KickoffLabs Blog:

Four Good Reasons to Charge from Day One

By Josh Ledgard

Mar 22nd, 2012

cash register

No price, no value

Starting out completely free with the idea (or hope) of eventually changing to paid model is a major mistake.

If you plan on charging for your product or service, here are four good reasons to do so from the very beginning:

1. You Avoid Setting Poor Expectations

When you start out completely free – with no inkling that you’ll one day start charging – you’re undermining the value of your offering. People don’t value free. We love free. We just don’t value it very much, if at all.

When you’re giving away the farm, you’re sending the message – both directly and indirectly – that there’s not enough value there to put a price on.

What’s worse is that people are also going to come to the conclusion (rightly or wrongly) that your product or service mustn’t be very good quality. They’ll figure that if it were, you’d be charging for it, wouldn’t you?

2. You’ll Uncover Your “Real” Target Market

The people who aren’t willing to pay for what you offer aren’t your target market. Plain and simple.

How can you test response to a concept or headline or package deal or anything else if you’re not presenting your marketing efforts to your real target audience?

Sure, you might be able to get thousands of free members or subscribers, but what if none of those people go on to buy when you switch to the paid model? What then? It means you’ve been spending your time and money talking to the wrong group of people.

Far better to present your value proposition as convincingly as you can (see this post for a vital tip in this area) and find out who will actually pay for it. Then communicate with those people, find out more about them, their needs, the obstacles they’re looking to overcome, and so on. Then use that insight to further refine your communications to that audience – in a positive feedback loop.

3. You Can Provide Proper Support

There’s a double-edged sword to consider when it comes to getting more users of your product or service: Support.

You see, the more people who take up your offer, the more support you’re going to have to provide. And providing that support obviously costs money. Most businesses operating on the free model simply aren’t built to scale support. How can they if they’re not making any money? That venture capital can only stretch so far and most users expect better support – yes, even for a free product/service.

So the equation here is simple: Charging from the start… equals ability to scale quality support as more users come on board… equals satisfied users who continue to use your product/service and are likely to tell others about it.

4. You’ll Build Trust

Or, rather, avoid eroding trust forever by doing a “bait’n’switch” manoeuver. What this means is if your service was free and now it’s suddenly $10 per month, people are going to be highly sceptical no matter how you try to “justify” your decision.

Now, there will, of course, be readers of this blog post who’ll argue “The original free accounts should remain free. So where’s the problem?”

The problem is in how you’re going to be perceived in the market. People who were thinking about joining and didn’t now have to pay $10 per month – even though you never said anything about it changing from free to paid in the past.

Consequently, these people will probably be thinking

Will the price go up again? Are they just getting me in at $10 a month and once I’ve spent all the time and effort to integrate my business with their solution, are they then going to hike up the price? And will it go up every year after that? When will it ever stop?

Obviously you don’t want people asking those kinds of questions. So don’t put yourself in a position where they are.

The long and the short of it

Charging from beginning is a simple way to avoid devaluing your product or service, getting led astray by the wrong audience, running into problems with the scalability of support, and losing the trust of your target market.

By all means offer a free trial, but make sure you’re actually charging money in some form or another right out the gate. It’ll be much better for you in the long run.

– Scott

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