showing value? Because, you know, we're mainly self-directed, but then we have this concierge approach as well. What are some of the challenges with that? Well, here I'd say the biggest challenge, and when we're still working through, is how do you make sure your highest valued leads and accounts are getting the right experience? How do you even get in touch with them? And then even if you're able to set up a structured trial, almost everyone who's doing that trial will have their own experience instead of preconceived notions about the product because it was self-directed. And that is definitely a double-edged sword. So something to keep in mind when you choose a hybrid model. Now, there are a lot of opportunities in having a product that can support self-directed. And that is really quick time to value, fast deal cycles, implementations, high win rates. Your CS and support teams, you'll start to view them much more as revenue generators versus cost centers. And even if you're lucky, if an account— well, if you're not lucky and an account churns, folks will come back because they can use it on their own. We're starting to get a little bit short on time here, so I'll just wrap up with the main point here around selling. So when you have both money coming in from self-serve and direct sales, that just— you can almost hear the conflict straight away internally, right? So first of all, reps are going to get distracted by lower value activities. It's really easy for them to claim self-serve leads as their own. They might engage with the lead that ultimately buys self-serve. They might try to convert monthly deals to annuals. Really, really tricky. And so here, what helped with— for us was being very strict on a minimum deal size for direct sales. And then of course you have the question of, hey, which revenue channel are you going to optimize, especially if they're roughly the same size and growing at the same rate? And here what helped us a lot was making an exact decision to say that free and self-serve are just for reducing friction top of funnel to get more leads. And what we really optimize for is direct sales. So that helped us. And of course, the beauty of this, and I'd say the main opportunity, is suddenly your sales motion is not just an inbound or an outbound one, but it's kind of a hybrid inbound-outbound model. You get folks who come inbound, and then you can start to outbound decision makers at the accounts. So outbound is never truly cold outbound. Outbound, which creates a lot of nice opportunity for your sales team. Secondly, when, you know, self-service mainly to create leads, you start to view that money almost as free cash flow and negative CAC leads, which is kind of nice. And of course, if in the sales process you end up not winning a deal, you're still going to keep the super fans that paid out of pocket. So it's a future upsell opportunity. So a lot of challenges that require a lot of exact decisions, but also great opportunities. And to wrap this up and go on to questions, so hybrid models, why are they awesome? Well, they can really help differentiate when you're up on folks who rely more heavily on freemium or more heavily on sales. You're gonna need to figure out how to qualify, show value, and sell, and make the interface between those really smooth. And to really make this work, you're gonna need a separate breed of rep that is somewhat different. You're gonna need to think about free and self-serve, not so much as a separate revenue channel, but really about being a friction reducer to get more trials. And then you have to be ready to make a lot of exact decisions on where to focus and what degree of resource allocation you should have on, on different areas. So hopefully that can help inspire you in terms of figuring out your own hybrid model and why it's important. So with that, thank you everyone. And let's see what questions we have. And let's see here. We had one from, um, uh, we have one from Samir here asking, uh, how do you get thousands of leads? Well, we get many thousands of signups, actually, and through our automated scoring, we don't actually consider all of those ready, as in ready for sales. They're not true MQLs. And we're a little bit fortunate because our space, of course, being sales automation, we do our part of communications product. And so there is a lot of opportunity for viral growth, which is in our space how we get a lot of leads. But I'd say the main important part, of course, is getting really, really good leads. And we have a question from Christopher here, and thanks, Samir, for the question, by the way. And I'd say lastly, Samir, too, as I mentioned, we invest 20-25% of product team attention on top-of-funnel growth, which is an explicit exec decision. So another question from Christopher, what's a good conversion rate on freemium? You know, it's funny, I would have answered that question differently a year or so ago. For now, we see freemium purely as a way to get more and better leads for the sales team. I think conversion rates on freemium, there's a lot of literature on it. Our conversion rate shortly after trial is something in the like 4 to 5%, if I'm not mistaken, which I think is pretty awesome actually. And I think it purely depends on the type of business you are, what a truly good conversion rate is. Yeah, but I would hope it's in the mid to high single digits at least. Nice. Um, awesome. So a question from Eric. How would your business be different if you just focused on one channel? Why can't you live without both? Yeah, what an awesome question. Well, our perspective on this is we can't live without both because again, SaaS is just so crowded and we have incumbents and competitors that are purely one or the other. So for us, it's awesome to be able to offer buyers whatever buying experience they want. It's important for us to have this freemium experience since we rely almost entirely for leads on viral signups. And, and in a way, actually, it's interesting because if you— we think about— if I think about the historical genesis for this, we very much started out as a pure freemium product. And then discovered that the actual growth opportunity for us was layering on sales and viewing freemium purely as lead gen for sales. I hope that gives some more clarity, Eric. Okay, we have a question from Chuca. I love Mixmax. Thank you, Chuca. That's great, great to hear. How do you determine what is too much to give away for Free. Um, wow. That is a really good question. Um, I guess the way we think about free, again, free for us is in the context of growing and having as many leads as possible. And so, um, we like to give away anything that kind of doesn't cannibalize direct sales, which is the main revenue engine for us. And so anything that's scheduling, email tracking, basic productivity is like already free or liable to be made freer at Mixmax? I'd have to think about that a little bit more and see if we have a really good framework for it, but it's mainly will this be above and beyond what exists in the market today? Because again, the way we monetize is mainly through bigger contracts. So many exciting questions. Hard to See here, so let's see, um, from some anonymous, does MixMike use pure cold outbound as well? On what target ACVs? Um, yes, we do. We've actually started that and started trialing that. Um, so I don't have a ton of metrics to share on it. Initially, it looks pretty much like what you'd expect on a classic sales funnel. Uh, our minimum ACV in sales today is $3K, but on outbound, we like to see $10K or more. Um, awesome. And we have from Mark, uh, hey Mark, I think we might've met in the past actually. Um, can you speak to the KPIs or how you qualify your power users that come in through freemium? Yes. So we do automated scoring. There are a number of products in the market that will do that for you. We use one called Netkudu, and there are very many, and they are basically based on a whole set of firmographic data, which is based on someone's email address. You can infer a whole set about the person and the company. So we understand if that's like a great lead for sales. And in addition, we actually look at usage data during the initial trial. So someone might come in, might not look great, but they're starting to use the product really, really deeply. Awesome. Or we might have someone who comes from an amazing account but doesn't use the product at all, but we're going to say, hey, they're probably a buyer doing a formal evaluation, so you should absolutely engage with them. And so the qualification of power users really is automated. And then of course, for, um, power users, we try to get in touch with them as well. And we're still working through better ways to get in touch with them, but typically folks that are engaged don't mind hearing best practices and understanding how to be most productive with the product. Awesome. Vincenzo, great question. What have your biggest challenges been with this model? I think actually the biggest challenges have been mainly organizational, and it's probably a little bit just how I think about what are the biggest challenges with startups. It's actually organizational challenges, typically, and just powering through the grind of what it means to build a company from nothing. And so some of these challenges I might have alluded to. So it's things like, how do we focus the product roadmap when we have you know, a lot of lower value customers coming in and some high value customers coming in. When you have both users that we rely on for groundswell support and buyers coming in who are actually signing the checks, who do you build for? And so some of the biggest challenges, I think, certainly from my perspective, have been the exact decisions that we have to make around where to invest, um, and when to make those types of investments. Yeah, so I think that's probably the biggest, biggest challenge. And that's awesome. It looks like we need to wrap up here, Lindsay. So bummer I couldn't get to everyone's questions. Thanks for such a spirited discussion. Hope you were a little bit inspired to try out new and different hybrid models. It's not a given organizationally, but I'm sure it'll pay off for you. So thanks so much, everyone.