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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Freemium Business Model to Fight Competition

I have a Software product that has many competitors.There are ones which are  5+ years old.I have been in the market for like 1 year.But been getting less than 10 sales per month.There has been an eventual growth in sales starting from 1-3 to a figure around 10.

The market is crowded with free tools doing stuff my product does.But i can say that my tool is much better in terms of usability,features etc

A few of the competitors is adopting a freemium business model ie: the software is given free of cost.Initially it works as full version for X days then certain features are limited(switched to free).If the user needs to unlock he needs to purchase.

My question is should i go with a freemium model.
My trial does not work on a day basis.It shows that the output is produced by my software.

When adopting a freemium model,should i offer two separate versions ie: the free and the full.Displayed in two tabs in the download page or should i follow the same (day based trial  offering full features for X days and switching  back to lite)

Any advice is much appreciated and tell me how im doing in such tough competition(im i doing okay?)  the website also has low traffic.
anonagain Send private email
Monday, April 14, 2014
So, I understand you to be saying that your competitors have recently started doing something, so you want to follow them and do it too.

Do you have any information showing your competitors have found the changes to be a profitable and sensible move for them? Have they shared their sales data publicly before and after the changes, in blogs or such?
Scott Send private email
Monday, April 14, 2014
Also if this is PSB136, don't be changing your nick!
Scott Send private email
Monday, April 14, 2014
@scott They have been trying out this model for quite sometime and their product is the most popular tool in the market.

And im not PSB,seen some of his/her posts including the last 'giving up' one.What makes you think im that person,is my sales that bad?
anonagain Send private email
Monday, April 14, 2014
Plus i have some reliable info that their business model is a success. :)
anonagain Send private email
Monday, April 14, 2014
It's not me; don't worry.  I'm on a coding hiatus for now.  And I punctuate.  :)
PSB136 Send private email
Tuesday, April 15, 2014
"Initially it works as full version for X days then certain features are limited(switched to free)." is not exactly freemium. Shareware worked like that ever since its invention.

In general, my view is that competing on price is racing to the bottom. Following your competition may be not so smart either. How about making your product overwhelmingly superior to the competition, or better serving the needs of a particular lucrative market niche, or better handling a popular use case, etc., instead, and raising your price?
Dmitry Leskov Send private email
Tuesday, April 15, 2014
You may wish to read "Freemium vs. Free: Why We Ditched Our Free Plan":

Dmitry Leskov Send private email
Wednesday, April 16, 2014
Fully agree with Dmitry - do not fall in a trap of price competition... In fact, your sales might boost even if you increase the price - but with some premium functionality, preferable.

Just curious - if the your market is saturated and there are tons of similar products (e.g. RAM optimizers, Registry tweakers, etc..), what's the point of not revealing it?
exim Send private email
Wednesday, April 16, 2014
After surveying a customer i found out that,the person would not buy the product if the price was hiked.The customer instead suggested why not go for an annual billing plan.

@Dmitry  In terms of features and stuff i can very well say that my product stands out and people will be willing to pay more.
as @ exim said  the market is saturated and the products introduced years and years before mine  have found a right price and they all sell at the same price tag.

When i had introduced the product i just got like 8 sales in 4 months.Now after like 1.5 years i get around 8 sales per month.
Is this a progress why doesn't any one comment on this? 

I think i will go with the freemium model since popularity will be highly milted for a saturated market if i stick to premium only.
anonagain Send private email
Wednesday, April 16, 2014
Anonagain, 8 sales per month is not a good mark for a software business.

What you have to evaluate is your sales / download ratio. If you are able to sell one licence for every 100 downloads, or more, you are fortunate.

In this case you must concentrate on increasing your traffic in all ways you can possibly imagine. Of course I mean targeted traffic.

If your rate is lower than that, you should consider the possibility of offering your prospects a bundle for the same price, including some useful FREE product of your own, or from other software vendor.

I anticipate you that finding software vendors willing to collaborate this way is not easy, but if you can find a good gift for your customers, your sales/downloads ratio will increase, and then  trying to get more traffic will make a lot of sense.
MSD Soft Send private email
Wednesday, April 16, 2014
> After surveying a customer i found out that,the person would not buy the product if the price was hiked.

Unfortunately, this just isn't a scientific test. What people say and what they will do are two different things and your sample size is way too small.

I suggest reading this:

Jonathan Matthews Send private email
Wednesday, April 16, 2014
> What people say and what they will do are two different things.

Along those lines, we've just had the perfect testimonial email from a customer. It basically said they love our software but thought it was a little bit too expensive.

The fact is, they still bought the software. If they didn't complain about the price then it could well be under-priced.
Adrian Lock Send private email
Wednesday, April 16, 2014
@MSDSoft Last month i had around 800 visitors and got 8 sales,checked the month before too I can say that i have 1% Conversion rate.

Hope this is good.My product is priced below $50,im thinking of raising the price to $50 for at-least one month and see the sales.
Is $50 considered too high for a tool that is NOT an impulse purchase,since the customer will need to use the tool again and again for solving a  problem.
As you can read from the feedback one of the customer is willing to pay the current price monthly.

Hope i need better traffic,for that free version will help a lot.

There are Online tools that offer what my product does they charge my price monthly for their top premium plan.
anonagain Send private email
Wednesday, April 16, 2014
Conventional wisdom: "If no one complains about your prices, you priced too low."

We seldom receive price complaints, and those that we do receive are usually not phrased as complaints. But we have separate tiers for early-stage startups and other small businesses. Maybe that is something that you could also try.

A simpler alternative is raising prices for business users while offering cheaper personal licenses, as in "licensed to a named individual vs licensed to a company/organization". Some payment processors enable you to have different pricing with and without the "Company" field on the order form.
Dmitry Leskov Send private email
Wednesday, April 16, 2014
Anonagan, 1% ratio is not bad at all :)

Try to drive targeted traffic to your site. Lots of ways to do that, but not an easy task indeed.

Talking about pricing, I agree with Dmitry. Try to offer different prices for individuals and companies.

If your competitors charge for a month what your software costs, you are not pricing too high. You have margin to experiment. Provide basic and pro versions based on features, do what Dmitry suggests, etc.

You can do lots of things with your pricing, but what really will change your business results is getting 800 visitors daily, not monthly. Put your efforts in marketing your product/website.

MSD Soft Send private email
Wednesday, April 16, 2014
"Conventional wisdom: "If no one complains about your prices, you priced too low."

From what I've seen and experienced you'll always get people complaining about the price no matter how low you go.
Drummer Send private email
Thursday, April 17, 2014
I believe once your product gets some sales, gets feedback, and has a decent conversion rate, you should set the focus to get more traffic to your site.

During the last years I also often wondered about what traffic do I need to have enough sales. And I think I also made the mistake that I spent too much time describing the features of the product in detail and writing complicated paragraphs about tasks people are not really interested in.

Just recently, a few months ago, I started to take a detailed look at the keyword and search query statistics from the Google Webmaster tools. So I started to re-write a lot of my web pages and created new ones for the most prominent search phrases to get more search impressions. Of course I'm still trying to describe the benefits of my software. However, I do it and have the focus on search phrases people actually use... This way I try to get 200+ visits a day with the current features of the product. Then I'm going to add some new features and try to get 500+ visitors...

I guess for a 50$ product one needs approx. 1000 visits/day (5 days a week, 10% download, 3% conversion rate).
xmlbuddy Send private email
Thursday, April 17, 2014
There's a lot of great information in here and @Dimitry brings up a few very great points.  I have sold various products for a while and the biggest lesson I learned was to offer different tiers to match a variety of buyers. 

Check out an eBook page for a Canadian engineering specific exam at    www.ppehq.com/nppe-buy-now.html  .  Its not the prettiest page but offering multiple packages really takes things to a whole new level.  It allows you to offer a free version (or really cheap version) to address that cost conscience buyer.  It also allows you to offer something to the buyer who is using the company credit card with a higher priced product. 

I would highly recommend going this route as it has well over doubled the revenue I make from this material.  Its not easy as you must find ways to provide substantially more value for your higher tiers but its a great way to outperform the competition. 

Getting more traffic - no comments right now - that's a completely different subject.  However, if you PM me I would be happy to discuss. 

Best of luck

Mike G
Mike Grossman Send private email
Tuesday, April 29, 2014
Thanks for all the advice.
I increased the price by around 25%.I did not get a sale for the last 3 days.Should i set back the price? Im losing my adwords investment.
anonagain Send private email
Saturday, May 03, 2014
Given your very low sales volume I don't think you'll get statistical significance with only a three day test.

Why don't you do it properly and do a proper A|B test?  Google website optimizer provides all of the tools for you to do this for free.

Calculators like this will help you figure out how long you'll have to run it for: http://visualwebsiteoptimizer.com/ab-split-significance-calculator/
Kremental Send private email
Tuesday, May 06, 2014

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