How to Convert a Free User to a Premium User
chagency.co.uk
chagency.co.uk
Giving away for free a product that creates significant value is charity.
Trying to charge a user for a product that offers little value will limit your user base and market awareness.
If you don't understand exactly the value your product creates then you are in trouble and not being able to balance fremium correctly is only one of the problems in this case.
The difficulty is that if you want word to spread among communities of people that contain your power users (and would-be power users), then by charging them money, you're constraining growth in those key communities. Any thoughts on how to deal with this specific tradeoff?
I'd be interested to hear more of your insights, especially about how the balance might change over time. Do you give away more for free in the early days, to raise more awareness? How do you know when it's time to stop giving it away for free?
We gave away premium licenses for free (no strings attached) to some socially active power users. It helped us to increase awareness.
Also, I found that premium users are more loyal in general and more willing to share the knowledge about our product.
>Do you give away more for free in the early days, to raise more awareness?
We surely did give away more for free in the early days. Partly, because we still figured out the product/market fit. As we pinpointed the PMF and added new features we periodically rebalanced the free offering. Since many new features became also available in the free edition we reduced some limits and capabilities of the free edition.
>How do you know when it's time to stop giving it away for free?
We never stopped. We still have a freemium model [1].
Overall, we try to keep the ratio of premium to free users at around 1:5. With my previous product, the ratio was 1:50 which was too unbalanced as I realized later.
[1] Comparison of our free/premium editions: https://easymorph.com/buy.html.
I suppose having answers to such questions would give a better understanding of the most efficient free/premium ratio.
Feel free to reach out to me by <username> at easymorph dot com for a chat.
Yes, not everyone will be able to do it. Yes, it's way way easier to do so in a blue ocean. I do branding work as part of my agency sometimes, so I definitely feel what you're saying when it comes to "free is low value, premium is high-value"
To find the balance is to experiment, just like I'm 100% sure you've seen along the years. I'm not advocating for charity, I like businesses, making money and unlocking value. The point of freemium was to give equality of opportunity: if a business is using your product, they're starting something.
By offering them the chance to have a lean start, eventually when they get to win (because that's why they use a product, right? To create more value, either financial or of some other kind), they're already locked in to your service and grateful for you helping them in the beginning.
And that's not only about new businesses. It can be applied to big corporate companies that start testing a new thing — obviously they're going to go with the less stressful and time-consuming option (if there is one) and test it at a small scale before biting the bullet
My main takeaway is: don't squeeze money out of your customers by severely limiting the free plan. Focus on delivering as much value to your users as possible. Help them grow so you can grow together. You will get happy customers who will be happy to recommend you, and happy to pay for your service.
Cloudflare, one of the examples mentioned in the article, is also a hero of mine, in terms of how much value they offer for free.
"You will get happy customers who will be happy to recommend you, and happy to pay for your service." — and some of them will become friends. we're talking long-lasting friendships because you helped them get off the ground
thx for the comment!
My main takeaway is: don't squeeze money out of your
customers by severely limiting the free plan.
For example, if you're a SaaS version control system, it's easy: Charge per-user-per-month for private repos and corporate-single-sign-on-system integration.
Boom, no hassle or difficult sign-up for free tier users, practically every company with more than a handful of developers has to pay, companies with 100x as many employees pay 100x more, no need to annoy free-tier users to push them onto the paid tier, no semi-permeable paywall where users can clear cookies or open multiple accounts.
But if you're a social network, or a tool for debugging regular expressions, or a chat app, or a newspaper, or a streaming music service? Much harder to draw such a tidy line.
But when you want to advertise, you'll have to compete with so many others, hence the bidding.
One could argue the "you're the product when the product is free", true but the equality of opportunity is there. And the cost of entry is 0.
Likewise, there's not a paid Facebook Premium tier or a paid Instagram Pro version.
The closest things to social networks that have a paid tier within the social media product are the likes of Tinder, Strava and perhaps LinkedIn.
Happened to me with an older guy whom I took advice from. He helped me a shitton without asking me. I'd often tell him "how can I help, you're offering so much free stuff to me". Eventually, he asked me to become business partners in a venture — I said yes willingly but thinking about it in retrospective, there was no way I could say no
What that means at scale could be after a product/online person helps you with a shitton of free resources/content, you'd feel guilty not to pay them back by donating to one of their fundraisers — see Wikipedia
They’re free as fuck and you’ve seen the “please donate so that we can keep it free”. I know they’ve got:
- over $80m (million dollars, yes) in donations in 2015 - assets worth around $100m in 2017 - probably even more due to anonymous donations (and if you’re donating a lot you want to be anonymous)
And I still have absolutely no damn problem with them asking for money. Yes, that’s revenue on top of which there are expenses (a huge bill, given how much they’ve got to cover).
They’re transparent, they don’t hide these figures I’ve just posted and that’s totally fine. Surely they must be in top 1000 value sources of the modern world.
I think it’s not shame that gets people to donate to Wikipedia but, if anything, guilt. I’ve helped you so much I’ll guilt you into returning it, at least to a degree. I think this is the next wave. And then everyone will be doing that (because making someone feel guilty is a flaw, somehow), it’ll be the old-school and we’ll find something new.
But hey, in the grand scheme of things, at least we all started being better by providing value
The fact that there's at least nominal value to Cloudflare in having me as a free customer gives me confidence and reassurance in using their product, as it lends credence to the long term availability of my free tier account and that I won't suddenly be the victim of a shift in their marketing and sales development budget.
I'm not sure what the right term for that type of incentive alignment is, but it reminds of me Geico auto insurance. As a business, their goal is to provide a long term and stable source of float to Berkshire Hathaway[1], not quarterly profits. To do that, they've optimized their business to capture and retain as much market share as reasonably feasible. Their rates are truly reflective of the actuarial expectations of insuring you - there's virtually no profit margin baked in because that could prevent marketshare growth, and you won't get bitten by shady exclusions buried in the fine print that you only find out about when you try to file a claim, and you won't get hit with an unexpectedly huge rate increase at renewal time due to a slightly worse than expected quarter and the need to engineer short term profits. The "gotcha" with Geico's pricing model is that they're using my business as leverage for other purposes (premiums as float to provide leverage to BH).
I do a lot of work in optimizing monetization strategies and developing/optimizing business processes, so I may be an atypical consumer. But I have far greater adoption of services when I understand the value drivers of the relationship. If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere. If I'm a marketing expense I'll try to avoid building reliance on your product into my life because the stability of our relationship is unknown. And if you're deriving profit from our relationship and I don't understand how, I'll default to assuming an adversarial relationship where either "I'm the product" or there's a hidden catch coming in the future. Whereas if I know that you're not directly extracting profit from our relationship, and I understand how you're indirectly driving profit from our relationship, I'm far more likely to trust you and integrate your product into my life.
> If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere.
That "elsewhere" might be the word-of-mouth on steroids that I talked about in the article.
Send me an email, tell me more about what you do, interested in hearing - daniel@chagency.co.uk
Optimizely[1] is a solid example of that. They used to have a free Starter plan, and had priced plans that scaled from hobbyist pricing level through to small/medium business pricing levels. They've shed all of that at this point in time, and now have three unpriced plans listed on their site and an enterprise sales process could rival Oracle or IBM in the level of self-assured salesmanship and abrasively aggressive price discrimination/discovery. Having used them at a previous company (starting with the free plan and moving to a ~$400/month plan), I was pretty shocked when I reached out to them more recently to adopt at a new company. Budgets less than $50k/year aren't worth more than a one-liner "no thank you" from their sales staff, budgets between $50k - $100k may be enough for them to do you a great favor in allowing you to become a customer, and budgets above $100k/year will at least get them on the phone long enough for them to tell you what the price floor is for your industry and company size (with actual usage volume being next to irrelevant). Word of mouth on steroids became irrelevant to them to the point where they completely shed not only their free tier but also all of their legacy small/medium business customers, too. And it didn't actually hurt their business any, and likely helped it in the eyes of the high margin customers they're going after now.
Contrast that with Cloudflare. Offering a free tier has real costs associated with it. But those free accounts also serve a valuable purpose to their product, and the word of mouth benefits are just icing on the cake. A core selling point of their product is the advanced threat detection and security capabilities that are enabled by the sheer size and scope of their network. The loss of their free tier customers would drastically reduce the visibility they had and in turn degrade the offering to their enterprise customers. Their free tier is a fundamental component of their business/product itself, rather than just an acquisition/marketing/pr cost. Which insulates me as a free user from feeling like the rug is going to get pulled out from under me at any moment when their sales strategy shifts.
On the bright side, I would never have created an open source alternative[1] without this happening, so ended up with a better solution for virtually free and hopefully helped others in the process...
Or there's the 'conversion option'.
A freemium user at any given time has a probability of conversion, and that probability is an option on future cash-flows.
Surely, the probability is highest somewhere near the start of use, but not right at the start, as most users probably start with freemium anyhow.
With products like Dropbox which are in some cases 'shared' - there's a material network externalization as well, which is a probability that a freemium account will bring in others. This goes beyond referral/word of mouth to the extent that the product is naturally networked.
For this later reason - social media sites are almost always free because the economic potentiality of the network beyond 'you' is always considerably greater than 'just you'.
Also, as you hinted at in your Geico example, is that there economic realities to incumbency and market share. Once something becomes a market leader and the 'de-facto' option, then there can be incredible leverage, especially in networked situations. What is the current alternative to Facebook today? Not much.
Obviously the dynamic changes once market share is established but before that, there's an impetus keep prices down.
Venture Capital is keen on that to the point wherein one might consider that VC money is just really a form of 'economic dumping' , i.e. money getting thrown into markets to sell stuff below market value to obtain market share. It's illegal in some ways!
For established marketing channels/user segments, you should be able to identify your response curves and probability of conversion at each stage of your marketing/acquisition funnel, including from freemium to paid user. If freemium conversions is a component of your sales process, you should absolutely be attributing the costs associated with supporting freemium users towards marketing, net any freemium-specific revenue streams such as ads. It's a fairly substantial component of the fully burdened cost per acquisition, and by allocating the expense towards marketing rather than diffusing it into operations, you get a much more actionable view of your true CPA. Being able to do so at a granular level requires putting in effort to integrate your marketing analytics with your operational analytics. But even just looking at it in aggregate is beneficial to understanding acquisition costs.
Network effects complicate that calculation a bit, depending on the nature of the network effect. Freemium Dropbox users sharing files could lead to net sign ups, as you mentioned. But the value from that is incremental user acquisition, and is still solidly a component of your marketing/acquisition costs. Contrasted with your social network example, where there is intrinsic leverage afforded by the size of the network that's independent/distinct from the potential to drive incremental user acquisition.
VC is its own beast. As you said, it's essentially a form of economic dumping. They prioritize growing market share first, and identifying network effects and associated leverage potential after the fact. Only after all that do they really mature their business model, and does it make sense to try to understand what component of network effects is a marketing benefit vs. a product benefit. Uber is a perfect example of this - their original pitch[1] was very solidly as a taxi app, and one that used exclusivity as a selling point no less. Virtually all of their pitched areas of growth were around potential for optimizing personal transit, with only a single mention of branching out their infrastructure to other location based services applications. Now they've distanced themselves as much as possible from their identity as a taxi service and repositioned themselves as a logistics and transportation juggernaut. And the ubiquity, availability, and consistency of their network is a core component that enables that product identity.
[1] https://medium.com/@gc/the-beginning-of-uber-7fb17e544851
For me, Dropbox, Spotify and GitHub all do this - naming them as examples of companies that don't is plain wrong to me.
Dropbox: 2gb of storage is nothing (weird and a bit sickening, but still).
Spotify: The ads experience in Spotify is probably one of the worst user experiences I know - so no real value here.
GitHub: no private repos for free users (might have changed?) made me choose Bitbucket. No use without private.
All in all, I don't really agree with the article: I actually do believe that a not-amazing-but-still-great experience is the way to go. See: Asana. It's OK++ for free, but I pay because it's better when I pay.
I felt envy seeing some my peers (who had no existing repos, or far fewer than me) get free PRO accounts while github probably though I should just buy one.
Long story short, I created a bitbucket account and later made heavy use of gitlab.
- 2GB is more than enough for Word documents and a few pictures.
- Listening to ads is totally normal because what's the alternative to Spotify? Radio.
- Most programmers have a job that pays well (and if not, they're in education), so they just need an online git repo for their hobby open-source projects.
But as soon as a non-free workgroup account shares its files with you you loose all your free space forever.
Instead of ads, in their free tier, they make me listen to sponsored songs by artists I'd never have heard of.
I use Spotify with the ads. I learn to ignore the bad ads like ads on the radio. These are rarer.
When I work on a private project large enough for it to need a repo, I'd like it to be public, so I have no problem with Github.
I am however subscribed to Notion.so since yesterday, after running into the 1000 blocks limit after multiple months of using it. I considered for a long while, but found that it does provide good value over all.
This is by far my favorite model (and would probably get me to pay for Spotify): A good free plan that gets you addicted, but runs out after some time (Yes, like a trial, but I wouldn't actually like the feeling of that).
Dropbox - still on free after getting lots of free space through promos
Spotify - family account
GitHub - paid for personal until the recent change
My takeaway, none of these freemium methods are “bad” but Notion felt the best as a consumer. I talk about Notion way more than the others and I believe their pricing model makes that possible
You didn't transfer any monetary value to them but surely helped them. That's a win-win. Amazing
> My takeaway, none of these freemium methods are “bad” but Notion felt the best as a consumer. I talk about Notion way more than the others and I believe their pricing model makes that possible
You mean the fact that they're charging per member per month at the topmost level? Or simply the low delta between plans?
> This is by far my favorite model (and would probably get me to pay for Spotify): A good free plan that gets you addicted, but runs out after some time (Yes, like a trial, but I wouldn't actually like the feeling of that).
Thank you, happy to see confirmation in regards to the idea of "emotional connection" from the article.
Any lines that stood out for you?
That was a quote from another Quora answer. The article was my answer to a Quora. I found that quote corny and far from what a startup should be. It's not what I believe in.
As someone else pointed in the comments, you're a power user. And you're annoyed by ads — but as mentioned in the article, some people prefer paying with time. And Spotify is okay with that. 2GB means is more than enough to change the word — a document can have only a few kilobytes and be the basis of the cure for cancer.
Same for GitHub. What I'm advocating for is giving equality of opportunity and then capitalising on people only if they make money out of it. "Not amazing but still great" is the way to go for short-term. But too many people are stuck in the short term, even though they've met their basic needs.
And what I'm saying is not limited to "poor people". I know a lot of rich people who like to start lean simply for the sake of seeing proof of concept. They have millions in their bank yet they ask their cofounder to chip in £5,000 on the idea.
In this sense, they'd benefit from equality of opportunity given by services — once their idea is validated (maybe after 5 tries?), they'll bring their money and power. But they'll start with the lean version, if possible
as I mentioned in the article, it might be hard to grasp for someone who didn't experience it
Spotify restricts the amount of songs you can skip to 10 in the free version. And next they play you an ad where they stage the (premium) feature of unlimited skipping as some revolutionary game-changer for music players. This anti-feature has literally no other upside for Spotify other than annoying users into subscribing. Which is all completely fair, since it is free after all but I can't find any mechanism which is more to the point of
“Provide incentive for prospects to sign up for freemium but do not provide too much value so that free version of the product is enough.”
Personally, I am more than happy paying for Spotify family.
That was a quote from another Quora answer. The article was my answer to a Quora. I found that quote corny and far from what a startup should be. It's not what I believe in.
As the article mentioned, the Spotify ads are for people who prefer paying with time. If your time that's being reaped by the ads is worth more than the $10/mo, then you're given the option to pay it.
I can't see anything wrong with what they do when looked at it from this POV. I understand where you come from, the "annoy me until I subscribe" but think about 3rd world countries where $10/mo mean way more than they mean in the US. They'd very very much rather pay with time than with currency
Disclaimer: I'm the co-founder of Veylinx, a platform to measure maximum willingness-to-pay of users.
1. It’s absorbed into culture as good practice. 2. It’ll be easier to accept micropayments, which I’m sure cryptocurrencies will take us to.
Emphasising point #2.
I got your email, I'll answer in a bit, thank your writing!
In all seriousness though, I think your service is something I'd be curious to find out more about and try. But we're a very small company (B2C in higher education), so upfront pricing really helps me gauge if it's something I can realistically explore, or if it's those typical "enterprise: call us" scenarios, then it's just never going to happen.
I'm not a provider, so can only provide anecdotal advise.
1) Google Drive. I started out (along with I suspect most people on Drop Box). DB blew my mind - it was novel. Then google rocked up and did the same thing. Then I got more capacity for stuff like "doing a security checkup", "integrated with gmail" then "free uncompressed 4k off your new Pixel phone" - and now I pay them cold, hard, money each month. Drop Box just sat there doing little in the meantime apart from asking me for money. Think it all boiled down to me considering them all the same, but google kept me engaged, gave me more every so often - so when I needed it, they were what I was using day to day.
2) Plex. Liked the free version and started using it. More importantly started finding free version kept on creeping into my stack-solutions I was building. "Free really good, but would really find that 'premium version' useful" Then bit the bullet on a "discounted unlimited version for life". Know for a fact there are 4/5 people out there that did the same based on my recommendation/server, and presume it's organically growing on from there.
3) Feedly. Switched to it as a replacement for Google/RSS Reader. I love it to bits and use it daily. Never given them a cent. There is a premium version for $5 a month, which has features I don't need. Seemingly no way to give them beer-tokens, a dollar a month. THE most frustrating use-case. All I can do is recommend them to others, and hope one of them pays (and T&C change doesn't leave me moving on and regretting my recommendation.
4) Spotify. I just paid from the start. Never even tried the free version. I'm 'happy paying'. Maybe similar to Netflix. I'll hand over an extra few dollars for a family plan or a 4k one - but I'm in. Please don't screw me, as the pain of moving isn't something I'm planning for my next month.
5) Patreon. I'm pretty sure I dislike everything about them - but they do provide a very easy/universal way to send a single dollar a month to somebody I admire. I pretty much loathe the politics associated (I'm a defend free-speech even though I detest it) sort of a person. BUT no better option yet (wanky youtube $5 a month for an icon in chat, is not what I'm looking for).
The Google Drive example — I said this:
"If you’re in a monopolistic environment and you’re successful, others will come. You can start building the experience right now in order to widen the gap between the next newcomer and you."
https://chagency.co.uk/blog/experiences/what-makes-or-breaks...
Dropbox was in a monopolistic environment, you called it as well saying it was novel. In the meantime, GD came and ate them. Instead of "staying there doing nothing and asking for money", they had time to widen the gap between them and others.
Where are they nowadays? They're doing good but they had to remarket themselves towards artists and creatives. I'm not sure where they would have been today had it not been for Apple, Amazon and Google coming up but that's the situation.
> 5) Patreon. I'm pretty sure I dislike everything about them - but they do provide a very easy/universal way to send a single dollar a month to somebody I admire. I pretty much loathe the politics associated (I'm a defend free-speech even though I detest it) sort of a person. BUT no better option yet (wanky youtube $5 a month for an icon in chat, is not what I'm looking for).
I've only briefly read about the controversies with them and I know Jordan Peterson is looking to create his own Patreon-like platform. Which leads to my (so far two-part) posts around "Don't hold your user hostages"
https://chagency.co.uk/blog/increasing-user-retention/dont-t...
In this case, Patreon holds their users hostages — just like you said, you dislike everything about them but it's the only far ———— so far. As a consequence of the controversy (i.e. we, Patreon, do this), at least one more platform will come out. And the guy has some following.
Thx for the comment!
This surely happens, but if it were common then wouldn’t donationware be more successful than it is? I have used various pieces of freeware/donationware over the years but they all seem like they’re just scraping by.
So the company offering the product took the risk (and the cost associated) of seeing if the idea works. But then, what I say is that they should charge enough on the premium to cover for all the freemium.
I didn't have in mind donation systems
What's the point of this illustration? Are you saying this is a jerky thing for rich people to do? Or is there some other lesson here? I'm honestly confused, and it's weird to see it repeated through so many threads.
> I didn't have in mind donation systems
You say to go as free as much as possible, to get people "on your side". This is precisely what happens with donationware. But people get PISSED when donationware turns paid. They don't jump for joy and open their wallets. If this is the case with donationware, why would it be different for freemium products?
I.e. even if I can invest say £100,000 into this business to jumpstart it, I'll first see if it can make some money by itself, just as if I've have had nothing. So I won't buy the £5,000 hardware (just an example) until I made £5,000 profits. That means whatever expenses the business made are paid from the same pot — the one with money the business generated.
Maybe after the business reached a certain threshold (and thus proof of concept), these millionaires that I've known will properly invest.
If that still didn't make sense, imagine you'll be looking for investment. You won't go and ask for it until you've got proof. In the millionaire case, it just happens to be the same person who's becoming an investor.
Regarding the second bit, I'm saying this: it can also be freemium and at the same time a premium plan. Or more premium plans
I still don't see how this anecdote is particularly responsive to the various comments it was used in reply to. So you're saying millionaires want to grow businesses responsibly? Great! What does that have to do with whether you feel joy in paying them money — which was what my original comment was about?
1. These rich people like to start lean (some of them) 2. This way of conducting business gives equality of opportunity 3. Therefore, these lean-starters will be drawn unto them and use them. Eventually, when they invest in their own ideas (remember what I said that it just so happens that the investor is themselves?), they bring their big money to this company
Makes sense now?
We give away 20 servers for free -- no invoice, no credit card needed, nothing. Once you exceed 20 servers, we charge (it's about $70/month).
You'd think that 20 servers is way too much to give away, but actually about 76% of our servers are on the paid plan and a huge percentage of our customers come from the invitation referrals when people change companies or consult for multiple companies.
(Our pricing might be too low and our product might be a bit too technical and scare off a lot of people who might not even know what SSH is, but for now that acts as a filter and keeps our support costs low; it's working for us, although we'll probably lighten up a bit on the technical homepage in the near future.) Also, the SaaS product acts as a frictionless testing area for people who actually just want to deploy the on-premise version, which accounts for approximately 40% of our revenue.
Our customers like the product and we have grown with many of them from free to paid. We're growing a startup for the long haul and don't have to demonstrate any particular growth rate to anyone.
The advice in this article works. Build something that provides some useful utility to people, and give as much away as you can. Most people will not abuse it and will return the favor as they grow.
So so glad to see you winning with this "strategy" — it's not a strategy IMO, it's the forward way of living and conducting business. I'll send you an email, would like to connect!
> We're growing a startup for the long haul and don't have to demonstrate any particular growth rate to anyone.
That's the ultimate level of power and freedom. I wish you well.
Ch Daniel
We take a pretty liberal approach to this :) there are a few companies on the platform now who just create a lot of companies and keep them all below 20 servers (that's pretty easy to monitor) but so far we haven't kicked anyone yet, and there's also a legitimate reason to do that (if you're an MSP and have multiple clients). We just send an email to clarify if we think it's an issue.
> I'll send you an email, would like to connect!
Sure thing - it's first.last @ userify! Great to meet you Ch Daniel and thanks for your nice comment!
I got mad love for you for doing this. Just tweeted at you but sending you an email now
As a little self promotion, and an example of this idea, I recently built an app that lets people listen to any article, it uses AI to convert the articles to Audio with some amazing sounding open source models. I decided to give folks up to 30 free article conversions per month and only charge after that, if they really love the product. You can try it here https://articulu.com
I may at some point be forced to lower that a bit because it does cost a bunch of money to run TensorFlow in the cloud, but trying my best to keep the karma goin.
We’ll see it’s a ton to build as a side project.
If you can make certain parts of the code reusable it will be for the better code wise too. But you know your situation better than me, just sharing a simple idea. Good luck, I would love to learn about ML more, but I don't have the background I perceive necessary to pursue that. Plus I've got other things I want to master (it's an ever growing list) that I need to focus on.
Do unto others as you would have them do unto you. Do good and it'll come back to you — you're not the one to keep the bill.
As you said, it's something to be taken out generally in life. I wrote about it in another post, addressing publicly the tech CEO and how she/he should not keep the tab. Do have a read if you're interested: https://chagency.co.uk/blog/general/dear-ceo-dont-keep-the-t...
(Please let me know if linking your own stuff is not ok on HackerNews, I just joined the community and it seems lovely)
I'd need the opposite of what Articulu is doing — transcribing my video's audio into written word. Had a look and it looks nice, will give it a try!
Let's connect, how can I reach you?
You can reach me right on the website, I put up contact info and it works.
Edit: excellent post by the way, loved it and shared it with some friends. That word of mouth thing is 100% true.
"By that I mean the freemium model should offer the client the chance to grow — equality of opportunity — and if it does happen that they grow and become profitable, the SaaS starts charging based on that. In a sense, value-based pricing, or at least as much as it could get with a scalable model."
kinda implies that your client is a business ("become profitable"). We have teachers as primary users, and I don't think the general arguments apply to that category of users (although freemium is still a very popular pricing model).
After I noticed it caused confusion, I added some extra comments in there as well.
I see it this way: I know a lot of rich people who like to start lean simply for the sake of seeing proof of concept. They have millions in their bank yet they ask their cofounder to chip in £5,000 on the idea.
So the company offering the product (MailChimp in this example) took the risk (and the cost associated) of seeing if the idea works. But then, what I say is that they should charge enough on the premium to cover for all the freemium.
Which MailChimp does. I know, $780/yr is a lot — but since they might help you start from 0, literally from ground level, I think it's reasonable for them to charge a lot. I don't know their niche so whether 780/yr is fair or not is up to them
But let me put it another way: if your mailing list is over 2000 people, aren't there more than $65/mo to be made, more than 8 cases out of 10?
If the click-through rate is around 10% and the conversion rate is around 5%, then depending on the price point (and whether selling subs or one-time), then quite possibly no. And even if I can clear $100 in extra revenue/month, paying more than half of that to an email service seems like too much. Factor in the cost of my time in building the emails, and I have to clear closer to $200/mo for this to make sense at all.
And I don't know the precise costs for the higher tiers, but after seeing this taste of their pricing model, I decided they weren't a good fit for me. If I ever end up as a subscriber, it will certainly be through gritted teeth, not the joy that you describe.
I know it's the last thing you'd want to hear but maybe the gritted teeth bring the nitpick and resentment that I see through the posts
As for nitpicking, I think you've got me beat with your last comment. Unfortunately you missed (or purposely omitted) the part about 500 addressees instead of 2,000, hence this reply.
After I noticed it caused confusion, I added some extra comments in there as well.
I appreciate it! Any lines that stood out for you?
Any lines that stood out specifically for you Zakir?
Worried about huge corps stealing your lunch? Use AGPL and I got it straight from Mr Eben Moglen that the corps wont touch it with a 500 foot pole.
You might have created a blue ocean for yourself and say "I don't need to offer freemium". But exactly what I'm trying to reach in the written piece is this idea around the equality of opportunity — "If your intent is to create a win-win environment and give equality of opportunity so that eventually the next Leonardo da Vinci will come from under your rooftop (and he won’t forget that), this is a way to solve the freemium-to-premium user conversion problem."
Also give them free because word of mouth is on steroids then. To cover up for the big costs, charge the premium enough. That might not be feasible for everyone so in the short-term go for the classic approach. But once you can... boy you should do it
In retrospect it seems obvious, I suppose good ideas do.
Wealthy people tend to give less as a percent of wealth.
But the general idea is solid.
Maybe you think the spinner is a better experience than getting a glimpse of the partially-loaded page, but I feel like the browser successively displaying content is a much better progress indicator than some dummy image spinning in a circle.