Pricing Your Product. A lot of startups treat pricing as a math problem or, worse, an afterthought. Pricing is as much an art as it is a science, one that relies as much on marketing and psychology as it does on classical economics. This Sequoia Guide covers strategies that can help you figure out the right price for your product—and end up with happier customers and more profit in the process. LinkedIn’s decision to package some seldom-used features as high-margin “premium” accounts spawned a business line that now makes almost $250 million a year. At eBay, touting the benefits of a low-cost tool meant the difference between profitability and a loss.
Meanwhile, companies that didn’t properly assess the value of their products and price them accordingly struggled or fizzled out. Setting a price for a product is one of the most important decisions a company can make. “If you picked your price once and never changed it, it’s probably wrong,” says Phil Libin, chief executive of Evernote. Why Price Matters. Calculate how much your virtual world can afford to spend acquiring a new player | Blog - Dubit.
Following on from my last post exploring how virtual worlds make money, how much they can expect to make, and the market size, this is the first in a series of articles that will dig into the numbers that drive both the costs and revenues for causal virtual worlds. In this post I’ll explain how to calculate the lifetime value of a player (LTV). In the following two posts we’ll look at the user acquisition model, and then dig into the cost of hosting, moderation, and support. The LTV is a key metric for profitability: the LTV of all paying customers must be greater than the cost to acquire those customers, plus the cost of servicing all free and paying customers. The lifetime value is driven by three metrics: Conversion of free players to paying playersSpend per paying playerLength of active membership Its important to monitor and optimize these three metrics, as we’ll see later, small changes can make big differences.
ARPU = % Converted x Ave Spend Note. LT = 1 / % Churn 1 / 33% = 3 Months. The Future of Freemium. Services such as Tencent’s WeChat (Weixin) must adopt a freemium model to survive How companies like Tencent are finding ways to keep their services free China is in love with Tencentʼs mobile chatting application, WeChat (Weixin in Chinese). The service—a close copy of the US application WhatsApp but with novel features like a ‘shakeʼ function to add new friends and walkie-talkie-like voice chatting—had more than 260 million users in China as of April 2013, according to company figures, after only a little more than two years of operation.
But like many who fall in love, We-Chatʼs users can be a fickle bunch. Most young Chinese agree with him. Tencent clarified at the beginning of April that it was unlikely to charge for using WeChat. Freemium has become a widely adopted business model in the tech world, supporting such success stories as file-sharing service Dropbox, note-taking software Evernote and internet calling service Skype (See The Land of the Freemium). The Rise of Freemium. Freemium Revenues: Social Media Business Podcast. We look at Freemium revenue in social networks and online communities including asking that: if freemium is the business model of giving it all (or most) of the services away for free, how can you then charge for it? And what is free stuff anyway – marketing? Advertising? A mugs game? If you offer some services at a paid-for premium, which ones should you choose to monetize?
This podcast comes from an overview of social media monetization revenues presentations and courses that I’ve been running for the last few years. Note: other episodes are here or you can subscribe to video on iTunes and also the AUDIO iTunes! Freemium Revenues: Social Media Business Ep.004 from Laurel Papworth on Vimeo. My podcast is an introduction to the concept of freemium. I think one way to increase social network revenue is to monetize the unreasonable. What do I get with a Pro account? LinkedIn, in October 2009 had over 50 million members (plus 385 staff) $75-100m – 1/4 from advertising. Like this: Free to Freemium: 5 lessons learned from YouSendIt.com. Today we have a fantastic guest blog from Ranjith Kumaran, on his adventure going from an ad-supported free service to a subscription-based freemium model.
Ranjith is the Co-Founder & CTO of YouSendIt.com, a Silicon Valley company that allows businesses and individuals send, receive and track digital content securely and easily. Enjoy! -Andrew Free to Freemium: 5 Lessons Learnedby Ranjith Kumaran IntroductionA tech reporter recently asked me if YouSendIt.com had made the switch from a free ad-based business model to a subscription-based freemium model “just in the nick of time”.
After all, with death chasing every ad-revenue-fueled startup these days, surely we must have been scrambling over the last few months! The truth is that we got our first paid subscriber at YouSendIt on the night of February 28th, 2006, over three years ago. So if you’re ready to take the plunge or are still on the fence between free vs. freemium then read on. Freemium | Startup Marketing Blog - By Sean Ellis. The startup I founded last fall, CatchFree, officially launched at TechCrunch Disrupt on Tuesday of this week. Only a TechCrunch event could offer this: within 24 hour we were contacted by Corp Dev at two of the biggest Internet companies in the world.
Of course it’s way too early to have any substantive conversations, but it’s a great early opportunity to build a relationship that could be meaningful down the line. More importantly, TC Disrupt was very helpful in kick starting our UGC. Users submitted and reviewed hundreds of free apps and services on the first day. We had identified a critical mass of authentic, non-anonymous reviews as one of the biggest hurdles in the business. TechCrunch helped us clear this hurdle in a single day.
It didn’t hurt that Dropbox, SpringPad, SurveyMonkey, LogMeIn, WordPress.com, Xobni, KissInsights, Lookout, Webs, Mavenlink, and many others also recruited their passionate users to support them on CatchFree via Twitter. The Key Challenge with Freemium. Mediapass - Premium Content Subscription Solutions. Pearltrees.
Search - social media freemium. Presenting Vimeo Plus. The Complete Guide To Freemium Business Models. Editor’s note: This guest post was written by Uzi Shmilovici, CEO and founder of Future Simple, which creates online software for small businesses. The post is based on a study done with Professor Eric Budish, an economics professor at the University of Chicago Booth School of Business. It also includes ideas and comments from Peter Levine, a Venture Partner at Andreessen-Horowitz and a professor at Stanford GSB The idea of offering your product or a version of it for free has been a source of much debate. Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. They will often copy the pricing strategy of similar products, base their decisions on pompous statements made by “experts” or rely on broken rationale (we worked hard so we should charge $X).
The Law of Marginal Cost Pricing plays a huge part in competing for customers. Guess what? An Experience Good At the core of the “Free” models are the products or services being offered to the customer. How to make freemium work for you. Following the phenomenal growth of Dropbox and Evernote, many companies are now trying to figure out whether to implement the freemium business model and if so, how to do it successfully. After studying this topic thoroughly and talking to many entrepreneurs, I found that there were two questions that people kept struggling with: What happens to the customer acquisition cost in freemium? What is the right free/premium segmentation? Customer acquisition cost in freemium Some people argue that freemium significantly increases the customer acquisition cost, and that the increase might in turn lead to disastrous results.
In order to understand what happens to the customer acquisition cost in freemium, let’s assume that your marketing investment is a given, so we’ll consider what happens to the total amount of premium users in the case of freemium. The total amount of premium users depends on three factors: Traffic. Signup conversion. Premium conversion. The free/premium segmentation.