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

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

 

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.  

Posted by Dharmesh Shah on Mon, Mar 26, 2007

COMMENTS

Hello,

Being a reader of this blog for some time, I wonder if you would allow us to translate your articles in French and post them on our blog. I really like the contents of your blog and woud be happy if French readers could enjoy your witts.

You would be named as the author of the article and that it is there by your permission.We would of course do it for free as it would be added value on our blog and for our french readers. You could use the translation for your own use, and we would stop the deal at the other party's request, "no questions asked".

Would you be happy with such a deal ?

Wathever your answer may be, thank you for your presenceand energy on this planet, I hope you'll be with us for a long time !

JBC

posted on Monday, March 26, 2007 at 12:40 PM by Jean Baptiste de Chocqueuse


Jean Baptiste: I would be honored to have the content translated for your French readers. Please just provide a link back to the original article (this way, I can track references to the article). Thanks.

posted on Monday, March 26, 2007 at 12:46 PM by


But don't worry, downloading other people's music for free is still OK.

posted on Monday, March 26, 2007 at 1:20 PM by Ian


Welcome to the 21st century - A time of free and open software, free websites and free communication.
Well, I guess the invisible hand of Adam Smith still lives in these parts of the Web.

posted on Monday, March 26, 2007 at 2:38 PM by Zee One


Nice postI I would add to #3 that charging early is also a good way to continuously test your market position, price, competition and value proposition. If you can't hold on to customers, and the reasons are more than just development issues, the reality will hit earlier in the cycle and stimulate a change in course.

posted on Monday, March 26, 2007 at 8:51 PM by A different Ian


I made a mistake by giving my software for free in the beginning of the development. I will never repeat this mistake again.

posted on Tuesday, March 27, 2007 at 9:23 AM by Verilog Simulator


Dharmesh, I think you're right on the money with providing value and charging for that value. One addition I think could be made to this post, particularly around point 3, is communication.

As a business coach, I often find myself working with companies that gave fanatical service when they were in start-up, and their product was still developing, but are now (years later) having problems with those clients who now 'expect' that kind of service to continue.

Definitely give that great service to early adopters, but be sure you communicate that the service is part of your value proposition in line with the early-stage software. As the product develops (with their assistance) and delivers more on its own, there will be less need for you to deliver that high a level of service.

In this way you will still attract paying customers early - you just won't have them demanding too much, or worse being annoyed at you, down the track when you have a great product and loads more clients.

posted on Thursday, March 29, 2007 at 3:13 AM by Jacob Aldridge


I'd add another point in there somewhere: talk directly with your users about why you are charging. On the Kayuda forums (<shameless plug> http://forums.kayuda.com/ </shameless plug>), we have made a point of talking to the users and saying things like "We are planning a subscription plan with extra features. What would you actually pay for?" We take pains to explain that we aren't charging because we're greedy, we're charging because we have to keep the lights on. People seem to get it, and it puts them "on side" with us, as they join in to help us figure it out. I've also made a point of using my real name everywhere, giving out my personal email address, and making sure that I sign every message (and not just with a signature file). The more that you can make your user view you as a honorable person who is just trying to make a living, instead of as as a soulless corporate vendor, the easier everything will be.

posted on Thursday, March 29, 2007 at 6:52 PM by David Storrs


Providing free software services works because the cost of supporting an additional customer is next to zero. The ability to get publicity by giving away a free product and selling a premier product is also catching on. But what about giving away the product for free, but selling plugins?

posted on Friday, March 30, 2007 at 6:53 PM by Vishi


Hello, I'm also a reader who likes your blog, though I just start to read it recently. From the hint of Jean Baptiste's comment, could I translate some of your posts to Chinese and put on the blog? Thanks

posted on Friday, March 30, 2007 at 11:45 PM by philip


Philip: Feel free to translate to Chinese. Once again, all I ask is that any translated articles have a link back to the original. Thanks. -Dharmesh

posted on Friday, March 30, 2007 at 11:55 PM by Dharmesh Shah


I come after the war but there is a nice interview of Matt Mullenwag on the .Net Mag Website. He explains: “I’ve always said that charging for software is something of a dead model. Onwww.WordPress.com, the things we charge for tend to be services – support, upgrades or hosting. The software itself, the core, is free.” http://www.netmag.co.uk/zine/discover-interview/matt-mullenweg Very intersted by the french translation Jean Baptsite. Where will you put it?

posted on Thursday, April 19, 2007 at 6:23 AM by Nicolas


The way i see people doing it now is giving the product away for free until enough people depend on it.. then a few years down the line..they slap a price tag on it.. yes,they lose some of the people who were using previously but that's what you gotta do.

posted on Friday, July 20, 2007 at 9:19 AM by webcam babe


webcam babe: I would like to respectfully disagree with you. You don't "gotta" get people hooked and then slap a price on it. When we originally opened up Kayuda, we had planned it as a subscription service. Then we worked out the projected revenue under an ad model and a subscription model. No matter how ridiculously optimistic we made our assumptions on the subscription side, we still always showed more money from ads than from subscriptions. And not a few pennies more, either...I'm talking an order of magnitude more. Most sites these days are ad-based because it pays better and costs less to run them that way. It's as simple as that. Yours, --Dks

posted on Friday, July 20, 2007 at 9:25 PM by David Storrs


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