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Question Details

In Sean's prolific interview on VentureHacks (http://venturehacks.com/articles/qa-sean-ellis), he recommends not charging before P/M Fit because you allow people to explore all of the functionality and can continuously survey them until some are saying they would be "very disappointed" without the product. I'd like to see this idea discussed further.

Playing Devil's Advocate, Charging is Good Because
1. Creates less noise, you can listen to the feedback of people who are paying
2. Proves people will pay for your product
3. Doesn't de-value your product


  • AndyNewbom (@andynewbom)

    its a TOUGH battle. product/market fit where no one is paying for what you do is hard to argue. BUT I agree that it is FAR better to get intense, detailed feedback and actual user cases early on. I have found that someone getting excited about what your product does does NOT mean you have P/M fit. it only means that you are good at explaining it and found an obvious solution/need pairing. what makes TRUE P/M fit IMO is when the user changes their behavior to match your product/service and becomes sticky. THAT’s fit that can be charged for.

  • Sean Ellis (@sean)

    I think you have some good points in your question details Trevor. I’m not stuck to the idea of keeping a product free pre product/market fit. I think it’s a pretty debatable point that probably leads to the typical “it depend” outcome.

    I’m generally in favor of products offering a free trial, so that at least buys you a little time to get feedback and see how someone uses it.

    The other thing to keep in mind is that offering something for free during Beta doesn’t necessarily create a lot of noise. Unfortunately it’s almost as hard to drive users for a free beta period product as it is for a paid product – unless it’s something people are already paying someone else for. Also, as long as you say it’s only temporarily free (you will pay for it when it comes out of the “early access” or beta period), then I really don’t think that you are devaluing it.

    Benefits of charging from day one is that it tells you if your product promise is something people would pay for. But in my experience, I can rarely guess the product promise. I have to learn what it is based on the feedback from people who consider the product a “must have.”

    • TrevorOwens (@to)

      My problem with doing a free beta is that when users stop using the product, I wouldn’t know if it was because the product wasn’t good enough or they weren’t serious enough. If I charge a small amount I only get people who based on the idea of the product actually have a need for it. Furthermore, if they cancel their account, I can immediately reach out and get their feedback.

      I’m a good marketer so I could get a ton of people to sign-up for something that’s free.

      • Sean Ellis (@sean)

        Even if you are a great marketer, you can only get them to keep using it if it actually provides real value. The “noise” issue tends to sort itself out further down the funnel.

        • Gab Goldenberg (@gabgoldenberg)

          Can you elaborate how the noise issue tends to sort itself out, Sean?

          • Sean Ellis (@sean)

            Sure Gab. Each step in the funnel that a user takes imposes a real cost on that user’s time and effort. If you think of repeat usage as a step in the funnel, the reward of a great/useful experience needs to be there to justify coming back. Fact is, people are just as fickle about a free product as they are for a paid product. “Free” can drive lots of signups, but often those people give up on the product just as impulsively.

            So if you have a service like KISSmetrics, you can query users that have done X,Y and Z events, and you’ll have a great customer development pool.

            In my original answer I did say “it depends.” For pure enterprise products, I generally don’t recommend having it be free during a beta period (for some of the reasons Trevor mentioned in his original question).

  • Gab Goldenberg (@gabgoldenberg)

    Here’s my experience.

    I wrote The Advanced SEO Book as follows. I created a few free chapters, gave away one, then a few, by email, in exchange for subscribing to my list. Around 100 subscribers, I asked for pre-sales. I got one or two, and decided I had validation and went ahead. I continued pre-selling as I went and got more pre-orders.

    Sounds good, right?

    Here’s where it breaks down. I had limited feedback – what more did I need? People were pre-paying for the product!

    This lead to me not understanding the key value I was providing until I later got to pre-testing the usability for my ecommerce site selling the book. That’s laaate in the game – I had written the whole thing, got design work done, found an editor and done lots of editing with him (thanks Richard Kershaw for being amazing) …

    One of the big points that would have likely happened if I’d started with free would have been that I’d get feedback around the price point. While I sold a fair amount of copies in the price ranges I marketed the book at (around $85 – $150, incl. shipping), I might have sold a fair amount more if I’d tested my pricing sooner. Even that was partly due to my ignoring some early feedback from the likes of generous folks like Marty Weintraub… but the main point is that I thought I had validation because, to paraphrase Noah Kagan, I got the money. That made me satisfied that I knew what I was doing and didn’t get more user feedback.

    Ultimately I’d have done better listening more, and charging too soon (before p/m fit) closed my ears since I thought I had learned enough. I forget who pointed this idea out (I think Ben Yoskowitz?), but I hit a local maximum and didn’t know it. That’s slang for I climbed the little hill when for the same effort, I could have been on my way up Mt Everest n gotten more…

  • Anand Sanwal (@asanwalcbinsights-com)

    I think the answer might depend on who your customers are but in B2B settings which is what I know, I think you should definitely charge from the get go.

    Some thoughts:
    - Price in B2B settings signals that you’re a real business (even if you’re not quite there)
    - Price can connote quality. We had customers early on tell us that our pricing was too cheap and that worried them.
    - Charging for a product makes people value it more.
    - Charging for a product gets you feedback from people who matter. Feedback from people who believed in you enough to pay for it is better than feedback from people with opinions and no money.
    - This doesn’t mean you can’t do a free trial (or a freemium plan). We did freemium initially but got rid of it cuz it wasn’t working for us.
    - You can start with a low price and raise it as you get product/market fit. Our initial price was $2400/year and have raised every 12-15 months since then and our average ticket is way way higher (pricing is here for those curious – http://www.cbinsights.com/pricing

    Don’t be afraid to charge :)

    • TrevorOwens (@to)

      I’m a big fan of CB Insights

    • Gab Goldenberg (@gabgoldenberg)

      Fascinating tool you guys built there, Anand!

      • Anand Sanwal (@asanwalcbinsights-com)

        Thx Gab! Data businesses are hard but when the fly-wheel feels like it might get turning, they can be a lot of fun.

    • GrishmaGovani (@strangeloops)

      Great comment Anand. Agreed. Lot of B2B customers are particularly closed off the pricing unlike B2C customer within reasonable means. They more concerned about why they should change rather how much does this cost. Cost of change for a business is quite expensive unlike an individual i.e., getting 10′s to 1000′s of people to change and adopt can be a huge loss of productivity and revenue. It does not take as much effort for an individual to change.

      • Anand Sanwal (@asanwalcbinsights-com)

        Grishma – great comment.

        In B2B settings, they are almost always spending OPM (other people’s money) unless you’re selling to SMBs. And in that case, they’ll happily pay if you remove pain which may take many forms — make them look smart in front of their boss, get them out of work early, help them sell more.

  • Wouter Smet (@wauter)

    In my opinion, price is one of the things you have to experiment with WHILE seeking product/market fit. I consider price part of the ‘does it fit’ question.

  • Dylan La Com (@dylan)

    For those who haven’t read Sean’s interview, here’s the quote Trevor is referring to

    Should I charge users before fit?
    - “I think that it is easier to evolve toward product/market fit without a business model in place (users are free to try everything without worrying about price). As soon as you have enough users saying they would be very disappointed without your product, then it is critical to quickly implement a business model. And it will be much easier to map the business model to user perceived value.”

    • Dylan La Com (@dylan)

      I can see how this would make sense for certain products. It shortens the feedback cycle which could help accelerate PM fit, but I think you make some good points Trevor. How useful can the feedback be if the user isn’t actually paying for the product? I personally would be disappointed if I could no longer use a free service, partly just because I am no longer getting the service for free…

      Interested to hear others’ thoughts as well.

  • ShanaCarp (@shanac)

    Just because they are disappointed about your product disappearing, doesn’t mean they will pay later.
    I’ve been disappointed by not having certain products – and then didn’t mind giving the up when they charge. – but not enough to pay for it.

    Markets by definition have some sort of exchange in value in economics – if you are saying you are having product market fit, it means you have exchanged values (which in the US may mean dollars…)

    • Sean Ellis (@sean)

      And just because they paid for a product, doesn’t mean they would be disappointed if it disappeared later. Infomercials thrive on this…

  • Anuj Adhiya (@anujadhiya)

    No expert/experience on this topic but I liked what Ash Maurya had to say on testing pricing from day 1: http://www.growthhackers.com/the-10x-product-launch/

  • mattgratt (@mattgratt)

    My experience here is limited and based on one enterprise b2b startup and one departmental b2b startup, but I am 100% for charging initially if you intend on charging down the road.
    What I have observed is:

    - at bigger companies, people do not use products they have not paid for – they’re just too busy.

    - at smaller companies, people may use a product they don’t pay for once.

    - if your value scales over time with more usage, you should charge so people approach your offering appropriately instead of hoping to have it work instantaneously.

    - if you have any expensive features or external integrations, it’s hard to do them for free.

    - free users (the people that will go out and try everything that’s free, want your product to be free and easy, etc.) are different than the sort of people that buy software to solve business problems, and the value of feedback from free users for a product you want people to pay for is not high.

    That being said, there are lots of very successful freemium b2b companies, so this is just what I’ve seen. YMMV.

    • Sean Ellis (@sean)

      Great points Matt. Even if you make a product free during a Beta period, I think you should set the expectation that it is only free for a temporary period (if that’s the case).

      One of my early companies did this for a B2B product targeted to small IT consulting companies. We said if they actively participate in the formal Beta program that required surveys and interviews, they would lock in a 50% discount (whatever the price ends up being). This formal beta period only lasted a couple of months. But in the three months after it finished, we sold about 1000 subscriptions and generated over one million dollars in revenue. I doubt we would have generated $1m+ dollars in the first three months if we didn’t follow this approach.

  • LiamGooding (@liamgooding)

    One of my biggest regrets in Trak.io’s private Beta was that we didn’t charge from day 1, and charge recurring.

    After a few months we started charging a one off fee of $29, which promised at least 1 month of usage. Most users got around 4 months for that.

    The problem was, while we converted users with this at 11%, we have no data about RECURRING payments from this period. And in my opinion, this is one of the strongest indicators of P/M fit for a SaaS startup.

    So on this, I think I disagree with Sean.

    Seeing if users will pay for a product tells you a bit about the marketing, the prettiness of the UI, the onboarding.

    Seeing if users continue to pay, and don’t cancel their subscription, tells you about the value your product delivers to their business/lives.

    without sounded cold or blunt, many of the free users in our private Beta were actually “noise” which made it harder to hear the signal coming from our paying users, users who were most likely to be our customers.

    I wrote 2 blogs that share my thoughts on this in more detail: One about our “charging for private Beta” and then one about why we dropped our free plan (which goes into a lot of detail on my thoughts on paying vs. not paying during a Beta)

    http://blog.trak.io/growth-hacking-pre-launch-revenue/

    http://blog.trak.io/freemium-vs-free-why-we-ditched-our-free-plan/

  • TommyWalker (@tommyismyname)

    Personally, I say (and have done) both.

    With my info-beta product “Social Filter” I decided to contact the first group of Alpha testers, and let them know “hey, this is free, but I really want to see you use it to help me work out the bugs”

    They did & nearly everyone in the first group saw some kind of positive, transformative, result. Ok, the idea is validated to be useful, and because it was a 6 week thing, and people kept showing up, it was also validated to be “engaging”

    The second group I ran w/ different people, I decided to charge. Nothing much, but enough to cause a little friction.

    Surprisingly, fewer people actually stayed for the entire course, however the people that DID saw better results than the first group, and it turned out the people who didn’t were the kind of customers that saw buying the tool as fixing the problem (I’m very very clear that it is not)

    Even though I haven’t done anything with the overall concept yet, due to scheduling constraints really, I have decided that I will validate each concept this way.

    Because beyond Product/Market fit, you also have to consider Product/Founder fit. Thinking about this stuff was cool, but I also had to ask myself if it was something I ultimately wanted to invest more time into.

    For me, the answer was “not right now” but I also know the concept isn’t something many others will be running with any time soon & I’m ok with that :-)

  • Anand Sanwal (@asanwalcbinsights-com)

    One other comment on B2B sales focused on “pilots” or “proof of concepts (PoCs)” — Even for these, I’d recommend charging.

    Even if a modest amount for an enterprise – $5k, $10k, $25k.

    This makes them go through procurement on their end which ensures they’re committed. Otherwise, you can get a lot of window shoppers with no budget who kick the tires, cost you time and ultimately have no budget.

    Of course, there are times when free fishing expeditions may be useful in the very early days, but we’ve found that our best pilots are the ones that we charge for. It says they’re committed and that you value your time.

    BTW, we’re a bootstrapped company so this advice may not be great for VC-backed businesses. YMMV.

  • BillFreedman (@pidginbil)

    The best debates are where both sides have strong believes and both are right…that’s true for this debate.

    I want to add one new idea to the discussion: non-monetary payments.

    I’ve succeeded with trials where as product market fit began to evolve we began bartering: a free month or professional services in exchange for a reference call/success story/guest blog post.

    The greatest value I’ve gotten from early customers is 1) continued usage, 2) actionable feedback, 3) references. All three are more valuable than cash. These people will be helpful to validate pricing/ROI as you set the price for customer #10 and beyond.

  • joshledgard (@joshledgard)

    The number one reason we went straight to charging for KickoffLabs is to eliminate the noise of feedback from people that were never going to pay anyway.

    We’ve always had a Freemium model so we were an interesting case for this. What we learned was:

    Feedback from PAYING customers was wildly different than feedback from FREE customers.

    We would have wasted a LOT of time had we focussed on what the FREE users were telling us we needed to do in order to get them to pay.

    But when we focussed on what paying customers were requesting we created a deeper value for them that enabled us to charge more for future customers.

    We did, however, launch with significantly cheaper prices than we offer today… to help offset the “beta” nature of our initial product.

    Thanks,
    Josh Ledgard
    Founder – KickoffLabs

  • PushkarGaikwad (@pushkar-gaikwad)

    I am little late in replying but felt to add my view too since I faced the exact same problem with inBoundio.

    The rule you need to follow is simple – How much value is getting created if you don’t charge and give it for free ? if giving free is making your product popular then give it for free but for many which lacks referral users (enterprise and mid size business segment or non web related), for these you are better of charging from beginning to cut the noise and stay focused.