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My first business was an accident.
When I was in college in the late Nineteen Nineties, I built a membership website for a student organization. It resembled Facebook, but predated Mark Zuckerberg’s efforts by several years. I released it as an open source product – and it became a huge hit. It was so successful that regardless that it was free, people began paying me for it, asking for customizations and features to make use of it on their sites.
There is an ongoing debate about whether it is price giving away your product for free. On the Startups tab on Reddit, opinions are mixed. “In general, the word ‘free’ may sound like a good thing, but giving something for free always lowers the perceived quality of something.” I’m writing one user.
I disagree. I think giving away your product, at least on a limited basis, is one of the best things you’ll be able to do for your business. Here’s why.
Non-customers can try it out
People love free things. Behavioral economist and creator of the book Ppredictably irrational: hidden forces that shape our decisions Dan Ariely demonstrated this in a popular experiment in which he offered a Lindt truffle and a free Hershey Kiss for one cent. Even though truffle was undoubtedly the best chocolate, most individuals selected Hershey Kiss as a substitute. This experiment highlights an vital point: free is the lowest barrier to entry.
There are several methods to draw customers by offering a product for free, which normally involves letting them try what you’ve got prepared before committing to paying. One option is a free trial, which makes the product available for a certain period of time or a certain number of uses before payment begins. Another is the “freemium” model, which provides users access to the basic version for free, with the choice to upgrade to a paid version that provides more features.
Creating a “try before you buy” offer is one of the best ways to draw recent customers. However, converting free users to paid users is not all the time easy – because Harvard Business Review notes“once customers become entrenched in a free platform, it can be difficult to get rid of them.” The authors’ research has shown that one strategy is to supply multiple versions of a product or service. With two options, customers can stick with the free versions. However, given various options, they often select the middle “compromise”, feeling that they are settling for a reasonable solution.
However, depending on the way you structure your offer, the reality is that you simply only need a small percentage of conversions to achieve success. My company Jotform has 200,000 customers who pay for our products monthly or annually – that is just one percent of the 20 million individuals who have signed up over the last 17 years. Still, it’s enough that we have reached 100 million free monthly energetic users.
It builds trust in your product
After the huge success of the open source product I released in college, I decided to take the same approach with Jotform. For the first yr of our existence, our online form builders were completely free.
The advantages of this technique were twofold. First, it gave Jotform the opportunity to grow its user base without spending a penny on marketing. Secondly, I was capable of gather feedback and improve what needed fixing. I completely agree with speaker and creator Brian Tracy, who wrote about the tremendous value of testing products with customers, advising entrepreneurs to “go to a potential customer with your sample or prototype and ask if they’d buy it… Then ask them how much they’d pay for it for this product. If people criticize your idea for a recent product, ask how the product may very well be modified to make it more attractive.
Believe me, the first version of our product wasn’t perfect, and I’m glad I had the probability to handle these early issues before launching the paid version next yr. Before we launched our first premium form builder in 2007, I was confident that it was price the fee we were asking people to pay. Customers could also see that we had made corrections and improvements based on their feedback, which increased Jotform’s credibility.
Our initial premium version cost $9, which was low enough that we continued to do consulting work and adapt modifications to the software we sold. It was slow, as bootstrap often is. But what was vital was that with each iteration our numbers kept growing.
There is a lot of discussion about the potential dangers of giving away a product for free. For me, it’s all part of my low-risk approach to entrepreneurship. Offering a product without asking for anything in return not only builds your customer base, but also gives you a probability to get feedback and make changes before the stakes get too high.