Grammarly leverages a freemium service, where free users are prompted to switch to a paid subscription. Grammarly makes moneyby selling premium plans starting at $11.66 to $29.95 per month. The company also makes money by selling human proofreading services to its paid users.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Grammarly’s value proposition revolves around providing individuals with an AI-powered writing assistant that helps improve the quality and correctness of their written communication. It offers real-time grammar and spelling checks, style suggestions, vocabulary enhancements, and plagiarism detection. Grammarly assists users in crafting clear, error-free, and impactful written content for various purposes, including academic, professional, and personal. By enhancing writing skills and saving time on proofreading, Grammarly contributes to improved communication, productivity, and confidence in writing.
Provides an AI-powered writing assistant for grammar and spelling checks, style suggestions, vocabulary enhancements, and plagiarism detection. Helps users create clear, error-free, and impactful written content. Serves academic, professional, and personal writing needs. Enhances writing skills and boosts productivity. Fosters user confidence in writing. Attracts users seeking to improve writing quality and efficiency. Increases user productivity by reducing the time spent on proofreading. Drives user engagement through continuous writing improvement.
– Grammarly’s value proposition aligns with the universal need for effective written communication. – Offering a range of writing assistance tools caters to diverse user requirements. – Enhancing writing skills and boosting productivity contribute to user satisfaction and loyalty.
Customer Segments
Grammarly targets a broad range of customer segments, including students, professionals, writers, bloggers, and anyone who writes for academic, business, or personal purposes. It caters to individuals seeking assistance with grammar, spelling, and writing style improvements. Grammarly offers both free and premium plans, making its services accessible to a wide demographic. While the free plan serves as an entry point, the premium plan offers advanced features and additional benefits. Additionally, Grammarly Business targets organizations, including businesses and educational institutions, seeking to enhance the writing skills of their employees or students.
Targets students, professionals, writers, bloggers, and individuals who write for various purposes. Appeals to those seeking assistance with grammar, spelling, and writing style improvements. Offers both free and premium plans for accessibility. Provides advanced features and benefits through premium plans. Targets organizations, including businesses and educational institutions, with Grammarly Business. Offers a range of plans to cater to diverse user needs and budgets. Extends services to organizations for employee or student writing improvement.
– Catering to a broad range of users across different writing needs maximizes Grammarly’s market reach. – Offering both free and premium plans allows users to experience the platform before committing to premium features. – Grammarly Business addresses the writing improvement needs of organizations, expanding the customer base.
Distribution Strategy
Grammarly’s distribution strategy primarily relies on its website and browser extensions. Users can access Grammarly directly through its website, where they can create and edit documents, or by installing browser extensions that provide real-time writing assistance across various online platforms, including email, social media, and content management systems. Grammarly also offers desktop applications for Windows and macOS, ensuring users can access its writing assistance tools seamlessly. Additionally, the platform provides APIs for integration with third-party applications and services, expanding its reach and functionality.
Relies on a digital distribution strategy through its website and browser extensions. Offers direct access through the Grammarly website for document creation and editing. Provides browser extensions for real-time writing assistance on various online platforms. Offers desktop applications for Windows and macOS. Ensures accessibility and convenience for users through multiple access points. Provides APIs for integration with third-party applications and services. Expands reach and functionality through platform integrations and partnerships.
– Digital distribution simplifies access to Grammarly’s platform, eliminating the need for physical distribution channels. – Accessibility on various online platforms ensures broad accessibility and user convenience. – Desktop applications cater to users who prefer a standalone writing environment. – APIs enable integration with third-party applications, enhancing the platform’s functionality.
Revenue Streams
Grammarly generates revenue primarily through premium subscriptions and partnerships. Premium subscriptions offer enhanced features, including advanced grammar and style checks, vocabulary enhancement suggestions, and plagiarism detection. Users pay subscription fees on a monthly or annual basis to access these premium features. Grammarly also forms partnerships with educational institutions, businesses, and organizations through its Grammarly Business offering, providing tailored writing assistance solutions and revenue opportunities.
Relies on revenue from: 1. Premium subscriptions, with monthly or annual fees. 2. Partnerships with educational institutions, businesses, and organizations through Grammarly Business. Ensures income through subscription fees for premium features. Diversifies revenue sources through partnerships with institutions and organizations. Attracts premium subscribers with advanced writing assistance features. Expands the user base and revenue opportunities through partnerships.
– Premium subscriptions provide a consistent source of income and incentivize users to upgrade for advanced features. – Partnerships with educational institutions and businesses create additional revenue streams and address specific customer segments.
Marketing Strategy
Grammarly’s marketing strategy includes content creation, digital advertising, educational partnerships, referral programs, and social media engagement. The platform produces educational content, blog articles, and guides on writing-related topics to attract and engage users. It utilizes digital advertising to promote its premium plans and free writing assistant. Grammarly partners with educational institutions to provide writing assistance tools to students and educators. Referral programs encourage users to refer Grammarly to others, earning rewards in return. Social media engagement fosters a community of writers and encourages user-generated content sharing.
Utilizes content creation, digital advertising, educational partnerships, referral programs, and social media engagement for marketing. Produces educational content, blog articles, and guides on writing-related topics. Runs digital advertising campaigns to promote premium plans and the free writing assistant. Partners with educational institutions to offer writing assistance tools to students and educators. Encourages user referrals through incentive-based programs. Fosters community and user-generated content sharing through social media engagement. Focuses on building awareness, educating users, and expanding the user base through various marketing channels.
– Educational content establishes Grammarly as a trusted source of writing advice and attracts users seeking writing improvement. – Digital advertising campaigns drive user acquisition and promote premium plans. – Partnerships with educational institutions expand the platform’s reach and address the academic segment. – Referral programs incentivize users to advocate for Grammarly, contributing to user growth. – Social media engagement builds a community of writers and encourages content sharing.
Organization Structure
Grammarly operates with a structure that includes teams responsible for product development, content creation, marketing, partnerships, user experience (UX) design, customer support, and business operations. Product development teams focus on improving writing assistance tools and features. Content creation teams produce educational content and resources. Marketing teams handle promotional efforts and user acquisition. Partnerships teams collaborate with educational institutions and businesses. UX design teams work on optimizing the user interface for a seamless experience. Customer support teams assist users with inquiries and issues. Business operations teams manage financial and administrative aspects.
Employs a structure with specialized teams for product development, content creation, marketing, partnerships, UX design, customer support, and business operations. Ensures continuous enhancement of writing assistance tools and features. Focuses on creating educational content and resources for user engagement. Manages promotional efforts and user acquisition through marketing teams. Collaborates with educational institutions and businesses through partnerships teams. Optimizes the user interface for improved user experience through UX design teams. Assists users with inquiries and issues through dedicated customer support teams. Manages financial and administrative aspects through business operations teams.
– Specialized teams contribute to ongoing platform improvement, user satisfaction, and safety. – Educational content enhances user engagement and positions Grammarly as a valuable resource. – Marketing and user acquisition efforts play a crucial role in platform growth and revenue generation. – Partnerships with educational institutions and businesses expand the platform’s offerings and address specific customer segments.
Competitive Advantage
Grammarly’s competitive advantage stems from its AI-powered writing assistance tools, continuous improvement, and accessibility. The platform’s advanced grammar checks, style suggestions, and plagiarism detection set it apart in the writing assistance industry. Grammarly’s commitment to ongoing development ensures that it remains at the forefront of writing technology. Accessibility through both free and premium plans caters to a wide audience. Partnerships with educational institutions and businesses expand its reach and provide tailored solutions. Grammarly’s reputation for accuracy and effectiveness enhances its credibility and trustworthiness among users.
Derives a competitive advantage from: – AI-powered writing assistance tools with advanced grammar checks and style suggestions. – Continuous development and improvement of writing assistance technology. – Accessibility through free and premium plans for a wide user base. – Partnerships with educational institutions and businesses for tailored solutions. – Reputation for accuracy and effectiveness, building user trust. – Leading position in the writing assistance industry.
– Grammarly’s advanced writing assistance tools provide a clear advantage over basic grammar checkers. – Continuous development ensures that the platform remains up-to-date and relevant. – Offering both free and premium plans maximizes user accessibility and adoption. – Partnerships with educational institutions and businesses create revenue opportunities and expand the user base. – A strong reputation for accuracy and effectiveness builds trust among users and organizations.
Developed in 2009 by Ukrainians Alex Shevchenko, Max Lytvyn, and Dmytro Lider. The company grew quickly also thanks to its viral engine and its freemium offering.
And it was pretty much bootstrapped until 2017 when it got a venture funding for $110 million to further scale its operations.
According to an interview for Voice of America, reported by Forum Daily Grammarly founders reported:
We saw a lot of plagiarism and wanted to help teachers and other students who honestly wrote their work to solve this problem.
Therefore, they wanted to solve a problem of plagiarism, and indeed we might argue that one of the key value propositions of Grammarly is its plagiarism checker able to check (according to the company) to billions of pages in a few seconds.
According to LinkedIn, the company has 302 employees as of October 2019, mostly distributed across the US and the Ukraine offices. According to LinkedIn, about 40% of the employees work in Engineering and IT which shows a strong focus on the product.
And around 32% of employees work in Sales and Marketing roles.
Grammarly culture, mission, vision, and core values
Source: Grammarly
Grammarly’s vision is to build a comprehensive communication assistant.
As pointed out on Grammarly website:
All Grammarlians care deeply about improving our users’ lives through better communication. We take personal responsibility for achieving aggressive goals both individually and collectively. Additionally, we all share a set of core EAGER values, which ensure that you are joining a highly effective, collaborative team.
Therefore the mission is to improve our users’ lives through better communication.
From its mission and vision Grammarly articulated its core values:
E: ethical
A: adaptable
G: gritty
E: empathetic
R: remarkable
Source: Grammarly
From these values, the objective is to offer a payoff of Grammarly users defined as to accelerate personal and professional growth.
Grammarly monetization strategy
Grammarly leverages on a freemium model where its browser extension is offered for free to users. Those users are prompted to upgrade to the premium version to get more value. For instance, Grammarly provides a side-by-side comparison of a free and premium account:
Advanced features, like grammar, context and sentence structure; vocabulary enhancement suggestions; genre-specific writing style checks and plagiarism checker detectors are offered for the premium account which starts at $11.66 per month, up to $29.95 per month!
Grammarly also offers a human proofreading services that allow paying users to get additional services, by choosing three modes of delivery (24 hours, 3 hours, 30 minutes).
We don’t sell or rent user data to third parties for any reason, including for them to deliver their ads. Period. Our business model is a freemium model, in which we offer a free version of our product as well as Grammarly Premium and Grammarly Business, which are paid upgrades. The only way Grammarly makes money is through its subscriptions.
Grammarly marketing strategy
As pointed out on marketingland.com Grammarly was ranked number one on YouTube first-annual list of top TrueView, based on the action taken by users on the Grammarly ads. This shows how good is Grammarly at communicating in a very short time its payoff to its potential users:
Grammarly viral growth
According to Owler, Grammarly might make around $7.8 million per year. Its viral growth leverages on a set of free tools:
Grammarly for Mac
With its app for Mac, Grammarly makes it easy to use its editor to Apple users.
Grammarly for Microsoft
With its app for Microsoft, Grammarly makes it easy to use its editor to PC users.
The Grammarly Keyboard
With its app for mobile, Grammarly makes it easy to use its editor to mobile users
Grammarly chrome extension
The Grammarly Chrome extension is also a key tool that allowed the company to grow quickly its free users base. Thanks to a seamless UX and a set of prompts Grammarly managed to reach profitability and become cash-flow positive.
A glance at Grammarly technolgy-driven approach
As a company that automates most of the processes related to grammar and sentence structure. Grammarly has to leverage on several technologies to make this process work.
For instance, what might seem a very simple task, like splitting sentences has to have natural language capabilities. As the Grammarly engineering team explains:
At Grammarly, we use a lot of off-the-shelf core NLP technologies to help us make a little bit of sense in the mess that is natural language texts (English in particular). The issue with all these technologies is that even small errors in their output are often multiplied by the downstream algorithms. So, when a sophisticated mistake-detection algorithm is supposed to work on individual sentences, but it receives a fragment of a sentence or a couple merged together, it may find all sorts of funny things inside.
The major strength of the company is how they’ve been able to release these at a massive scale. In 2019 Grammarly reported over 20 million users, which might make also a simple NLP task quite complex.
Another key element to understand how technology-supported Grammarly growth is its ability to make its browser extension work at scale.
The browser extension reported over 10 million users as of October 2019. And it has been a key element to enable Grammarly viral growth. Indeed, the freemium is most of all a marketing tool that should enable companies to cheaply acquire leads that can be converted in paying customers.
In Grammarly’s case, a browser expension might seem a simple thing, yet as the Grammarly engineering team specified:
These extensions may look easy on the outside because they are low profile and easy to use. But it is actually a complex product supported by a full team of engineers. We have been developing and perfecting it for 6 years.
That is why the engineering team has implemented a branching model to reduce manual tasks, which as you can imagine, on a user base of 20 million might be impossible to keep up for a company with a few hundreds of employees of which only about 24 people in support, according to LinkedIn:
Grammarly branching model to eliminate as much as possible manual actions, architectured by the engineering team (Source: Grammarly Engineering Blog) as an example of how tech helps to support Grammarly growth channels. In these cases, technology and engineering are the most important marketers, as they enable a free product to scale, thus making the brand resonate across millions of users across the world.
What’s a Grammarly competitive advantage? A platform-agnostic AI tool
A competitive advantage is not easy to identify and it is often related to multiple factors. In this paragraph, we’re focusing on one particular competitive advantage, but it is important to highlight this isn’t the only one that makes Grammarly tick so far.
Hoover, Grammarly’s CEO explained to TechCrunch what one of the key advantages of Grammarly is its “platform-agnostic approach.” In short, Grammarly focuses on being anywhere the user needs to be.
This is a great advantage in an era where competition for AI tools is increasing substantially and also large tech companies like Google are providing automation tools for writing. However, those are still closed platforms with their own business logic. Grammarly goes beyond that.
Value Proposition:
Writing Improvement: Grammarly offers real-time grammar, spelling, punctuation, and style suggestions to help users enhance the quality and clarity of their writing. By providing instant feedback and corrections, Grammarly enables users to avoid common errors, refine their language usage, and produce polished and professional-looking content.
Error Detection and Correction: Grammarly’s advanced AI algorithms detect and highlight errors and inconsistencies in users’ writing, including grammatical mistakes, typos, and contextual errors. By flagging potential issues and offering corrective suggestions, Grammarly helps users identify and rectify errors, ensuring accuracy and coherence in their written communication.
Style and Tone Enhancement: Grammarly provides insights and recommendations to improve the style, tone, and readability of users’ writing based on their audience, purpose, and context. Whether aiming for formal, casual, or professional communication, Grammarly offers tailored suggestions to align the tone and style of writing with users’ intended message and audience expectations.
Vocabulary Expansion: Grammarly suggests synonyms, word replacements, and vocabulary enhancements to enrich users’ writing and avoid repetition. By offering diverse word choices and alternatives, Grammarly helps users enhance the variety, clarity, and impact of their language, enabling them to express their ideas more effectively and persuasively.
Platform Integration and Accessibility: Grammarly seamlessly integrates with various platforms, including web browsers, word processors, email clients, and social media platforms, allowing users to access its writing assistance tools across different applications and devices. With browser extensions, desktop applications, and mobile apps available, Grammarly offers users flexibility and convenience in improving their writing wherever they work or communicate online.
Revenue Streams:
Subscription Plans: Grammarly offers premium subscription plans with advanced features and functionality beyond its free offering. Users can upgrade to Grammarly Premium to access additional writing checks, plagiarism detection, vocabulary suggestions, and style enhancements. Subscription plans are available on a monthly, quarterly, or annual basis, generating recurring revenue for Grammarly.
Enterprise Solutions: Grammarly provides enterprise-grade solutions tailored for businesses, teams, and organizations seeking to improve their writing quality and consistency across their workforce. Enterprise offerings include team accounts, centralized administration, integration with collaboration tools, and custom solutions, generating revenue through enterprise subscriptions and licensing agreements.
Partnerships and Integrations: Grammarly partners with third-party platforms, educational institutions, and technology providers to integrate its writing assistance tools and services into their products and ecosystems. Through API integrations, white-label solutions, and OEM partnerships, Grammarly extends its reach, expands its user base, and generates revenue through licensing fees, royalties, and revenue-sharing agreements with partners.
Affiliate and Referral Programs: Grammarly operates affiliate and referral programs that incentivize users, bloggers, influencers, and affiliates to promote its products and services. Participants earn commissions or rewards for referring new users to Grammarly or driving subscription conversions through affiliate links, banners, and promotional content, creating a revenue-sharing model based on user acquisition and conversion.
Education and Academic Partnerships: Grammarly collaborates with educational institutions, schools, and universities to offer tailored solutions for students, educators, and academic organizations. By providing educational licenses, institutional subscriptions, and learning management system (LMS) integrations, Grammarly generates revenue through educational partnerships and licensing agreements in the academic sector.
Marketing Strategy:
Content Marketing and Thought Leadership: Grammarly engages in content marketing initiatives to position itself as a thought leader in writing enhancement and communication skills. Through blog posts, articles, ebooks, and educational resources, Grammarly offers valuable insights, tips, and best practices for improving writing quality, attracting and engaging its target audience with informative and relevant content.
Influencer Marketing and Endorsements: Grammarly collaborates with influencers, celebrities, educators, and industry experts to endorse its products and services and promote their benefits to their respective audiences. By partnering with influencers across diverse niches and platforms, Grammarly increases brand awareness, credibility, and trust, leveraging influencer endorsements to reach new users and drive conversions.
Digital Advertising and Retargeting: Grammarly utilizes digital advertising channels, including search engine marketing (SEM), display advertising, and social media advertising, to target and reach potential users interested in writing improvement and language enhancement tools. Through targeted ad campaigns, retargeting strategies, and dynamic content, Grammarly increases brand visibility, drives website traffic, and encourages user sign-ups and subscriptions.
Email Marketing and Engagement Campaigns: Grammarly leverages email marketing campaigns and engagement strategies to nurture leads, onboard new users, and retain existing subscribers. By sending personalized email newsletters, product updates, feature announcements, and educational content, Grammarly keeps users informed, engaged, and active, driving user retention, loyalty, and lifetime value through ongoing communication and relationship-building efforts.
User-generated Content and Community Engagement: Grammarly fosters user-generated content and community engagement through its platform, social media channels, and online forums. By encouraging users to share their writing experiences, success stories, and testimonials, Grammarly amplifies its brand advocacy, social proof, and word-of-mouth referrals, harnessing the power of user-generated content to inspire and motivate prospective users to try Grammarly’s products and services.
Distribution Channels:
Website and Browser Extensions: Grammarly distributes its writing assistance tools and services through its official website, allowing users to download and install browser extensions, desktop applications, and mobile apps compatible with various operating systems and platforms. By offering direct downloads and installations, Grammarly ensures accessibility and ease of use for users across different devices and browsers.
App Stores and Marketplaces: Grammarly distributes its mobile applications through app stores and digital marketplaces, including the Apple App Store, Google Play Store, and Microsoft Store. By listing its apps on popular app distribution platforms, Grammarly reaches a wider audience of mobile users, increases app visibility, and facilitates app discovery and installation, driving user acquisition and engagement through app distribution channels.
Partnership Integrations: Grammarly integrates its writing assistance tools and services into third-party platforms, applications, and software ecosystems through partnership integrations and API access. By partnering with technology providers, productivity platforms, educational institutions, and content management systems (CMS), Grammarly extends its distribution reach, embeds its solutions into existing workflows, and facilitates seamless access to its writing tools within partner environments, driving user adoption and usage through integration partnerships.
Educational and Institutional Sales: Grammarly distributes its products and services to educational institutions, schools, universities, and academic organizations through direct sales, institutional licenses, and bulk subscriptions. By offering educational discounts, volume pricing, and tailored solutions for the education sector, Grammarly penetrates the academic market, expands its user base among students and educators, and drives institutional adoption of its writing enhancement tools through educational distribution channels.
Affiliate and Referral Networks: Grammarly leverages affiliate and referral networks to extend its distribution reach and acquire new users through affiliate marketing partnerships, referral programs, and incentivized promotions. By incentivizing affiliates, partners, and influencers to promote its products and services through affiliate links, referral codes, and promotional campaigns, Grammarly taps into existing networks and audiences, driving user referrals, conversions, and revenue growth through affiliate distribution channels.
Key takeaways on Grammarly business models
Grammarly leverages on a freemium service model. Its product is designed for virality as it offers a set of free tools, mostly compatibles with any device.
Thanks to its AI and seamless experience, free users are turned in paying customers. Prompts within the product make it easy for free users to understand the benefits of having more advanced features through the paid version.
Grammarly’s vision is to build a comprehensive communication assistant which payoff for its users is to grow professionally. Grammarly’s core values can be summarised in the “EAGER” framework.
Grammarly is one of the best examples of how afreemium model, well-engineered, can bring massive growth and virality for an organization.
This also requires substantial investments in technology and engineering to require the platform to work at scale to sustain its growth.
Thus, Grammarly business model teaches us how a freemium can help sustain the growth of an organization. But it’s also a cost center as it requires substantial engineering resources to sustain and maintain it at scale.
That is why it’s important to understand the economics of the paying subscribers and how to make freemium work for your organization.
Key Highlights
Business Model:
Freemium model: Offers free basic services and prompts users to upgrade to premium plans for enhanced features.
Premium Plans: Ranging from $11.66 to $29.95 per month, providing advanced grammar, context, style checks, and plagiarism detection.
Human Proofreading: Offers paid human proofreading services for premium users.
Bootstrapping and Funding:
Founded in 2009 by Alex Shevchenko, Max Lytvyn, and Dmytro Lider.
Initially bootstrapped.
Raised $110 million in venture funding in 2017 to scale operations.
Mission and Vision:
Vision: To build a comprehensive communication assistant.
Mission: Improve users’ lives through better communication.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
