Monday, November 06, 2006

freemiums: how to make sales with FREE stuff

You'll attract more paying customers by giving away FREE stuff, than you will by charging money for everything.

You've seen it yourself. How many web sites or blogs do you visit--where there is NO free stuff? Where there is NO other reason to visit it but to buy stuff? And I mean, that rules out Amazon, for example, because they provide free music mp3s, and abundant product reviews and advice. So they are giving away free stuff, and I've downloaded a ton of free music mp3s to prove it.

Think of some way to provide something free.

For some businesses, especially consulting, writing, art, music, and other digitizables, it's easy and quick to do so.

For other businesses, especially physical manufacturing, personnel, and high ticket items, it'll take a little thought, perhaps a visionary leader.

But every business of every type has some expertise, instructive anecdotes, historical insights, and other information that customers want, need, and seek. Your future customers are already out there, searching online for what you could give them.

FREE information, software, and other valued items accomplishes many objectives for a company or individual entrepreneur. I don't have to waste your time explaining good will, word of mouth, blogospheric buzz, audience loyalty, niche markets, scalable online ecommerce applications, or web marketing strategy.

But, instead, let's look at How To Do It. How to use free samples and free products to attract and gain the loyalty of customers.

When I worked at Garden Way selling TroyBilt tillers via direct mail, we always included a FREE handbook of gardening tips, or similar device, in every mailing. Thus, our direct mail was not considered "junk mail", but value mail. Mail that was eagerly anticipated and enjoyed. I talked to actual customers, along with Dean Leith, the CEO, and got first hand confirmation of this.

The principle is the same in the online world.

Get sales by giving away tons of FREE stuff. You may tack a modest, discreet ad to the end of your FREE stuff, and many will respond favorably to what you have FOR SALE, because they have become addicted to your FREE stuff. I'm trying to spell this out as simply as possible, so everyone, including those who do not know English well, will understand and go succeed.

Let me shut up now and spin you off into another orbit.

"How To Use Freemiums To Increase Your Sales" by Dmitri Dayvdov, Business 2.0 Magazine.


In these days of Web 2.0 services that rely on quick customer adoption, the strategy has become so common that VCs have coined a term for it: freemium.

We're talking about companies like Six Apart, which offers its LiveJournal blogging platform for free and has sold 2 million of its customers a premium version, which costs $20 for a one-year subscription.

When the service is free, word spreads

Danny Rimer, the London-based venture capitalist with Index Ventures, has been an enthusiastic investor in freemium-type businesses since 1999. His firm led an $18.8 million investment in Skype, which resulted in a handsome return after the $2.6 billion buyout by eBay.

Freemium works because "you reduce the main stumbling blocks of product adoption," Rimer says. "Web-based users who don't have to pay for it will often start evangelizing the benefits to others."

Right now Rimer has several freemium-style businesses in his portfolio. He's an investor in music information service; MySQL, a provider of open-source database software that has become the second-largest open-source software firm after Red Hat; and Stardoll, a digital doll creator and online community that attracts a largely preteen following.

How can you make your freemium service soar? Here are nine tips from venture capitalists and entrepreneurs.

1. Have a product or service that truly stands out.

Its performance, ease of use, and reliability should be superior to those of current offerings.

2. Know your upselling plan from the beginning.

Before you even go into beta, make sure you have at least one paid, add-on premium service up your sleeve. Better yet, have more than one.

3. Once you've decided that a product will be given away for free, don't change your mind.

"The fundamental 'what's for free' and 'what's for pay' divide needs to be set early," says Adeo Ressi, CEO of Game Trust, a startup that hosts 45 free games and sells enhancements online. If you make changes, Ressi says, you risk alienating customers accustomed to getting your product for free.

4. Access to your product should be just one click away.

The fewer time-consuming plug-ins, downloads, and registration forms required, the better. Otherwise people may get bored or frustrated and abort.

5. Make sure the major bugs have been exterminated.

Your product can be in beta, Rimer says, but not "so much in beta that it doesn't work well."

6.Harness the collective intelligence of your users.

MÃ¥rten Mickos, CEO of MySQL, says customer suggestions can help speed up product improvements or inspire ideas for premium services.

7. Keep improving the product to give users more reasons to stick with it.

"The reality is that offering a product for free can be far riskier than if you actually charged for your product," says Howard Anderson, a lecturer at the MIT Entrepreneurship Center. "Only one in 10 companies will succeed at pulling this off."

8. Identify a range of revenue sources.

The Epocrates service, which offers medical professionals both free and premium access to reference material via PDAs, doesn't charge just for the premium information. It also charges fees to pharmaceutical firms for surveys it conducts of Epocrates customers. Similarly, MySQL makes money from customer service as well as from fees charged to firms that redistribute the software.

9.Timing is everything.

Make sure that revenue from your premium service soon covers the cost of your free service. Otherwise, cut your losses and move on to the next startup.


Stop complaining about "bad business" or whining about how you wish you had more clients or customers.

The rage in Investment Capital is on virtual product providers, companies with digital content and services, with low or no entry costs, and free or low cost distribution, like software and consulting. These firms give away Free stuff, then have more advanced stuff that is Premium and costs money, through paid upgrades, peripherals, or subscriptions.

Hook them with the Free stuff, then hold them with frequent updates and new free offerings, and tap into that pool of free users as your best market for paid items.

But the paid items have to be other than "just more of the same". There must be something special about the paid items. More depth, more specificity, more customized, more distribution, or faster speeds and more features.

Think, right now, of what you could put together as a FREE offering to potential customers. Frequent blog postings on a focused topic is one way. Free mp3s or CDs of music, or even lectures or seminars, is another way. How about assembling How To tips on things your customers typically need to do?

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