Turning Your Users Into Paying Customers

Startups often hesitate to charge their users for their products or services, but the hosts advise founders to start charging. Some founders may already be charging something, while others have never considered asking for money. The hosts aim to provide guidance on how to overcome this reluctance. People often choose not to charge for their products or services due to various reasons, such as the desire to gather feedback and users without charging or fear of making mistakes. Successful startups are always testing their pricing strategies and it is important to pick a reasonable price to get the startup up and running, with the ability to optimize pricing later. Founders should not worry about getting the price perfect from the start and can grandfather in existing users while charging higher prices for new users. Charging big companies does not hinder deals and actual sales and revenue are crucial to validate a product's viability. Learning from paying customers is valuable as their reactions to the price reveal their true opinions. The open core model and Slack's freemium strategy are effective approaches. Consumer businesses can monetize through advertising and should not hesitate to charge for their product or service.

Introduction

Startups are often hesitant to charge their users
The hosts advise founders to start charging
Some founders may already be charging something
Others have never considered asking for money
The hosts aim to provide guidance on overcoming reluctance to charge

Why are people not charging?

People often choose not to charge for their products or services due to various reasons.
One reason is the desire to gather feedback and users, which is perceived as easier without charging.
Founders may fear making mistakes and believe they cannot change their pricing once it is set.
Perfectionism plays a significant role in this mindset.
It is important to note that pricing can be adjusted regularly.

Successful startups are always testing

Successful startups are always testing, including testing their pricing. The price that startups ask for their product or service is dynamic and doesn't have to be perfect from day one. It is common for startups to pick a price out of thin air and start charging customers to see if people will pay for their product. The important thing is to pick a reasonable price that gets the startup up and running, and then optimize the pricing later when the company is more established. The key is to keep moving forward and not get hung up over pricing.

Successful startups constantly test their pricing strategies.
Startups often pick a price without much analysis and start charging customers to see if people will pay.
It is important to pick a reasonable price to get the startup up and running.
Pricing can be optimized later when the company is more established.
The focus should be on moving forward and not getting too caught up in pricing.

Advice on pricing plans

Founders should not worry about getting the price perfect from the start
Existing users can be grandfathered in and new users can have higher prices
Successful companies often have early users on outdated pricing plans
Selling and promoting the product is important

Anti-signal of not charging big companies

The anti-signal of not charging big companies is a misconception among founders. Charging money does not hinder deals with big companies, as they are accustomed to spending on software. Not charging can raise doubts about a company's ability to support them. It is crucial to have actual sales and revenue to validate a product's viability. Selling free pilots to big companies does not prove much and fails to demonstrate the ability to change behavior or gain commitment.

Assumption - Learn from people using for free

Learning from people who use a product for free is valuable, even if it should be paid.
The best feedback comes from paying customers, as their reactions to the price reveal their true opinions.

Devil's advocate - Open core model

The open core model is a business strategy where companies offer free open source software to attract users, with the intention of upselling them later on. Key points include:

Companies use the open core model to gain adoption from developers and then sell them enterprise support plans.
This approach is more sophisticated and strategic compared to simply giving away free pilots or not charging for the product.

Slack strategy

Slack's strategy revolves around the freemium business model, offering a basic version for free and monetizing through constraints. Key points include tracking user conversion, determining upgrade timing, and maintaining discipline in product expansion.

Consumer business

Offering a product or service for free initially can help consumer businesses monetize through advertising and attract a large user base.
Founders should be transparent about their intentions and not hesitate to charge for their product or service when needed.
It is crucial for consumer businesses to address the issue of monetization rather than avoiding it.

Takeaway

The importance of charging for your product or service instead of offering it for free
The need for a structured plan and path to getting paid
Strategies such as freemium and open core
Advising against charging out of fear or worry
Highlighting the importance of putting pricing out there to learn if the product is something people want.