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Do free services attract customers?

Usually, big guys, Google, FB and others give free service and fee-based service. Does it apply to start ups in general? What should be ratio of free service and paid service? How can you compare this with marketing start up with paying ads?

7 Replies

Corey Blaser
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Corey Blaser Entrepreneur
Founder at Origami
It is a hard question and depends on your positioning strategy and target market among other things. Some questions you should answer are 'Would it be better to give a limited "trial" offer to let them get to know your service and then convert later?' 'Is the cost of being seen as free (read lower value) worth the position you are placing your service in?' ' Are the people you are targeting used to getting things for free or do they traditionally pay for their services?'

The list could go on, but you need to sit down and create a position statement. It will direct you in just about everything related to your brand, marketing, pricing, etc. Here is a great article describing the position statement.
Brian Ross
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Brian Ross Entrepreneur • Advisor
Engineering Lead at Haven, Inc.
As a developer who always wants to be able to try something out before making a commitment, yes. To have a free level offering (not a limited time trial period) it also makes me more likely to sign up because I can also experiment later and not affect my main paid account if I eventually got one.

So it really depends on your customer base and their needs. If it's a social app for the general public it better be free unless you are intentionally curating an exclusive club. But since you mentioned ad-based revenue, doesn't seem like that's your goal.

A startup's main goal is growth - so unless you are very picky about that growth, a free level product is almost necessary to bring sign up friction down as low as possible. One product type where this is prevalent is web-based project management apps like Basecamp, Assembla, Sprintly, Pivotal Tracker, and others.
Erol Akarsu, PhD
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Erol Akarsu, PhD Entrepreneur • Advisor
Software Architect

Corey,

No. People pay for services that are being made free that should entice customers to sign up. Here is analogy, you give some items in market free but you expect that once customer enters into market, he will buy other stuff. Or suppose that there are some labor intensive services outside and you trying to make it cheaper, optimized and high quality through online. Initially, to generate traffic suppose it would give one free service that clients must have.

Bria, I was comparing paying ads fee and giving some free services.

Bharathi Masilamani
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Bharathi Masilamani Entrepreneur • Advisor
Software Development Manager at Amazon
Not sure if you have heard of the Freemium pricing model -http://en.wikipedia.org/wiki/Freemium

It is quite common for startup to offer minimalistic services at Free and charge for premium services. And it works wonders if you have the right product.
Rand Strauss
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Rand Strauss Entrepreneur
Transforming politics and government, Visionary at PeopleCount.org
You might consider partnering with others who have similar services. If you can partner, say, with people who doresume and cover letter writing and with job-finding services, esp county services, you might get a lot of referrals. An alternative to free is cheap- giving a free taste and then an introductory week or month or a small set of services for, say, $10. This loosens their wallet as well as gets you paying customers. Plus you can try different price points to see what people are willing to pay for their first services.


Alen Mazi
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Alen Mazi Entrepreneur
web design & digital marketing
think about freemium


Juan Posada
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Juan Posada Entrepreneur • Advisor
Technology executive, startup advisor and entrepreneur. Also a garage tinkerer and maker movement supporter.
At the risk of over simplifying, I would say "free" does not intrinsically attract new customers - it only lowers the perceived risk of trying your product for people who are already (or through other means) attracted to it.

You have received some good advice already, to which I would add a suggestion to separate two questions which I think you are combining above -the first one is "how do I monetize my product", and the second one is "how do I attract customers to my product".

Hope this helps
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