| I can vouch for the freemium approach. Your free service is there to create word-of-web and word-of-mouth growth. You may even want to hold off on the premium version for a year or so. There's some conflict between being non-commercial and buzzworthy, and pushing your premium version to get subscriptions. Learning about your customer is crucial. The easy and cheap way to do this is run a survey on your site, while your service is still in the free phase. You can promote this survey aggressively to a portion of your user base and expect around a 15% response rate. One of my businesses had some obvious quantifiable differences between a free and premium version, so the survey included these 3 questions: * Would you be willing to pay more for an enhanced service? * How many Xs, Ys and Zs would you want? * How much would you be willing to pay for this per month? After collecting thousands of responses, I ran them through a Bayesian clustering algorithm (which can handle missing answers) and it spat out a bunch of service levels and price points that made a lot of intuitive sense. These were $5, $10 and $20/month, and later we added $40/month. Interestingly there was one big cluster that wanted the world for $1/month, whom we naturally decided not to cater for. We also learned that some features, such as RSS, didn't correlate at all with people's willingness to pay, so we added them into the free version. Net result after a few years is about 1.5% of active users are on one of the premium levels, with the number approximately halving as you go from each price point to the next. Since the price doubles at each level, the total revenue from each price point is about the same. And it's a very tidy living for me and my partner. One last thing: pay a lot of attention to what happens when people's subscriptions end involuntarily, because their credit card expired or stopped accepting payments. This happens a lot. You want to target these people with reminders about the premium service's benefits, and a discount promotion to sign up again with their new card. |