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Why Free Plans Don’t Work

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Re: Why Free Plans Don’t Work

#21

Post by michael_dorfman »

bmcnamara82 wrote: post #17

Instead of saying that "free" plans don't work outright, I argue that they work for some type of products and don't work for other products. He provided examples of niche products that so far, serve small markets. LessAccounting, Crazy Egg, - what is their user base numbers? One example he gives has a user base of 5,000 users. If you are a niche product, I don't think the free plan is ideal since you are serving a sm…

Conversely, if you have an app that is going to get a really large user base, and I'm talking 'millions', then it probably will work (i.e. google, twitter, facebook, ect.)

Actually, not. None of those are using a "freemium" model; they are all ad-based products. If your business model is dependent upon giving advertisers eyeballs, "free" is a great way to go-- but that has nothing to do with the topic at hand.

Re: Why Free Plans Don’t Work

#22

Post by [deleted] »

bmcnamara82 wrote: post #17

Instead of saying that "free" plans don't work outright, I argue that they work for some type of products and don't work for other products. He provided examples of niche products that so far, serve small markets. LessAccounting, Crazy Egg, - what is their user base numbers? One example he gives has a user base of 5,000 users. If you are a niche product, I don't think the free plan is ideal since you are serving a sm…

[deleted]

Re: Why Free Plans Don’t Work

#23

Post by revorad »

noverloop wrote: post #8

I think you should use a free plan if actively using the 'free' plan will eventually force the user to go to a paid plan. e.g. dropbox. If you just give your core product away for free then users will only switch if they need the extra features of the paid plan. You can still use 'free' for marketing, because total conversion rates with a free plan will probably be higher, just don't expect these 'free' customers to…

Is there any evidence that Dropbox's conversion rates are higher than the other apps the OP cites?

Re: Why Free Plans Don’t Work

#25

Post by Groxx »

noverloop wrote: post #8

I think you should use a free plan if actively using the 'free' plan will eventually force the user to go to a paid plan. e.g. dropbox. If you just give your core product away for free then users will only switch if they need the extra features of the paid plan. You can still use 'free' for marketing, because total conversion rates with a free plan will probably be higher, just don't expect these 'free' customers to…

I'll admit I'm a free-dropboxer, but that's almost exclusively because their plans are all too large and too expensive. I'm one of the multitude calling for a 10gb / 20gb plan. I've got photos elsewhere, but my main set of stuff I'd store is only about 5gb, and duplicating that (much less the 50gb of their smallest paid plan) to every computer is a waste - I'm using it for temporary storage and backup, across two (eventually 3) operating systems, none of which are more than 50% happy with each others formats without freaking out the next application I use.

In the meantime, though, my main Google account has 20gb for $5/year, and for the equivalent-lowest of 50gb/$100 I can get 400gb, which will also store my emails and photos. I can back up any email account on my machine by dragging the messages to a gmail folder, and waiting a little while. Docs now allows 1gb any-kind file uploads. I can send my photos to Picasa (the reason I have the extra space).

I'm a massive word-of-mouth spreader of Dropbox though, especially as I'm the Geek of a few families + their neighbors. I've probably gotten them more business than what I cost to host.

Re: Why Free Plans Don’t Work

#26

Post by shadowsun7 »

I loved this article, but after thinking about it for a bit I realize that there is an argument for going free. Two pretty strong ones, in fact.

1) If you want to get acquired - and we're talking about a big acquisition here - it would do to go free so you manage to score a big-enough user base to get noticed. And so the bigger company is interested in acquiring you not only for your technology, but also for your users. (That said, acquisition may be a risky bet.)

2) Going free also makes sense if you want total market dominance. In which case, free is really the only way to go. The writer is speaking from the POV of a micropreneur, and it makes sense for him to retract his free plan (in fact, it makes sense for 37signals/the 37signals model to do so too).

But if you're in the position of being the next Facebook, going free and dominating the market is really the best thing to do. (Or Youtube, or Google, or Flickr).

You find lots of users, lock out the competition, and then you can figure out how to monetize.

Which only goes to show that there are all kinds of businesses out there, and the advice you read on the net really should be done through the context of your particular business and/or market.

Re: Why Free Plans Don’t Work

#27

Post by emanuer »

rmc wrote: post #20
emanuer wrote: post #16

I was just thinking this about Evernote the other day. I really want to pay them. They make a great product that serves me very well. I do believe they deserve my money. The problem is, the payed plan would be a complete waste for me. I don't need it. The free thing fulfills my needs perfectly. If it would be a 30 days trial, I would be a happily paying customer by now. The same thing is true for dropbox for me. Afte…

Why not buy the non-free plan for a week, then cancel? Or email them. They might use PayPal, perhaps you could transfer money in there if you know the right account.

Most important reason: laziness

I am not going out of my way to give them money. However I am perfectly willing to pay when they change their price structure. [For dropbox I found their prices per GB are almost double of cheaper competitors. They could charge much less per GB if they would get money from more customers]

Re: Why Free Plans Don’t Work

#28

Post by Groxx »

emanuer wrote: post #16

I was just thinking this about Evernote the other day. I really want to pay them. They make a great product that serves me very well. I do believe they deserve my money. The problem is, the payed plan would be a complete waste for me. I don't need it. The free thing fulfills my needs perfectly. If it would be a 30 days trial, I would be a happily paying customer by now. The same thing is true for dropbox for me. Afte…

I'm not touching Evernote again until they get exporting features. It's a really impressive, useful service, but despite their repeated claims of supporting open formats they've provided utterly squat in the past few years I've watched them.

Years. More than enough time to write exporters (not even .txt / .rtf!) if they value it at all.

Re: Why Free Plans Don’t Work

#29

Post by mortenjorck »

Groxx wrote: post #28
emanuer wrote: post #16

I was just thinking this about Evernote the other day. I really want to pay them. They make a great product that serves me very well. I do believe they deserve my money. The problem is, the payed plan would be a complete waste for me. I don't need it. The free thing fulfills my needs perfectly. If it would be a 30 days trial, I would be a happily paying customer by now. The same thing is true for dropbox for me. Afte…

I'm not touching Evernote again until they get exporting features. It's a really impressive, useful service, but despite their repeated claims of supporting open formats they've provided utterly squat in the past few years I've watched them. Years . More than enough time to write exporters (not even .txt / .rtf!) if they value it at all.

Sounds like a good freemium upsell to me.

Re: Why Free Plans Don’t Work

#30

Post by dagw »

Perhaps a good balance is, instead of free, charge a small one time setup fee. pinboard.in for example does this and it seems to work really well. They offer a premium version with a monthly fee and a "free" version, which cost something like $5 or $6 to set up.

To me, the difference between free and a one time $5 fee was minimal, but to the people running the site difference in revenue is probably pretty huge.

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