How a free plan led to explosive growth
Let's start with a bit of background for context. Mailchimp started back in 2001 when two web designers, Ben Chestnut and Dan Kurzius, used some old code initially intended for a (failed) digital greeting card product to solve their customers' need for an email tool. This code would eventually become the foundation of what we now know as Mailchimp.
Jumping forward to 2009, Mailchimp was already a popular email marketing platform. However, the team quickly realized that to become the top choice for small businesses and marketers, they needed to make their offering even more accessible. This led them to launch their free plan, allowing small businesses and solopreneurs to get started with email marketing without any upfront cost.
This wasn't your typical, 30-day free or free for the first 10 subscribers type of free plan you would instantly need to upgrade. It was a plan that some businesses could literally be on for free, forever. It currently includes up to 500 contacts, with 2,500 sends per month, which is plenty for many small or growing businesses to get started with email marketing.
With a completely free plan, and a pretty good one at that, it removed one of the biggest roadblocks for getting people to sign up: asking for payment. Customers could sign up for free and use it forever until their list got too big, which would be years of free service for some creators or small business owners.
But how could a totally free plan help? Wouldn't that cost money and cause existing, paying customers to downgrade? While there were certainly existing customers with small lists who stopped paying for their plans and switched to the free plan, Mailchimp's growth exploded after this totally free offering caught on.
Mailchimp's free plan launched in September 2009. Just one year later, Mailchimp saw an increase in paying customers by 150% and profits? A 650% increase! Read that again. That's profit, not revenue. The numbers don't lie. The bold idea to offer a free plan was a huge hit and became a key factor in Mailchimp's meteoric growth.
Overall, Mailchimp's freemium strategy has been a massive success for them. It eliminated one of the most significant pain points for small businesses: cost. This allowed more companies to get started with email marketing and grow their customer list through Mailchimp, ultimately leading to more revenue from loyal customers sticking around and upgrading to paid plans as they outgrew the free option.
But what about the paid plans?
While this whole forever free plan strategy significantly boosted Mailchimp's sign-ups, what about the paid plans? The goal of Mailchimp is to get customers on paid plans, so ensuring a proper pricing strategy is critical.
In 2010, one of Mailchimp's founders, Ben Chestnut, wrote about his fascination with the art and science of pricing. After changing pricing models half a dozen times and tracking things like profitability and customer actions like downgrades and refunds, there was plenty of data to work with to decipher the "right" price. This eventually led them to completely ditch the fee on their starter plan and helped secure their current pricing structure.
Mailchimp's pricing has landed at a tiered pricing model, starting at free and going up based on the number of contacts and sends per month and additional features. This allows customers to customize their experience and only pay for what they need at their current level of growth.
Bonus: making email marketing fun
Even though we're attributing most of MailChimp's growth to their bold move to add a forever-free plan, it's worth noting that from the beginning, the founders of MailChimp have been passionate about their mission. This led them to create an email marketing tool that was insanely useful and added a layer of fun to email marketing, which, to many business owners, felt like a chore.
Changing how people felt about email marketing by providing a more engaging, friendly platform has been essential in standing out against other email marketing companies' cold, corporate feel. Many users connect with a more humanized, fun voice across the platform, from their copy to their well-designed, engaging templates.
