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7 Pithy Insights On How Not To Give Your Software Away For Free

Posted by Dharmesh Shah on March 26, 2007 in strategy pricing business model 14 Comments

If you are a startup entrepreneur, at some point, you will need to make a decision regarding your business model.  Many software startups have a strategy to build early market traction by giving away their offering for free with some plan to monetize at a later date.  I'm not going to make a strong argument against this.  So, for purposes of this article, lets assume for a moment that as a software startup, you actually *want* to charge money for your software someday. 

For some background on the issue of pricing models, I suggest my previous article:  Startup Pricing Models: Free Forever, Freemium and Freedom To Pay

Here are my thoughts on how to go about charging (gasp!) money for your software:

7 Pithy Insights On How Not To Give Your Software Away For Free

1.  Design for Dollars:  If you are hoping to charge for your software someday, it helps to actually design it from the beginning with this goal in mind.  As you are building the product, try and think about how you might build it so that someone, someday will actually pay you money for it.  Trust me, it helps.  [Note:  Apologies for the reference to dollars (vs. rupees, Euros or something else).  The poet in me likes the alliteration and I happen to reside in the U.S.)

2.  Resist Guilt:  This is a tough one.  Many software people find it hard to rationalize in their heads that they can actually charge money for their product.  Though I'm a big fan of free (as in beer) software myself, the reality is that not all businesses can afford to do this.  There's nothing inherently wrong for charging for a product that costs you money and talent to build.  If doctors, lawyers and architects can charge for delivering something of value, why not you?  The key is point #1 -- build something people are willing to pay for.

3.  Charge Early:  Try and find a way to start charging for the software as early in your development process as possible.  This can get a bit tricky in the early days, but it is worth the effort.  The key here is to build something of value as early in the process as possible and then to amplify that value by throwing your personal passion into it.  For example, at my startup HubSpot, we're still in beta but have been bringing on paying customers for months.  Rather than being embarased that the software is so early, we make up for it by fanatical support for our early customers -- and letting them help drive the product development.

4.  Charge Often:  Avoid trying to lock your customers in to some long-term contract.  I'm a big fan of monthly agreements.  If you are charging your customers monthly (instead of a big up-front fee), the burden is on you to "earn" your customer's business every month -- or they leave.  Keeping your customers happy is your problem not theirs. 

5.  Let Them Try Before They Buy:  This one is obvious.  Minimize buyer's remorse by letting customers try out your offering before making a large committment. 

6.  Ease Adoption:  Reduce the "time to enjoyment" for the customer. Help them get immediate benefit and enjoyment.  We live in a fast-paced world.  If it takes your customers days or weeks to get even marginal enjoyment from your product, you're going to have a hard time charging for it.  Make it simpler and make adoption easier. 

7.  Make Your Customers Smarter:  This is a bit of a weird one.  When you're charging your customers, remember that not all of your value is delivered through the software -- a lot of value can be through the experience of dealing with you.  Customers want to learn and grow.  They want to improve their lives and/or businesses.  When buying from you, customers want some direct benefit from your product (basically, the ones you promised), but they also want to feel like they got something out of the relationship.  Seek ways to help your customers get smarter in whatever area of expertise you have.

Those are my thoughts.  If you have any additional insights on ways to make it easier to charge (gasp!) money for your software please share them in the comments.