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Five million customers, no ad budget: How Hootsuite used a freemium model to build its business | Financial Post

An article by Ryan Holmes talking about the tactics and methods Hootsuite used to build with small budgets and big fun including Hootups, community activities like translation project, creative swag and more…

Ryan Holmes | April 10, 2015 1:04 PM ET

Ryan Holmes: With literally millions of apps competing for attention, startups are finding themselves forced to pour ever greater sums into marketing efforts. But money isn’t always the answer…

But more money isn’t always the answer. In Hootsuite’s first three years, we grew our user base from zero to five million people. During that time, our marketing budget was pretty much non-existent. We turned instead to a pair of complementary, low-cost approaches to find and keep customers. It may well have made all the difference.

Freemium economics One fundamental decision made shortly after launching in 2009 was to make our social media tool a freemium service. The majority of our users — and we very quickly reached the million mark — paid nothing. They could (and still can) log in for free to view their social media accounts from one dashboard, schedule messages and see analytics. Companies that wanted beefed up functionality and extra support, paid a monthly fee, ranging from as little as $9 to $1,000 and up for large enterprises with lots of employees.

Why invest so many resources and so much bandwidth catering to millions of free users who would never account for a cent of revenue? For starters, freemium dramatically reduces the need for traditional marketing and sales efforts. Our free users — in steady, predictable numbers — became paid users. Instead of having to sell them on the merits of our product with expensive ads, we let them see for themselves. Our product became our best marketing tool and salesperson. On average more than half our paying customers, including large clients, start out as free users.

Meanwhile, our free user base fulfilled another key function: It kept us honest. Free users are fickle; they’re not locked in by a contract or any other obligations. They can, at any moment, pick up and take their “business” elsewhere. So to maintain and grow our free user base, we had to continually update our product, rolling out new features to stay ahead of the pack.

These same features helped us win and keep paying customers. While other corporate tools were years behind the social media curve, our efforts to satisfy free users meant we could offer big enterprise customers the latest technology.

Seeing value in community But the freemium approach wouldn’t have been as effective were it not for another equally important strategy: investing in a fully functional community department. In many startups, the community team, if there’s one at all, is treated as an extension of marketing or customer support. While their ostensible role may be “building a community” of users, they spend a lot of time pitching products and fielding help calls.

Our community department, by contrast, didn’t have direct sales or support responsibilities. Their primary mandate was to help people who already knew our product connect with one another. In the early days, they set up social media accounts in a half-dozen key languages, sharing updates with users around the world.

At the same time, they led a crowdsourced translation effort that saw our tool translated into more than a dozen local languages, from German and Italian to Thai and Chinese. (Amazingly, translations were volunteer-driven — motivated by love of the technology and a liberal helping of swag, i.e. stickers, T-shirts and cuddly stuffed animals inspired by our owl logo.)

Online efforts were supplemented by old-fashioned face-to-face events. In emerging markets, the community team helped users organize hundreds of free meetups (branded as “HootUps”), where people could get together and trade product tips. Ultimately, a network of hundreds of volunteer “ambassadors” around the world took shape, enthusiastic users who agreed to spread the word in their countries. Many of these ambassadors were bloggers, consultants and marketers whose own agenda of developing a large online following aligned well with ours.

Cumulatively, these projects gave us entree into new markets, initiating the viral chain of adoption in other countries and spreading our product beyond its original North American user base.

Source: Five million customers, no ad budget: How Hootsuite used a freemium model to build its business | Financial Post