There seems to be some misunderstanding in today’s world and quite honestly, it’s not getting any better. We’re in the world of “finding free”, particularly when it’s a service-based business. Have you ever scheduled one of those “Free 15-minute consultations”?
Even in the startup world, where you are providing software-as-a-service (a.k.a SaaS), people are expecting it to be free, at least up until a certain point. The standard features of it are typically free, but full access requires a monthly or annual commitment. You’ve probably noticed that some social membership sites are adopting this business model as well. Basically, groups of people with common interests or industry involvement seek to gather online and share information, knowledge, and resources. However, if you want more in-depth access to this information or training materials, many that were once before free, are now charging a monthly or annual access fee.
Free 15-Minute Consultation – From the consultant’s side, these consultations are meant to see if their services would be able to provide a solution to a problem or fulfill a need of the inquirer. It’s meant to vet the situation and qualify the prospect. It’s meant to see if it’s a “good fit” for the business and for the prospective client’s needs. It’s not meant to provide free service to a prospect who has no intention nor means to purchase the service, whether from them or from a competing service provider.
Free Sign Up – Sure, sign-ups are free. Why? Well because you are confirming your level of interest by providing your contact information in order to create a login. Let’s face it, it’s a mundane task to answer the same questions about yourself and create usernames and passwords for everything you do online. If you are willing to take that extra step to complete the process, chances are that you’re really interested in that service/product.
Free for the “Basic” Service – You typically find this for online SaaS products (SaaS is defined above in the first paragraph). Basically, it’s a software you use, online, to complete certain tasks. There’s everything from graphic design to marketing automation, scheduling tools, word processing, social media posting, and the list goes on and on. This is probably the most common product one sees for “free.” Again, this tactic is meant to vet the situation, qualify the prospect, and let you take the product for a test run.
Free for X Number of Days – Did you know you that for most automobile manufacturers you are allowed to test drive a car and take it home for 48 hours before you buy it? This tactic is also used for SaaS products. The purpose is to literally allow you to “test run” the product, hope you fall in love with it, and buy it and it works quite well for many industries, including the automobile industry. A finite trial period for use of a product is an effective way to convert prospects into paying customers.
Unfortunately, many startups make the mistake of starting out as a free product with no expiration date in sight. They just want people to use it, try it, and show traction for the product. They hope that the product or service becomes “sticky”, making people feel that they can’t live without it and be willing to pay for it at some point in the future. However, this open-ended technique doesn’t work well for customer conversions in early-stage startups. Why?
Truth: People don’t value what they get for free, particularly when you are the new kid on the block.
The key to startups successfully converting customers is providing value immediately so that your customer feels confident that you’re offering something worth paying for. Here at TPM Focus, we suggest charging something, even if it’s a small amount so that you are able to confirm that customers value your product or service. If you don’t believe in that philosophy, ask other startup founders about their experience. Many of them will tell you that they gave their product away for free, and possibly for too long, and very few (if any) converted to paying customers. Here are a few examples: Katch.me, Meerkat, Blab.im. These startups were in too deep and were unable to convert their hundreds of thousands (and some had millions) of users, to paying customers before running out of cash to continue operations.
Think about it: How many products do you use for free and then once they ask you to pay for it, you just find another provider (a competitor to them) who will let you use theirs for free? Think about DropBox and Google Drive……the list goes on.