Kill the Free: How to Increase Revenue by 40%
A couple of days ago I tweeted the following…
Dropped our free plan, dropped the trial period, dropped our cheapest plan and doubled our prices. Result? 40% increase in revenue.
That seemed to strike a chord with quite a few people, many of whom are also shooting in the dark trying to figure out how to make their businesses succeed.
So, I thought I’d expand on those 21 words I tweeted to offer a little more insight and thoughts on the matter.
Pricing and the Survey Industry
My tweet referred to a change we made about a month ago on PopSurvey. At its core, PopSurvey is just another player in the vast online survey industry. Yes, it absolutely changes the way people create and take surveys; but, at the end of the day, we’re competing with the thousands of other businesses in that space.
When you’re in an industry that’s so crowded, you spend a lot of time fighting comparisons. “So you’re like Survey Monkey, but with fewer features?” or “I love every single thing about PopSurvey, but this one obscure feature that nobody else on the planet could possibly need except for me…well, the other guys have it and you don’t.” or “Surveys ‘N More has a free plan with 80 bagillion responses, so they’re automatically better than you.”
That’s the kind of stuff we fight against every day. When people have such a large pool of software to choose from, they narrow it down to two things: features and pricing.
And we’ve chosen to have fewer features and charge more for them. Which makes a ton of sense, right? Well, no. At least not to the majority of customers. Thankfully, we’re not after the majority.
Customers Who “Get It”
The fact of the matter is, there are a near endless number of people and businesses who send out surveys. And, while you could try to go after all of them (ala Survey Monkey), that’s a route we think makes for bloated software that’s a serious hassle to use.
So, even though the “majority” might not see the value in the way we do surveys, there are customers who do. And they tend to be businesses who are at least moderately successful and value quality software that removes hassle, saves them time and positively reflects their brand.
Those are the customers we’re after, and those are the types of customers who are happy to pay money.
We’ve gone back and forth on our pricing setup over the past couple of years, but have always had a free account. It’s “industry standard” to do it that way, so it seemed like the competitive thing to do.
But, after we started focusing on who we’re after, it started making more sense to drop the free plan. People who signed up on the free plan and didn’t upgrade within a couple of days, almost universally fell into the, “This doesn’t have all the features that your competitors do” bucket and we simply would never be able to convert them.
Then, at the end of April, I attended MicroConf and, after hearing Jason Cohen’s advice on pricing and how they changed things at WPEngine, along with Hiten Shah’s talk and the advice he gave me, I finally got the courage up to drop our free plan.
But, not only did I drop the free plan, I dropped our lowest paying plan ($12/mo) and doubled the prices of all the other plans.
The $12/mo customers tended to need the most hand-holding while bringing in the least amount of revenue, so it made sense to drop the cheapest plan.
But, why double all the other plans? How about…why not? When you’re in the thick of building your business and your scraping by trying to make it work, it’s easy to get stuck in the mindset that you’re product isn’t all that valuable. But, if people are already signing up and using it, then it is valuable to them and the difference between $24/mo and $49/mo isn’t much if it’s adding real value to their business.
So, that’s what we did.
Also, trial periods are a pain. Customers are more likely to stick around and invest in the usage of your product if they’ve given you their billing info. We just make it abundantly clear that we have a 60-day money-back guarantee. Done. Easy as that.
After making all of those changes, there were some obvious effects that initially made me squirm.
Signups dropped off dramatically for obvious reasons. Most of our signups started off as free accounts before, so we lost a huge swath of customers there. But, in reality, 99% of those people never would have been happy with our product, so losing their signups was actually a good thing.
Paid signups took longer. Since we didn’t have a trial and there was no free account, people seemed to spend more time researching our product. Signing up wasn’t an impulse thing anymore; they wanted to make sure they had the right product. And, that’s a massive win for us. Customer’s who signup after doing a lot of research on your product are a heck of a lot less likely to churn.
The big payoff from all of these changes made it all worth it. As I mentioned, we saw a 40% increase in revenue, compared to previous months, after the change. No copy tweaks or UI changes could ever bring that kind of increase, so stop with the child’s play and start charging for the value you offer.