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Posted by TJ Keitt on August 27, 2010
Recently, I published a report about a small software-as-a-service (SaaS) vendor, Dimdim, which is having success in the crowded Web conferencing market. Like many small vendors, Dimdim provides a free service tier, generously allowing up to 20 participants into the free meeting, to help drum up business. The report, though, did not simply highlight the number of users that Dimdim has captured in four short years of existence -- over 5 million -- but also its success in attracting partners like Intuit, Novell and Nortel CVAS. Why? For new vendors entering crowded markets, attracting partners is vital for two reasons:
For small SaaS vendors, the freemium model -- providing a free tier -- can be an efficient way of facilitating these business relationships. How? First, you have to set aside conventional wisdom, which says free tiers are best suited for sneaking through the backdoor of businesses and creating evangelists. The freemium model should not be seen as simply a way to bypass IT department gatekeepers, but as the foundation of a marketing campaign that attracts buyers (people in companies who will actually pay you) and partners. The graphical illustration of this idea is below.
In practice, for small SaaS vendors, the freemium model for attracting partners allows two things:
I would be remiss if I did not mention that the success of this approach to partnerships is only successful if the product delivers. So, product managers and marketers at small SaaS vendors need to know at the product development stage what issues they plan to address for customers and partners. In the Dimdim example, this meant providing an open source version of their product (great for systems integrators looking to develop on top of the communication software), open APIs (valuable for partners interested in attaching other services) and a mixed delivery model (suited for partners who want to present a hosted and on-premise version of the product to the market). It was this flexibility that kept partners around after they found the product when searching for a Web conferencing solution.