Should Grammarly prioritize expanding its free tier features to attract more users or focus on enhancing premium offerings to boost subscription revenue?

Introduction

The trade-off we're examining today is whether Grammarly should prioritize expanding its free tier features to attract more users or focus on enhancing premium offerings to boost subscription revenue. This scenario touches on the classic product dilemma of user growth versus monetization. I'll analyze this trade-off by considering user segments, business goals, and potential long-term impacts on Grammarly's ecosystem.

Step 1

Clarifying Questions (3 minutes)

• Based on recent market trends, I'm thinking user acquisition might be a challenge. Could you share any data on our current user growth rate and churn?

Why it matters: Helps determine if we need to focus more on acquisition or retention Expected answer: Moderate growth, high churn in free tier Impact on approach: Would lean towards improving free tier to reduce churn

• Considering our revenue model, I assume subscription is our primary source. What percentage of our revenue comes from premium subscriptions versus other sources?

Why it matters: Informs the potential impact of focusing on premium features Expected answer: 80%+ from subscriptions Impact on approach: High subscription dependence would favor premium enhancements

• Looking at user behavior, I'm curious about the conversion rate from free to premium. What's our current conversion rate, and how has it trended recently?

Why it matters: Indicates the effectiveness of our current freemium model Expected answer: 5-10% conversion rate, stable or slightly declining Impact on approach: Low conversion might suggest need for better free-to-premium pathway

• Regarding technical feasibility, are there any significant infrastructure or development constraints that would limit our ability to expand either tier rapidly?

Why it matters: Determines the realistic scope of potential changes Expected answer: Some limitations, but generally flexible Impact on approach: Would influence the timeline and scope of proposed changes

• Considering our current roadmap, how does this decision align with other ongoing initiatives or upcoming feature releases?

Why it matters: Ensures alignment with broader product strategy Expected answer: Some overlap with planned AI enhancements Impact on approach: Would look to integrate decision with existing plans for synergy