There’s a big difference between "almost free" and "free". This can have profound implications for your pricing strategy and the success of your new venture.
A common web business model is offering a free entry level account, with subscription for "premium" features. A free 30 day trial, with subscription needed to continue, is another approach. Done right, these are powerful pricing strategies for new ventures.
Think about it from the customer’s perspective – adopting your new product is a risk. Will it do what it promises? Will it be worth the money I pay for it? And who the heck are you guys anyway?
Unless you have the credibility of established brand, it can be an uphill battle to get customers to adopt your new product.
The solution is simple – take away as many barriers to trial as possible and let your product speak for itself. If it delivers real value to people, then it becomes a no-brainer for them to buy because you’ve helped eliminate most of the risk. And since they are used to your product by then, they often stop looking for alternatives.
Barriers to Adoption
Cost (any cost at all) is a powerful barrier, so make a basic version free – or at least free to try. Even a tiny price like $1 is a barrier – not so much because of the money, but because they have to give you personal information (including credit card details) and put up with the hassle of payment processing.
A lengthy registration process has the same negative effect. "Why should I give you information about me? I don’t know what you’re like or even whether I want to use your product yet".
Get all these hurdles out of the way – ask for the bare minimum of information, maybe just an email and password.
If you offer easy, free trial and deliver compelling value to people, they’ll stick around. More importantly, they’ll often be willing to pay you for the service or an upgraded version of it. It’s all about taking the risk out of trialling your product.
A good example is Squarespace, the publishing service I have used to create this blog. They offered a 30 day free trial, and all I had to do to register was provide a login name, password and an email address. So it was a no-brainer to try their product. And since it delivered on its promises, and I had already built a prototype, I was more than happy to pay their monthly fee. In fact, I even opened up another account for a different venture of mine. Plus I’m telling all of you about it!
So think about how you can use the magic of free to help your new venture. Exactly how you structure your revenue model depends on your business, but usually there’s a way to make the numbers stack up and still offer free trial.