Charging for our product originally hurt but ultimately saved our startup(medium.com)
medium.com
Charging for our product originally hurt but ultimately saved our startup
https://medium.com/initialized-capital/how-charging-for-our-product-originally-hurt-but-ultimately-saved-our-startup-391e69ae42ba
8 comments
Hi, how are your "Personalized plans using sophisticated data analysis" protected from extrinsic fraud and extreme drops in value?
> We didn’t want to teach ourselves how to find money-losing customers
This!!!
Coming from the travel business. I remember this vividly.
You acquire a customer that is not loyal to your product even for 3 seconds for 1$ and you make 0.8$ out of that customer.
Building a customer acquisition strategy that will work in the long run and will make you money is such a key realization.
Even if it takes you longer and seems like you are moving slower, you should not be tempted.
At one point, we saw a 200% increase in users over the course of two weeks due to some "growth hacks". Those ended up just costing money in server and engineering costs. None of the customers actually stuck with the product for the long run.
This!!!
Coming from the travel business. I remember this vividly.
You acquire a customer that is not loyal to your product even for 3 seconds for 1$ and you make 0.8$ out of that customer.
Building a customer acquisition strategy that will work in the long run and will make you money is such a key realization.
Even if it takes you longer and seems like you are moving slower, you should not be tempted.
At one point, we saw a 200% increase in users over the course of two weeks due to some "growth hacks". Those ended up just costing money in server and engineering costs. None of the customers actually stuck with the product for the long run.
Jason Fried's whole business philosophy comes to mind [0][1].
[0] https://m.signalvnoise.com/why-we-choose-profit-e511efc4dcb9
[1] https://m.signalvnoise.com/exponential-growth-devours-and-co...
[0] https://m.signalvnoise.com/why-we-choose-profit-e511efc4dcb9
[1] https://m.signalvnoise.com/exponential-growth-devours-and-co...
100% agreed. Eventually, most companies come down to people being willing to put money down in exchange for something they value. And then doing that again and again over the course of the relationship.
So many entrepreneurs are really building products, not businesses. They want to be insulated by money while working on making their perfect thing. And I get that. Building is fun. It's scary to put yourself and your product out there. And it's hugely unpleasant to have that fail.
But until we try for real, we'll never truly know what works. The sooner and more often we try for real, the more likely we are to find what works.
So many entrepreneurs are really building products, not businesses. They want to be insulated by money while working on making their perfect thing. And I get that. Building is fun. It's scary to put yourself and your product out there. And it's hugely unpleasant to have that fail.
But until we try for real, we'll never truly know what works. The sooner and more often we try for real, the more likely we are to find what works.
>So many entrepreneurs are really building products, not businesses.
This!
This!
I think there is a sense of “if I pay, it probably has a value so said company can charge a customer, and it is likely said company will not to fail so soon.” Not that this is always true, but with a reasonable trial and active customer support team, I think a starter plan is never a bad idea at all. Making a paid plan also means the company has to work double harder now to deliver a better product and a better customer experience, unlike IMO a free tool has the “we will get there eventually, let’s test with free users first.”
It's not about how much you charge, it's about how good your business is. I am far more confident about gmail's long term prospects than their paid competitors', for example.
Well, this is a great point. Gmail eventually grew into a B2B-B2C model. Users get a reliable mail service with a nice interface, Google gets ads revenue, and then Google sell business Gsuite. There is a trio-business relationship, hence why I think it's a B2B-B2C. We can cite Facebook, Yelp, LinkedIn as similar examples.
I guess startups that provide utilities (I can't figure out a better word, but think Github/Gitlab/CircleCI) should charge as early as possible, whereas startups focus on user contents can remain free for a long period of time, and then think about how to get users to pay (think of Tumblr's paid themes, although really unsuccessful from my perspective).
Everyone takes a different path and some just won't last no matter which approach to take.
I guess startups that provide utilities (I can't figure out a better word, but think Github/Gitlab/CircleCI) should charge as early as possible, whereas startups focus on user contents can remain free for a long period of time, and then think about how to get users to pay (think of Tumblr's paid themes, although really unsuccessful from my perspective).
Everyone takes a different path and some just won't last no matter which approach to take.
Right, but I think the point is that those free users are not a good analog for paying users. The things you learn from those free users will not help you figure out how to serve customers who will actually pay something for your service.
Yes, exactly. Free users are likely not going to stick UNTIL very later. I remember using lucidchart.com from time to time. I just needed a quick sketch and I could bypass the free limit with some careful tricks. Until I was required to make more and bigger architectural diagrams did I sign up as a paid customer.
Free users are basically visitors and focusing on them early on is a distraction (focus on what isn't interesting to your paid users) - and if there is a group of people willing to pay, they will most likely have common expectations for what the product should be.
Free users are basically visitors and focusing on them early on is a distraction (focus on what isn't interesting to your paid users) - and if there is a group of people willing to pay, they will most likely have common expectations for what the product should be.
I'm debating the merits of this right now. For the moment, I'm not charging for my beta. I have received some good feedback so far, but people haven't been as active using it as I would like.
I'm wondering whether it would be better to find a smaller number of people willing to pay for the product and really tailor the experience to them.
I'm wondering whether it would be better to find a smaller number of people willing to pay for the product and really tailor the experience to them.
I would argue yes, find a smaller number of paying customers and tailor the experience to them. It's incredible difficult to get paying customers, and if you can get some, then you can begin the journey of expanding your feature set / distribution channels / promotions to reach other customers.
It's kind of like the idea of focusing on fewer people who love you, vs lots of people who just like you, where love = paying customers :)
It's kind of like the idea of focusing on fewer people who love you, vs lots of people who just like you, where love = paying customers :)
>a smaller number of people willing to pay for the product and really tailor the experience to them.
Maybe. Or they could just be outliers who happened to be willing to pay for your product early on. You want to be open to customer feedback of course but it's also about your vision for the product.
Maybe. Or they could just be outliers who happened to be willing to pay for your product early on. You want to be open to customer feedback of course but it's also about your vision for the product.
Generally a client does not have any reason to use your product until they have some skin in the game. They are more than happy to try a free product, but probably will never actually utilize it. And the ones that are on the free plan will be a pain point. If a client or customer is unwilling to spend any money on your product/service there are two options: They are cheap and will never be paying customers, or your sales people are bad at their jobs.
That is slightly hyperbolic, but in my personal experience dead on.
That is slightly hyperbolic, but in my personal experience dead on.
Skin in the game doesn't have to mean money. In an enterprise sales context, for example, if a company is going to commit a lot of employee time to an eval or workshop, that may be sufficient. You also presumably have sales reps who can gauge how serious the prospect is. But, definitely, if all you're talking about is a web signup, then there's no skin in the game.
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Let's play a game I like to call "Supporting Character in Thor: Ragnarok, or FinTech Startup?"