|Lessons In Pricing A Product: Why My Startup Rejected The 'Freemium' Model
One challenge every entrepreneur faces is figuring out the value of the product they are selling, and how best to price it. Some entrepreneurs may be tempted to give away their product for free at the outset (aka “freemium”). It sounds like a good idea, right? If people are using it, they will learn about your product, which might lead them to purchase it in the future. They could also tell all of their friends who will tell all of their friends and so on and so forth, and before you know it, you’ve achieved that holiest of grails – a viral hit. In many cases, that strategy makes a lot of sense, particularly if you’re selling a product directly to consumers and getting lots of users really fast is a key metric for your investors. But it’s not always a good strategy, and in our case, I decided against it.
I run an edtech company, Torsh. We are a teacher professional development platform and the person who purchases our product is usually not the person who uses it. In our case, our product is purchased by a school, university, or nonprofit organization on behalf of teachers and coaches who will use it. Teachers like many other professionals are required to participate in ongoing professional development to keep their skills sharp, and the vast majority of teachers expect that their employers will pay for it. So it was clear from the beginning that we could not sell to the end user, as there was a pre-existing pattern of the employer paying for products like ours. But why not offer it for free? Well, our first customer offered to pay to build the product and the second customer had no problem paying what we asked them to pay. Then, the lightbulb went off: Our product offered obvious value and customers were willing to pay for it, so why bother with free? The crucial first step for any entrepreneur is to figure out who you are selling to and how to monetize your product, and then be willing to adapt and use different strategies as your company grows.
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This article originally appeared on Forbes.com. You'll find a link to the original after the post.
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