Are non-paying customers worth anything?
Just after posting my thoughts and tips on using gateway products to get people over the hurdle of a first purchase, I visited an ambitious technology company about to launch an innovative online product. In my last post I talked about having a product ladder, in which there is something with which people can engage that’s free.
And, for online products I even recommended the Freemium model where you have a version that is completely free.
So, when the conversation with this tech company turned to pricing, I brought up a number of examples of similar companies giving a version of their product away for nothing. Mailchimp’s Forever Free account is the one that really demonstrates this. Being intelligent people, they had of course considered this – but ruled it out. Having talked to other technology providers they’d been advised that the conversion rate from free to paying was likely to be abysmally low and that many customers would simply use the free version forgoing the benefits of the upgraded one.
It’s often said that if you give something away for free then people don’t attach any value to it. Now, whilst I think this can be true in some situations, I firmly believe that, done well, a Freemium model can be really powerful. Here’s a rundown of five key ways to think about the value of non-paying customers.
1. Benefit from positive word of mouth
Having a bank of customers who are gaining benefit from your product for free gives you massive word of mouth opportunities. I’ve lost count of the number of people I’ve recommended the Mailchimp system to even though I have never paid them a penny. What’s more I do things like mention them in blogs (oh look I’m doing it now). If you’re smart about creating a free service that is genuinely useful, then make it really easy for people to share your details, then you will create an army of advocates who are effectively doing your marketing for you. You’ll also often find a number of your non-paying customers more than willing to appear in case studies for you. And, we all know how powerful a real life case study can be.
2. Monetise their goodwill with an affiliate scheme
The link to Mailchimp above is an affiliate link. If you click on it, and then sign-up, I will get Monkey rewards to spend on handy add on extras like inbox inspections. One of the stipulations on their free account is that an affiliate badge goes out on the bottom of the emails you send out via their system. So, again their non-paying customers are doing a great job of marketing their product. A little reward for doing makes it even more likely that they will do so.
3. Create a barrier to entry to competitors
If your free version is genuinely useful it is likely to mop-up people who may have gone to competitors undercutting your price. And, by getting as many people signed-up and using your service, you then pose competitors with the challenge of getting people to switch. And, being as people are pretty lazy on the switching front, this makes it harder for them to get a foot hold.
4. Mobilise their feedback for product development
The great thing about non-paying customers is that they usually know the deal. They’re getting something from you, so it’s only fair that they give a little back. You can make it a contracted part of the deal that they provide certain levels of feedback, and invite them to complete surveys, questionnaire or qualitative feedback groups to review and test new features or ideas. In fact, you’ll often find that non-paying customers are more likely to do this sort of thing for you than paying ones.
5. Provide an upgrade path to paid services
Lastly, you have a pool of people to sell to. If you’ve structured an effective product ladder there will be a few features that people really value that are just out of reach on the free version. This gives you an excellent way to up-sell people to the next level of functionality. You can also make available a set of add-on or one-off paid for services appropriate to these people that can give you an excellent additional income stream.
So, whilst converting non-paying customers into paying customers is the most obvious way to think about their value – if this is the only objective you have in mind for them – you’re definitely missing a trick (or four).
By Bryony Thomas | Chief Clear Thinker | Clear Thought Consulting Ltd | @bryonythomas | www.clear-thought.co.uk
You may also be interested in:
- Blog: How to generate awareness for your small business
- Blog: It’s not luck, it’s good marketing
- 10 minute video: How social media supports every step of a sale
Clear Thought Consulting works with small businesses, equipping them with the marketing strategies, suppliers, skills and set-up that they need to become bigger businesses. We do this by planning and delivering 12-month marketing transformation programmes – supporting a small business through a step-by-step process to making marketing pay. We firmly believe that when you can’t out-spend your competition, you have to out-think them.
Published on 14 September 2011
