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The Profit in “Freemium”

When it comes to pricing your product or service, if you’re in the tech industry; it may actually pay to offer value for free. Before you label this as a “crazy idea,” spend a moment and look at the vast array of successful technology products that we depend on but are 100% free. Just a few off the top of my head: Google, Tumblr and Eventbrite. An equal number of very profitable companies also provide free models and have paid tiers where you can sign up for a base account and then pay for additional features such as more hands-on customer service and greater digital storage space.

The overwhelming reason why tech companies go “freemium” is that this model attracts a lot of attention. If someone is giving you a free sample or even better, giving you the entire product for free, wouldn’t you be curious to give it a try? After all, what is there to lose?

So how do you make a profit from free? Consider making your revenue from other ways besides directly from your consumer. There’s a lot of hidden value in simply having a large number of people using your product or service. Is there profit potential in user data? Can you sell advertising space? Can you entice customers by first offering them a great base model for free, allowing them to trust your business so that eventually they’ll be happy to pay for more “souped-up” paid models?

I’m not advocating that you “give the farm away,” just to consider a carefully planned out strategy that could boost your publicity by allowing customers to “test drive” your offering first before they pay  – or even for an unlimited time. Depending on your approach, you’d be surprised at just how much value you can generate by giving it away for free!

Bryan JaneczkoFounder, Wicked Start
Bryan has successfully launched multiple startups. His latest venture, Wicked Start, provides tools to plan, fund, and launch a new business. Also author of WickedStart: Guide to Starting a New Venture with Passion and Purpose, Bryan is committed to helping small businesses grow and succeed. | Facebook | @WickedStart | LinkedIn | More from Bryan

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