
How to Plan a “Freemium” Revenue Model - OmMalik
http://blog.recurly.com/2009/10/planning-a-freemium-revenue-model/
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patio11
I think a lot of people could do better by looking at the range of customers
for their product, a-priori deciding that some segment of that range should
pay money and that the other segments can be used for harvesting attention (or
links, or what have you), and then crafting their pricing chart to match.

One teacher responding to my customer survey recently wrote the comment "15
cards is too few for a teacher to use the free plan. It should really be 25 to
be appropriate for a classroom." Indeed, it is almost like I planned it that
way...

This will probably have better results than the typical "Plan A gets you 5
units of goodness, Plan B gets you 10, Plan C gets you twenty!", especially as
customers from all of the plans tend to waaaay underuse their allocations
anyhow. (Related thought: your plan names and the story they tell are probably
as important as the numbers under them, if not more so.)

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rubeng
Frankly, your short comment was more enlightening than the article itself.
It's so easy to say that with the right features, upgrade prompts, and
pricing, things will work out -- much more difficult to actually do.

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jacquesm
Offering a freemium model based on something like a simple metric (such as the
2GB example for dropbox) can work - for a while - but it will also become an
Achilles heel.

Microsoft (hotmail) & Yahoo for the longest time offered < 10MB of storage,
enter Gmail with 1 GB instantly changing the game.

So if you decide to make your free to paid conversion dependent on a single
metric better have a battle plan ready in case someone decides to start giving
away that which you sell.

Better than just a single metric is a combination of a lot of items, things
that people will not feel the need for at first, but over time they'll wish to
have those features. That's good, especially if the need arises at a point in
time when the cost of switching becomes higher than the cost of paying for the
extended features. Make sure that it is _really_ value for the money they pay,
not just some pacifier or 'feel good' feature (you're supporting the site, or
something like that doesn't cut it, there has to be a balance).

If you combine freemium with ad support then make sure that your paying users
never ever see another ad, and put a 'get rid of this ad' link near the ads,
leading to a page that explains the benefits of signing up (other than
removing the ads).

Essential features should be functional in the free package, but stuff that is
hard on the server or that requires a lot of capital outlay can justifiably
made part of the paid offering. Users will understand that, especially if you
make some effort at explanation.

