The Profit in "Freemium"

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!

Bryan Janeczko
<p> Bryan has successfully launched multiple startups. His latest venture, Wicked Start, provides tools to plan, fund, and launch a new business. Also author of WickedStart: Guide to Starting a New Venture with Passion and Purpose, Bryan is committed to helping small businesses grow and succeed.<br /> <a href="http://www.wickedstart.com" target="_blank">www.wickedstart.com</a> | <a href="http://facebook.com/wickedstart" target="_blank">Facebook</a> | <a href="http://www.twitter.com/wickedstart" target="_blank">@WickedStart</a> | <a href="http://www.linkedin.com/groups?gid=3277641" target="_blank">LinkedIn</a> | <a href="/author/bryan-janeczko/all-posts" target="_blank">More from Bryan</a></p>

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