As others have mentioned, the key distinction is whether you're targeting individuals or businesses.

Typically you'll have a tough time convincing individuals to part with $20 per month and typically there's a free alternative.

It's much easier to convince businesses to spend the same amount and, as a bonus, many will be suspicious of free offerings. In fact, others will subscript to a higher premium tier purely to "buy the best for my business."

I always refer people to this StartupSchool talk by DHH of 37signals which outlines their business model, and explains their focus on small businesses: http://www.omnisio.com/startupschool08/david-heinemeier-hans...