Monetizing a Freemium Model with Scarcity
Company: DocFlow (Document Management SaaS)
TTM Metrics:
- Revenue: $300k
- Profit: $30k (10% Net Margin)
- Free Users: 200k
- Paid Conversion Rate: 0.3%
- Blended CAC: $20
- LTV: $60
Current Scenario
Pricing Tiers:
- Free Plan: Unlimited docs, 1GB storage, basic templates.
- Premium ($9/month): 10GB storage, advanced templates.
Ad Strategy:
- YouTube ads targeting students: “Organize Notes for Free – Forever!”
Customer Feedback:
- “Why pay? Free does everything I need.”
- “I’d pay for collaboration tools, but they’re not offered.”
Diagnostic Process
1. Freemium Audit:
- 95% of free users never hit storage/template limits
2. Competitor Analysis:
- Notion locked collaboration behind $10/user plans.
3. Survey:
- 68% of free users were students; 12% were teams needing collaboration
Key Insight:
Freemium model attracted low-value users while ignoring teams.
Problems in Detail
1. No Artificial Scarcity:
- Free plan was too generous (unlimited docs).
2. Team Tier Launch ($29/user/month):
- Real-time collaboration
- Shared templates
- Version history
3. Ad Pivot:
- Targeted “remote teams” with: “Stop Doc Chaos – Collaborate in One Place.”
Implementation Steps
1. Week 1-2:
- Update free plan limits in Firebase.
- Build collaboration features with Draftbit ($5k).
2. Week 3-4:
- Email free users: *“50+ Docs? Upgrade Now or Lose Access.”*
- Run LinkedIn Ads targeting project managers.
3. Week 5-6:
- Case study: “How StartupX Saved 200 Hours/Year with DocFlow Teams.”
Results (6 Months Later)
- Paid Conversion Rate: 4% (+1,233%)
- Team Tier Adoption: 500 teams
- Revenue: $1.2M (+300%)
- LTV: $420 (+600%)