People have no idea how hard it is to get first 10 paying customers
I'm kind of conflicted on this. Yes, it is hard to get ten people to pay money, in that you have to have a mostly-functioning product, a website which markets it, and some way to charge their credit cards. But this is not really that hard.
BCC 1.02 ("Like 1.00, but with less crash bugs and the brand new ability to print to non-default printers") got to ten customers in six weeks from 1.0's launch, entirely on the strength of organic search marketing on two pieces of content. That was when I was young and stupid. Y'all can do better.
I think software (let's scope it to B2C software for the moment) is like lemonade stands. You know how you get ten customers with a lemonade stand? Your price? Doesn't really matter. Your stand's design? Doesn't really matter. Your taste? Doesn't really matter. Your location? Probably matters for getting hundreds or thousands of customers, but for 10, pretty much any street will do. The key hurdle you have to get over is charging money for lemonade. I am worried that people think it is really really hard to run a successful business, and that stops them from ever charging for lemonade.
I think SaaS has WAY more friction than most people think. While all entrepreneurs LOVE recurring revenue, a lot of people temperamentally don't want to rent software-- they want to own it. Patrick, didn't you try a SaaS offering at one point, or am I making that up?
I'm currently on my third SaaS offering at some stage of development (Appointment Reminder). The first two got shelved prior to launch after I lost faith in their individual business models during development.
But how do you get over charging for something that competitors offer for free? Even if your product is better in different ways, that's a hard sell.
Stick a price tag on it.
[Edit: I wanted to leave that line alone for impact, but it might be read as overly abrupt or insulting. That isn't my intention.
I've always had free competitors. They were at the top of the three search terms I most wanted when I started, though I have since learned that I was mistaken about that. One thing I've learned over the years is that I am fairly well informed about the top twenty alternatives to my software and my customers are not. Relatedly, I was very sensitive to the notion of paying $25 for software and my customers were not. And I could put up with a little frustration and ease-of-use niggles to get a deal and my customers viscerally hate that.
P.S. I can't decide which is worse, selling to price-sensitive customers or playing price-chicken with someone whose product is free.]
Might as well show you, since it is semi-relevant: I started to make my product after an acquaintance of mine wanted a particular activity for class. I told her to Google it. She told me that this was the printed output from the #1 result.
http://images1.bingocardcreator.com/blog-images/hn/free-comp...
Can you see a woman with a graduate degree feeling effing fantastic about herself for printing that out and giving it to a third grader? Just because it doesn't cost any money doesn't mean it is free.
Postscript: that competitor is still in the top 3 for a few related search terms. They run AdSense ads. For me. And they perform the best anywhere on the Internet.
Sorry just wondering if you could expand a little on this paragraph:
They run AdSense ads. For me. And they perform the best anywhere on the Internet.
I think he means that his competitors run AdSense, showing for keywords that he bids on, so in effect they're just channelling part of their traffic to him. Since it's a competitor, there's a great efficiency in the traffic since the people are actually looking for his product.
Oh okay, as in they are an AdSense partner - ie they have ads on their website?
How often have you picked one product over another because of a key difference between them besides price?
Price is an important difference but not the only one and not the most important one for all people all of the time. Be different on something besides price and move on.
Before heading down the freemium path be sure to take the time upfront to build two bottom up revenue plans. One plan for freemium and one for strictly paying customers. Be sure and include a detailed breakdown of each of the channels you'll be using to acquire customers and their costs. It's ok to make educated guesses here.
It can be quite painful so see how many customer you'll need with freemium before you reach your revenue goal and what it will cost to get them vs. just charging. Are you sure you're setup for that? Does it make sense given the size of your market? Given the likely customer acquisition channels available to you and their costs. Does it work with your budget?
Not everyone is Facebook.
3/10 cent a gallon for water delivered straight to the home.
$1.50 gallon for a jug in isle 13 at your super market
or $1.75 for a 20oz bottle at the checkout counter.
Are these all the same product? Do they even compete?
That example is going in my playbook. (And the product is available for free, in nigh-infinite quantities, in every occupied building in America. You don't even have to ask for it. In fact, asking for permission to take some would have whomever you asked immediately question your mental state!)
There is an interesting book by Adrian Slywotzky, The Art of Profitability, that goes over various profit models. I think the above example falls into 'Multi-Component' profit, in that the same product (water) is priced differently in different businesses (super market, convenience store, delivery); since customers behave differently in each purchasing situation you see the ability to price the product in various ways.
Another example would be how Coke is priced (to restaurants, grocery stores, vending machine).