Honey changes its business model from freemium to 30 day trial

Takeaways from intranet platform provider, Honey, which switched its business model from a limited freemium to a 30-day free trial, pay-per-user approach to billing.

Chip Kellam, CTO [standing]; Rachel Kaplowitz, CEO [background] and Allison Morris, Client Services Manager.

Photo by Brady Dale.

The team behind Honey, which aims to be a better internal company intranet, made a big strategic switch earlier this month when it moved its sales model from a freemium, tiered approach to an unlimited 30-day free trial followed by pay-per-user billing. The team walked us through the process and described key changes they made to make it work.

We covered Honey’s intranet service before. Previously, a company could have up to 10 users free forever and then there were tiers above that where the price for the service escalated. You can see one natural problem here, a small company might be reluctant to let that 11th employee in and even a larger company might hesitate to let that next employee move it to another pricing tier.

The freemium model also failed to create a sense of urgency on the sales side, said Alison Morris, Client Services Manager on the Honey team.

Now, under the 30 day free trial, a company can have as many users as it wants in its platform to trial, but at the end of 30 days they will have to pay for each employee in the system (though they don’t have to bring every employee in).

“Usually when we do a product release, we can do a lot of it in advance,” said Morris, by way of explaining just how much work this changeover was. “In this case, a lot of things had to change at the stroke of midnight.”

Here are some of the changes that Honey had to make to work under this new model:

  • Completely revamp there life cycle of emails to new users, so that they fit into the 30-day window. The email content is designed to guide companies to a successful deployment of the platform, based on “what kinds of behaviors we saw at other successful companies,” Morris said.
  • Updating the life cycle of emails to administrators, who hear from Honey at least twice per week through the trial.
  • One of the best new emails comes on the second day. It’s a personalized email from CEO Rachel Kaplowitz that invites new companies to set up a call with her to talk about the service. The response rate to that has been really high, which helps with sales and also introduces the Honey team to new use cases.
  • The in-product on-boarding experience. Design elements walk new users through features of the platform as they open it for the first time. That went live Friday.
  • The software around billing had to move from the bucket approach based on the total user base to one that charged per account within a company.
  • Honey is usingĀ Stripe, a developer-centric payment startup, for its billing.
  • They also changed the system so that a domain isn’t locked out if one team within a company goes through a trial of Honey and doesn’t buy. Later on, if another team started the process, it would just start fresh, rather than locking that previous team out.

It’s only been a little over a week since the change happened, but they are starting to see signs of improvements, said Morris.

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Open rates on their emails are better, more people within companies are getting invited to use it and more content seems to be going up more quickly. This last point is key, she said.

“That empty room syndrome is one of our biggest challenges,” Morris explained. A company launches a new internal social network, and there’s nothing there. The company has to put its own content in, and the sooner it goes in and the more of it there is, the more likely the firm is to adopt.

Here are some screenshots of its new onboarding prompts, which launched this weekend:

[slideshow_deploy id=’16134′]

Chip Kellam, CTO, explained that if the content is going up, that’s a good sign.

The hardest part of the shift was communicating effectively with those customers who were and had been under the freemium model for some time and those other potential customers who were already midway through the sales cycle. The four person team had to reach out to each of those edge cases and work with them one by one.

Companies that were already under a paid platform of some kind were given the option to simply stay on that scale for as long as it made sense for them.

For the small team, the change appears to be decreasing friction in their day to day work. They no longer have to negotiate with clients about new pricing tiers as they just barely cross over into a new bucket, customized billing has been eliminated and their isn’t any internal confusion over just which special deal they had granted to which company and for how long.

Since companies now pay on a per user basis, there’s no sudden jolts in prices. Additionally, since Honey can integrate with APIs, it’s possible for companies to put users on autopilot, such that when an email address shuts down when an employee leaves, that user would automatically shut down in Honey, too. That means admins don’t have to worry about double-checking that they aren’t paying for users who are no longer at the company.

Honey is a four person team based in Huge Labs in Dumbo. They are not yet discussing revenue or user numbers.

Companies: Honey
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