The Profit in "Freemium"
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When it comes to pricing your product or service, if you’re in the tech industry; it may actually pay to offer value for free.
Before you label this as a “crazy idea,” spend a moment and look at the vast array of successful technology products that we depend on but are 100% free. Just a few off the top of my head: Google, Tumblr and Eventbrite. An equal number of very profitable companies also provide free models and have paid tiers where you can sign up for a base account and then pay for additional features such as more hands-on customer service and greater digital storage space.
The overwhelming reason why tech companies go “freemium” is that this model attracts a lot of attention. If someone is giving you a free sample or even better, giving you the entire product for free, wouldn’t you be curious to give it a try? After all, what is there to lose?
So how do you make a profit from free? Consider making your revenue from other ways besides directly from your consumer. There’s a lot of hidden value in simply having a large number of people using your product or service. Is there profit potential in user data? Can you sell advertising space? Can you entice customers by first offering them a great base model for free, allowing them to trust your business so that eventually they’ll be happy to pay for more “souped-up” paid models?
I’m not advocating that you “give the farm away,” just to consider a carefully planned out strategy that could boost your publicity by allowing customers to “test drive” your offering first before they pay - or even for an unlimited time. Depending on your approach, you’d be surprised at just how much value you can generate by giving it away for free!
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