Tag Archives: pricing

Moving from Free to Paid: 3 things that you cannot afford to mess

Often consumer online products need a critical mass of users to even know if the product is indeed 6280507539_f32a72be10_qworking and adds value to the users. Most products start by offering the product/service free to attain critical mass and also get actively engaged users. No sooner does it gather enough engaged users, the juggernaut of “monetization” is on its way and the only model that might be feasible is the user-paid model. Most products usually have a well-thought road-map on how long the free model must continue and how to start some positive cash flow. When you move to a paid model, you could mess up totally by doing these:

Convolute the user experience: This strategy only spells doom for the product. Alternatively, look at features you can carve out for paid users; the user experience of the product as a whole should be left in-tact. Sometimes it so happens that the whole set of existing features forms the perfect user experience and removal of any feature cripples the product so much so that it becomes useless. In such cases, the challenge would be to create new feature set – which are enticing enough for a segment of users to pay or create a limited time period for usage of the free product.

– Delay moving away from free: The conversion percentage from paid to free is usually a small fraction; running free version for a long period increases the cost of acquisition of paid users.

– Asking for “long-term” commitment: Users moving from free to paid should have a smooth “on-boarding” experience. Mandatory long period sign-ups (even if there is opt-out facility) causes high drop-out rates among users.

You build your user base with a lot of effort – let it not wither away when you need them the most.


Photo credit: https://www.flickr.com/people/68751915@N05/

Pricing and packaging lessons from a grandma

Shukla Bai, a sexagenarian based out of Bangalore used to baby-sit her grand daughter so that her daughter could go to work. With her grandchild now going to school she had some free time and thought of making some sweets and savories at home and sell them to friends and acquaintances.  Shukla being a well known cook among her friends and acquaintances, it was not difficult for her to start selling purely by word-of-mouth. After a few months, she feels that this sort of home-made quality food product would be needed by even those who she does not know or does not reach her through word-of-mouth. Almost all her sales so far was through pre-ordering – it was kind of baked-to-order. But to increase her sales she had to identify the right mix of place, price and promotion where interested buyers would simply buy seeing the product and not pre-order for something which they have not seen. How did Shukla, not  a management graduate, not a graduate, just a simple literate increase her sales? She did a customer-segment pivot.

Shukla would usually buy vegetables at a store near by and the cash counter had the desk usually free. She suggested to the shop keeper to try selling her eatables by just placing the transparently packaged eatables near the cash counter; customers who were to check-out after buying vegetables would see this home-made eatable and buy. The shopkeeper did not mind as his investment was zero and if it sells he would make some profit. Shukla was best at making pooran poli, a traditional sweet very famous in Karnataka and Maharashtra states of India. The sweet being a bit tough to make, many would like to buy if they see one with the right quality. She made packs of 5 pooran polis with a IMG_0024-modselling price of fifty rupees. She had hit the PLACE aspect for the product precisely on the target; there was good traction as far as enquiring about the product was concerned. However the sales really was not as much as she expected. The shop-keeper told her that most people asked for the price but did not buy. Shukla studied the people who frequented the store. Most of them were young couples or nuclear families with 3 or less members. Further, her competitors sold at eight rupees per piece whereas she was selling at ten rupees – because she did not compromise on quality. However how would a customer know without trying that her product is worth the extra two rupees? Why should a customer buy an unknown product? What did Shukla do? Customer need pivot!

Shukla – firm that she will not compromise on quality, reduced the size of each piece, made packets of three pieces instead of five, priced it at twenty five rupees per packet. The sales saw a dramatic increase – as the new price point was a lot cheaper – and the risk factor to try a new product was low as after all you have just three pieces, also perfect for a nuclear family. She got the PRICE aspect perfectly right.

Shukla does not even know about Eric Ries’ Lean Startup principles to say that she did a customer-segment and customer-need pivot. There is no need for her to theorize her actions. She did what every product manager must do – know thy customer. I as a product manager have lessons to learn from this sixty-year-old lady about passion for understanding the “need” in the market, addressing them and iterating according to signals from the market.

Last heard: Shukla Bai expanded her sales to ready-to-order meals in addition to the existing sweets and savories she started selling. Also, customers now started buying the 5 piece packets at higher price having ascertained the quality.